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Top 3 Stories from the December Issue
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ECONOMIC OUTLOOK:
2011-2012
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Positive economic signs
graced the holidays; retailers saw record holiday spending, fewer unemployment claims were filed,
and the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed
into law on December 17. The new tax law will add some stability to the economy, as tax rates are
now set for the next two years at 2010 levels. New tax breaks for businesses and individuals were
included in the bill as well. We've also had a good run in the stock market, which--as of December
29--had returned the Dow Jones Industrial Average (DJIA) to August 2008 levels.
We certainly hope that these signs of economic recovery are sustained throughout 2011.
Unfortunately, when we plug the numbers into our econometric models, the results show that the
improvements may be short lived.
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INDUSTRY AT A
GLANCE
From Forest2Market's Economic Outlook
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The final manufacturing
statistics are in for October. New orders, the forward-looking portion of the Census Bureau's
report on shipments, inventories and orders provided little in the way of encouragement for
manufacturing. New orders decreased $3.4 billion (0.9 percent) to $420.3 billion in October.
Excluding transportation, new orders decreased 0.2 percent. Orders for durable goods decreased 3.4
percent (led lower by transportation equipment) while nondurable goods orders increased 1.5 percent
billion.
"I don't think we're in for a prolonged downtrend in new orders but this [report] is a
reflection of the weakness we saw in demand over the summer," Scott Anderson, a senior economist at
Wells Fargo Securities Inc. in Minneapolis, said. "We had a buildup of inventories over the summer
and that's having a consequence."
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HOUSING MARKET
UPDATE
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2010 left its mark on
wood and building products markets, with the worst home sales in more than a decade, high
unemployment, record foreclosure levels, and tightened credit requirements. Confidence among
consumers, producers and lenders remained low.
In 2011, concerns about market conditions will continue. One of the concerns will be a
double-dip in home sales prices. The most recent numbers from the S&P/Case-Shiller Home Price
Index, which tracks real estate value changes both nationally and in the 20 largest U.S.
metropolitan areas with a two-month lag time, were the lowest in over a year. Economists and
industry experts are predicting another 7-8 percent decline in home sales prices in the first half
of 2011 before prices stabilize in the second half of the year.
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BIOMASS CROP ASSISTANCE
PROGRAM
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On December 15, the
United States Department of Agriculture (USDA) released all the documents necessary to kick off the
implementation of the Biomass Crop Assistance Program. Biomass conversion facilities can now apply
for qualifying status. As of December 30, only one facility had been qualified--a facility in Iowa
run by Poet that converts corn cobs into cellulosic ethanol. This number is likely to increase
quickly in the new year.
Suppliers for many wood products and pulp and paper cogeneration facilities will no longer
qualify for payments. Under the new rules, all wood fuel not separated from higher value products
at the harvest site are now ineligible, as are materials for which there is already a market--most
mill residues, for instance.
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SOFTWOOD LUMBER CHECK-OFF
PROGRAM
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Over the last two
decades, the softwood lumber market in the U.S. has been experiencing a gradual erosion of market
share. This has been true even in years like 2005, when sales were solid. The current state of the
housing market has exacerbated the problem. In addition, the steel and concrete industries have
undertaken well-funded and aggressive marketing campaigns, at times turning the lumber and building
products (LBM) industry's environmental messaging against it. Until the last two years, the
industry's response has been fragmented.
In an effort to strengthen the industry and reverse the trend of market share erosion, the
Binational Softwood Lumber Council determined that a check-off program would benefit of the
industry and developed provisions and rules for the program with industry input. An industry
referendum on the program will be held before mid-year 2011--probably in April.
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BOILER MACT RULE
DELAYED
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The Environmental
Protection Agency's (EPA) new Boiler Maximum Achievable Control Technology (MACT) Rule, which
according to a study commissioned by the American Forest & Paper Association could lead to a
loss of 17,000 pulp and paper jobs and create a ripple effect through local economies, has been
postponed.
The EPA recently requested an extension for implementing the proposed Boiler MACT Rule,
which was scheduled to go into effect on January 16, 2011. The EPA asked for the 15-month extension
so that it could reconsider the rule based on comments and additional data it received that "raise
questions about the agency's initial conclusions." Gina McCarthy, the EPA's assistant administrator
for air and radiation, said that some of the pollution limits "were simply too tight to...be
achievable."
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