BUSINESS FORECAST Ghanges will shape industry

By John B. Fery Chairman of the Board Chiel Executive Officer Boise Cascade Corporation

Y 30-PLUS years in this industry have taught me that there's one thing we can always count on . change. Today's environment ls no exceptlon.We're witnessing a change in U.S. demographics that will alter the domestic housing market well past the turn of the century. Fewer families are forming, which translates directly into fewer houses being built. This trend is not likely to be reversed until the children of the baby boom generation begin buying homes. The net result is that housing starts are apt to remain relatively steady at rates of about 1.3 million a year, which is far less than the historical rates we've enjoyed. On the plus side, however, families are living in the same homes longer and, consequently, are doing more repair and remodel work. This seement of the market should continue to grow at a healthy rate.

On the environmental front, the forest products industry will continue to face increasing pressure on timber supply, especially in the Pacific Northwest. Restrictions on timber harvesting have already resulted in the closure of dozens of Northwest mills, and there will be more, both in the Northwest and eventually in other regions of the country. A limited wood supply will ultimately result in reduced product availability and higher prices. All in all, it's going to be a tough, competitive market in which the advantage will go to those producers who have the most modern, efficient and strategically located facilities. Product innovation, particularly for products that require less raw material,

Story at a Glance

Demographic controlled housing starts of 1.3 million... healthy R&R growth... continuing environmental pressurcs . . promising worldwide madet for building materials.

such as Boise Cascade's recently introduced laminated veneer lumber (LVL), will also play an important role in the competitive environment I've just described.

Not all the changes that affect our industry are occurring so close to home. The creation of a European Common Market shows promise of greater economic growth and, therefore, greater demand for building products. The recent agreement by the Common Market countries to adopt common building codes means that U.S. suppliers can better compete in that market. On the other side of the world, residential construction rates in the Pacific Rim countries are expected to remain at high levels. All told, these worldwide changes should present significant opportunities for the U.S. forest products industry.

The future holds many changessome that may go beyond what we can anticipate today. And with change will come challenges and opportunities. Given Boise Cascade's commitment to total quality, combined with our natural resource base and a history of solid investment in our facilities, we're confident that we are well prepared to meet those changes.