SIow fiecoveryfor lumber suppliers

By T. R. Ingham, Jr. President Simpson Timber

f, f fHtS time it appears l99l will Fconclude with housing starts at their lowest level since 1946 and real GNP growth will be slightly negative. All indicators are the recession is at or close to the end. However. it will probably be the spring of 1992 before we can look back with confidence and say the recession is a thing of the past.

Forecasting what this means for housing and our related industries is a hazardous assignment, but like most firms who are planning for next year's business, we have had to form some judgements. First, we are assuming the recovery will be slow and gradual with housing starts reaching 1.25 million and real GNP growing at the rate of 2.5Vo. The demographics of net household formations and removals would imply a demand of 1.55 million starts but we believe the nationwide credit tightness and high consumer debt load will moderate construction activity.

If the above assumptions are achieved, total U.S. lumber demand should reach 47.9 billion board feet versus l99l usage of 43.8 billion. Structural panel usage in our country is forecast to be 27 billion square feet which would be 4Eo greater than 1991. Also, we believe repair and remodel will remain a significant factor accounting for about 3OVo of consumption.

All of our markets are more demanding in terms of quality and rapid response to expectations. The concept of just-in-time inventories as experienced by the unusually rapid depletion of inventories prior to the business downturn is a way of doing business today.

Unfortunately, our business forecast is clouded by the ongoing rash of environmental issues. Numerous well-

Story at a Glance

1.25 million housing starts...

2.5o/o real GNP growth...47.9 billion board feet lumber demand...repair and remodeling will remaln 30o/o ol consumption...industry must continue to fight for harvest rights.

financed groups are politicizing the science of forestry which ultimately will result in a reduction of the harvest levels from both public and private commercial timberlands. Even companies like Simpson, which prides itself on practicing sustained yield forestry, will be negatively affected by these takings. Some may view this as only a western issue but wetlands and other potential Iistings of endangered species are affecting other areas of our country.

Many people are skeptical of a timber shortage but we need to remember that we are finishing a year of very low housing starts and there is still public timber under contract. If there is no relief to the environmental frenzy and the market demand continues to improve, it is likely we will begin to experience significant timber shortages as the public timber currently under contract is depleted. We may see signs of this in 1992 and it will be a certainty in 1993. Our country is not running out of timber; we are losing the ability to manage and harvest our commercial timberlands due to the political and regulatory process.

All of us have a responsibility to work to change the tide of environmental extremism. We must continue to build strong coalitions at all levels of our industry to ensure our voices are heard.