Cedar faces tight supply

DETAILERS ordering cedar late Fftn* month or in December could face a tight supply.

Members of the Western Red Cedar Lumber Association anticipate a tight cedar log supply continuing into 1993. The British Columbia, Canad4 government's plan to remove approximately l'Vo of the Annual Allowable Cut (AAC) from the provincial industry harvest has already affected some companies. This combined with summer fire season closures further aggravated a tight log supply situation. The brunt of the AAC cutbacks are expected to hit in the spring of 1993. Other factors, such as a heavy winter snow pack shutting down logging operations, could further tighten supply.

International Forest Products Ltd. has had two mills running at half capacity during tlrc past six months as the severe surxner fire season limited log supply. John Drew, general manager at their McDonald Cedar mills, comments "supply is tightening but we are not going to run out of cedar."

Glen Connor, Canadian Forest Products manager of cedar lumber sales, maintains that U.S. buyers will continue to face an ordering dilemma.

About 854o of the province's cedar production goes into the U.S. market" according to WRCLA executive director Ken McClelland. [n addition to appealing to the environmentally "gr@n" buyers, cedar is etching out a brand of consumers that want "an original home, one that is not just a

Fewer panels, no shortages

lQtructural panel derrand will be met rJin the coming months although the West will lag in production.

Overall, structural panel production in the U.S. will increase. However, western production, which has dropped about 3Vo this year, will continue to decline. The timber harvest fiom private forest lands will be stimulated by higher log prices, but will not be enough to offset further harvest declines from western public lands.

"An increase in raw material supplies is not expected in the West at this time or in the foreseeable futue since significant new tracts have not been offered for sale on public lands for several quart€rs and there is no end in sight to the spotted owl debate," the American Plywood Association's annual "End-Use Marketing Profiles for Structural Panels, 1993" reports.

Total u.s. industry production, according to the report, is forecast to reach 25.5 billion square feet (3/8 inch basis) this yea4 26.7 billion feet in 1993 and 27.5 billion feet in 1994. Industry production in 1991 was approximately 24.3 billion feet. Western production has fallen from nearly 9.1 billion square feet as recently as 1987 to just 5 bilton feet or less this year.

Structural panel mill capacity in the U.S. as measured by equipment capacity is now 32.2 billion square feet. Part of this capacity is 1.2 billion square feet within westem mills which have been closed for some time, primarily due to the lack of adequate log and veneer supplies. Closed mills are still capable of operating, although some rnay require invesunent prior o start-up, APA notes. house, but a home with nanral ciaracter," he says.

Many western and inland mills are not producing at levels they could be if they were not constrained by a lack of wood supplies and this unused capacity has been estimated at 2.3 billion square feet This leaves 28.7 billion feet of sustainable productive capacity which will not increase unless raw mat€rial supplies increase or new mills oome on streiun.

At this time, new capacity planned for start-up by the end of 1993 totals 600 million square feet and will increase total productive capacity to 29.3 billion square feet. With no relief in sight for raw material supply, existing productive capacity and planned new capacity appears to be adequate to meet needed industry production of 2-6.7 billion feet for 1993.

Beyond l993,without new productive capacity to match increasing demand, market shre could be lost in some segments; APA concludes.

At present, despite demands made by Hunicane Andrew, it appears there will be less structural panel product available from western mills, but an adequate supply overall.

While supply side shortages have caused slight price fluctuations this year, "going back to the 1972 dollars and in temrs of buying power, cedar is still priced competitively,"reports McClelland.

He expects sales volumes this year will remain equal to 1991.

Bob Thompson, MacMillan Bloedel's North American cedar disributior rumagef,, maintains that higher cedar prices are really a market correction. "It has always been a specialty product but has not been priced that way."

He contends tightening log supplies, reduced production capacity, plus increasing consumer recognition of cedar's special qualities "should continue to remove cedar from commodity pricing and place it vrithin a less volatile market of specialty products."

Hany Erskine, Still Creek Forest Products Ltd. sales manager, believes an AAC reduction will push companies into more remote timber, which could spawn nore costly harvesting techniques. This would Eanslate into available supply but higher cost. He doesn't believe higher prices will drive away consumers as markets are going "green" and consumers want a qrrality product that won't need replacing on the short tenn.

"What's going to happen in the spring is probably not much different from the past 30 years. We always have spurts and hollows and the people who are thinking positively are gorng to do well," he prcdicts.

Cedar producers note that the market hedged when the international trade tariff of l4.5%o increased costs and buyers ordered smaller lots rather than a rail car, correctly gauging that Canada would have the countervailing duty reduced to a lower 67o. No one wanted to get sock with higber priced lumber in inventory and now some buyers have become used to purchasing in smaller quantities.

The question retail yards will have to resolve is again one of cost and supply. Traditionally the fall is the time when the yards let inventories dwindle, ordering in late November and December anticipating the rush of spring consEuction. However, this year that collective demand may hit a time when log shortages are alost acut€.