1 min read

Solid Wood Production Increases in 2010, Will Continue to Improve in 2011

Production at southern solid wood mills increased 4.8% in 2010. Compared to steep drops in 2009, this modest growth marks the beginning of a rebound. Forest2Market expects 2011 will bring modest improvement for sawmills and plywood mills as well, a result of stronger residential construction.

Lumber mills increased production by 8.8% in 2010, despite seven mill closures. Four plywood mills closed, reducing production volume by 3.2%. Delivered sawlog and plylog prices increased $1.53/ton over 2009 levels, according to Forest2Market’s delivered price service. Increased log size contributed nearly half of that increase. A rise in standing timber prices accounted for $0.44/ton. Most of the remaining increase reflects higher diesel prices. Haul distances remained flat.

Forest2Market's economic outlook indicates that there will be growth for the industry in 2011 as well, according to Daniel Stuber, Forest2Market’s Director of Operations. "Our economic outlook shows housing starts at an annualized rate of 625,000 in 2011, compared to 2010’s 587,600. That increase may not seem like a lot, but it means the worst is behind us. In 2012, we expect starts to top 760,000.”& lt; /font>

“Residential construction will improve for two reasons,” said Stuber. “First, we think the foreclosure fraud that came to light in the last half of 2010 will push homebuyers into the new home market. Because buyers are concerned about encumbered titles, the hassle of buying an existing home won’t be worth it, regardless of the price. Second, the recession taught us that base demand for new homes is roughly 500,000. The numbers dropped below this annualized rate only twice during the recession. Having passed this threshold in 2010, we expect continued growth going forward.”

Despite improvements in residential construction, Forest2Market’s forecast does show a second—shorter—recession between the last quarter of 2011 and mid-2012. This recession will take a toll on home prices, however, not new construction, which will see only modest retrenchment. “Overall,” said Stuber, “solid wood mills should expect to see slow growth in 2011.