Plywood

By BRONSON J. LEWIS EXECUTIVE VICE PRESIDENT AMERICAN PLYWOOD ASSOCIATION

Uncertainty hinges on housing prospects, which is the major facior affecting lumber and PlYwood markets. President Nixon's housing message to Congress in September, although favorable in its direction, remains uncertain in impact until its proposals have been acted upon. Those proposals were concerned mainly with easing tight mortgage credit that has slowed new housing starts. The increase in general con-

These projections could be conservative in view of tight capacity situations in the steel. aluminum. cement and plastics industries in 1974 which may result in greater use of wood products. But the extent of substitution of wood products for other materials will depend on the availability of wood relative to the availability of the other material, which is difficult to estimate.

Most of the change in softwood lumber consumption would likely be absorbed by shipments from domestic mills, since imports tend to stick to previously achieved high levels when the market declines. Improved exports will help reduce domestic market losses for lumber producers.

Demand for hardwood lumber in 1972 and,1973 has been strong. But demand by the furniture industry showed signs ofeasing in the second half of this year. Further easing is expected in 1974, with the slackening of home building. Shipments of

W"'silfi:;in plywood demand. Housing, which seems to be the nation's tool to fight inflation, has again been singled out as the major GNP component that must cope with the tight money, high interest cost problems brought about by U S. monetary policy. Tiistorically, we have faced six previous housing nose dives since World War II. Each has been a bit worse than the one before. As we approach the seventh downturn phase in housing cycles, we ask a number of questions, including, oowhen will high interest rates top out?" "How m,uch will the noney supply be allowed to grow?"

"How will the tools already in existence work?" and,"How soon cen u)e expect positiue subsidy help which can create a fast turnaround?o' ticipated to drop from 8.4 billion during 1973 to 6.8 billion in 1974, and then to recover to the 8.4 billion sq. ft. level during 1975. ln terms of plywood demand the forecast calls for 220 million sq. ft. consumption during 1973 and 240 million sq. ft. for both 1974 and 1975.

Environment, which found that the concentration of mature and overmature timber in the Western National Forests results in annual growth per acre ofless than halfthat found on other commercial forest lands.

The President endorsed the panel's recommendation to increase and maintain timber sales from the National Forests at allowable harvest levels when the market calls for additional timber and as long as adequate funding is available.

The recommendations of this landmark report must be implemented if the nation is to meet anticipated future needs for lumber and plywood and if prices are to be kept at reasonable levels.

The mobile home industry consumed 206 million sq. ft. of softwood plywood (3/a" basis) last year.

Mobile homes are expected to be an increasingly important market for softwood plywood as the styles change, as construction standards and codes get tougher, and as the mobile home industry comes closer and closer to fulfilling the great expectations for the modular housing boom.

Housing demand per se is considered in this forecast as being under satisfied, with the primary factor affecting housing volume being the available resources, primarily financial, with which to build.

Based on our calculations. the demand for housing will have an unsatisfied deficit at year end 1973 of over 1.3 million units. New family formationso demolitions, fire, flood and wind, need for vacancies to allow mobility, changing life styles (house more singles), longer life expectancy and second homes will provide a1974 demand total of over 3.5 million units. Demand for an additional 23/a million units is calculated for 1975. Thus, demand in the classic sense is more than adequate, and is not a limiting factor to new housing volume.

Housing volume in the near term is expected to be affected far more critically by mortgage money availability than by conventional demand standards or the ability of the industry to supply. While housing will drop, the drop is not apt to be as severe as it would have been without new tools to provide mortgage liquiditv.

The APA forecast calls for an estimated 2.1 million housing units in 1973, falling to 1.7-l.B million units for 1974 and going baek to 2.1 million units for 1975.

Total plywood consumption for new residential construction is an-

The nonresidential construction market for softwood plywood continues to grow at about the rate of change in total nonresidential construction expenditures.

Our estimates take cognizance of the declining non-building construction (dams, bridges, highways) and assume no growth, but a slight decline, in that area. We assume a 47o growth in nonresidential building. This translates into a plywood demand growth of about 37o for 1974 and a maintenance of that level for t975.

Story at a Glance

Downturn in plywood demand .d-i-y market up more transport market booming, as is export . . .'75: new production record.

A market of increasing significance to the plywood industry is the home owner market. Last year it consumed just over 3 billion sq. ft. of plywood in applications that cover every possible use. The largest single use is in home additions, alterations and remodeling projects in which tlyo-thirds of the total plywood used is applied by the home owner without professional help. Howevero past housing cycles tend to show that high interest costs tend to dissuade other home owners from undertaking major projects almost as frequently as some are forced to remodel. The result is an apparent standoff.

There are four major categories of industrial usage for softwood plywooodplant repair and maintenance, materials handling, products manufactured for sale and tools, jigs or patterns. The major volume is used in products made for sale, and the largest consuming industries are transportation equipment, wood products, including furniture and fixtures.

Our forecast reflects the rapid expansion of industrial production in all areas. This implies the need for substantial plant repair and maintenance activity and a rapid increase in consumption for pallets, skids, crating and other materials handling devices. Estimates include an average 5.37o increase in materials handling use and 37o increase in plant repair for each in 1974 and t9?5.

Transportation equipment is enjoying a boom, and plywood is benefitting from that. as well as from new innovations like FRP/plywood truck and trailer bodies. The new Department of Transportation regulations for trailer front ends will force modifications in all existing trailers before the end of 1975. Use of. r/2" plywood liners meets the requirement, so a large modernization market is anticipated in this area. The forecast includes an average increase in plywood usage for transportation equipment of 6 percent for each in 1974 and,1975.

lncreasing emphasis on the export markets for softwood plywood has already brought satisfying results. The 1973 total is expected to be 350 million sq ft.

It is expected exports will reach 400 million f.or 1974 and will maintain that level during 1975 when domestic demand increases.

The total softwood plywood production expected this year is 18.6 billion. 1974's expected total is 17.3 billion, and the 1975 expectation is 18.7 billion, for a new industry production record.