Western Lumber Outlook

By H.A. Roberts Executive Vice President Western Wood Producs Association Portland. Or.

I F there comes a lloud cheer from the West this New Year's Eve, it just might be lumbermen joy- fully celebrating the end of 1980: a vear that has beeri as difficult for operators as any in modem memory.

To say that it has been a crisis year for western mill managers and their employees, would be an understatement. In fact, probably many would tell you that 1981, no matter how it goes, would have to be an improvement over 1980.

Story at a Glance

1.6 million housing starts in '81 .. total U.S. softwood consumption up 12o/o. lumber exports wilf be olf 10o/o . . concern exists as to whether producers could fill needs if strong demand develops in early'81.

We are expecting a significant improvement next year. Our early forecast is for 1.6 million housing starts, compared to the 1980 rate that should end up between 1.2 and 1.3 million units. At the time of this writing we are keeping our fingers crossed for a 1.3 million-unit showing, but that performance hinges on interest and mortgage rates and what they do before [te- end of the vear.

As they always have been, interest rates are the key to the yearly success of our industrv. This vear we have seen the primd rate skyrocket to alltime highs, then plunge to around the ll%o level and then take right off again in a very volatile pattern. Mortgage rates followed the prime and brought new housing to a virtual standstill.

Earlier in the year we had at times about one-half of all Western sawmill employees affected by the housing recession; either laid off, working short shifts, or working alternate weeks. Except for very early in the year, the highest weekly rate that production reached, was a level some lS%o below normal.

During April and May, six of nine weeks' production ranged between 35-45Vo below normal. Most of the time, though, it hovered around a level 25-3OVo below normal. Only solid management at all levels has prevented this crisis situation from becoming a total disaster.

For the upcoming year, a 1.6 million housing unit-performance should allow the western mills to manufacture l7.l billion board feet of softwood lumber (excluding redwood) compared to an expected 1980 total of 15.5 billion feet. We look for total softwood lumber consumption in the United States to reach 36.9 billion feet. That would be an increase of lL%o from the consumption we expect in 1980: 32.9 billion feet.

Residential construction should lead the way in consumption, increasing to 14.7 billion feet, or 39.8V0 of total consumption. Repair and remodeling markets are again expected to fare well, accounting for 8.1 billion board feet in 1981, compared to 7.8 billion in 1980.

Scarce good news for the industry in 1980 was the strong demand from our export markets. Lumber exports could reach 2.0 billion board feet this year. Italy, Japan, Canada, Mexico, Spain, the United Kingdom and West Germany have already proved to be good customers during the year.

Lumber exports are expected to fall in l98l to 1.8 billion feet, lovo off 1980. That fall-off can be attributed to the expected strengthening of the American dollar abroad and increased domestic consumption.

Of key concern to western producers is the possibility that l98l lumber demand might not be filled in an orderly manner. Inventories are expected to be down five percent lower than they were at the end of 1979. Besides the lower inventory position at many western mills, some producers are not building log decks for normal production schedules. Those two major elements for potential trouble are already here. Should a strong demand develop early in the year, lumber producers could find themselves unable to meet demand for some products.

The long-term prospects for the western lumber industry does indeed look brisht. Most economic exDerts project, -that to meet the cominj demand for housing during this decade, this nation will have to build two mil(Please turn to page 72)