Strong Year Expected For Building Products

First quarter growth in the home building and home remodeling industries continues to eclipse even last year's frenetic pace, fueling a strong start to the year for the wood and building products industry, according toa new report from Bank of America's Paper & Forest Products Group.

With quarterly housing starts up an estimated 8.5Vo over 1998 levels, demand for building materials has been strong with softwood lumber, structural panel and gypsum manufacturers running full-out.

Last year marked a torrid year for the U.S. construction industry as record existing home sales stimulated a double-digit increase in home repair spending and total home sales rose by l2%o to a record 5.68 million units.

In 1998, existing home sales increased l3.5%o to 4.8 million units, the third straight record year. By January 1999, new home inventories stood at four months of supply, up from December's 3.8 months of supply, while existing homes for sale stood at about 4.5 months of supply, up from December's 3.9 months. New coefficients in the housins cycle, such'as the wealth effect of i rising stock market and the growing use of equity lines of credit to finance consumer spending, are dramatically adding to its staying power relative to earlier construction cycles, according to the report.

In 1998 alone. the value of real estate and financial assets held by American households and non-profit organizations rose by nearly three and 14 times the aggregate $owth in disposable income, respectively.

By year-end 1998, household net worth had risen by over $18 trillion during the past decade, while household liabilities were up by only $3 tritlion. Hence, a considerably wealthier American public has the unprecedented means to spend more on primary and secondary residences.

Softwood lumber producers, in particular, are poised to enjoy a remarkable upturn in profitability as lower log costs, high shipment volume and modestly higher prices are heralding the best cash flow picture in at least five years. Structural panel producers and gypsum wallboard producers are also enjoying outstanding margins.

Only log, wood chip and composite panel prices remain disappointing, according to the report.

The sector stands in sharp contrast to its pulp and paper counterpart, which remains depressed due to excessive foreign competition.

Instant Lumber From Straw?

Recent discoveries about the formation of wood cells has convinced Virginia Tech researchers that lumber mills may one day be extruding 2x4s made from straw.

According VTI, the cellulose derivatives from almost any plant mixed with lignin, in the proper portions and given the right conditions, should automatically self-assemble molecularly into wood-like cells.

A commercial formula for instantly transforming straw into wood could circumvent years of tree growth, but will take years of work to calculate, VTI claims.

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