© There will be high prices for lumber in 1994 and beyond. This year in the U.S. there will be a lumber shortfall
of about 2 billion board feet.

Recovery in U.S. economy ensures that
lumber demand will outrun timber supply

BY DOUG SMYTH

This year, the wait for a timber sup-
ply crisis will be over. A long-predict-
ed U.S. economic recovery is about to
spur enough housing starts, repair and
remodeling jobs and other uses of
wood that the once-unthinkable will
happen: North America will run short
of softwood lumber.

And the shortfall will be enormous:
roughly 1 billion bd ft during 1994. It
would be two and a half times as big if
engineered wood products and some
offshore imports were not available to
help fill the gap. While 1 billion bd ft
amounts to just 2% of the total poten-
tial US demand of 47.7 billion bd ft
this year, this shortfall will be suffi-
cient to keep lumber prices at record
levels.

Given timber shortages in the West
from British Columbia to California
and the inability of the US South to
step up harvests enough to offset
those losses, the outlook is for a con-
tinuing shortfall in lumber supply.

November 1993 marked the fourth
straight month in which US housing
starts maintained an annual rate of
about 1.4 million units. More impor-

, the number of detached sin-

je-family houses actually started
the first 11 months of 1993

by 81,000 over the number be-

the same period in 1992.

pee total softwood lumber

mentee) ities bad fever the
jumped oY 1.1 billion bd ft over the

qT

will swell US housing starts.

Repair and remodeling jobs con-
sumed an additional 500 million bd ft
in 1993. But a slow recovery in the
general economy prevented a severe
shortage last year. Lumber consump-
tion for nonresidential building, mate-
rials handling and “other” uses fell
about 900 million bd ft from 1992 lev-
els — enough to offset the drop in total
US lumber output.

Last year, US lumber production
fell by 1.1 billion bd ft, due mostly to
timber shortages in the West. South-
ern pine production rose by 300 mil-
lion bd ft, while western output
plummeted by 1.3 billion feet.

Canadian sawmills made up the dif-
ference, thanks mainly to higher pro-
duction in the eastern provinces.
British Columbia, Canada’s prime pro-
ducer, will see output drop in coming
years as the provincial government re-
duces annual timber harvests by 20%.
Only imports of private timber from
Alberta prevented production at BC
Interior mills, the largest producing
region in the province, from falling be-
low 1992 levels.

Eastern Canada cranked out con-
siderably more softwood lumber in
1993 than in 1992. Much of the in-
crease resulted because Quebec pulp
and paper companies returned their
public timber allocations to the gov-
emment. After the province reallocat-
ed the wood to independent sawmills,
they stepped up lumber production
and covered the pulp mills’ needs for
residential chips. Quebec accounted
for two-fifths of the 1.1-billion—bd-ft
ee in Canadian lumber output in

Overall, the picture is not encourag-
ing: Canada’s 1993 output of 24.6 bil-
lion bd ft is 1 billion Jess than in the

record year 1987. During the same pe-
riod, US softwood lumber production
fell by 4.7 billion bd ft to 33.5 billion.
Plummeting output in the West is re-
sponsible: a 27% fall to 17.5 billion bd
ft in 1993. A 15% jump in southern
pine sawing to 14.4 billion bd ft offset
about one-third of the western loss
during the period.

Despite extremely tight timber sup-
plies, production in the South is likely
to rise another 400 million bd ft this
year. The positive impact of higher
stumpage fees on lumber recovery
has been the biggest single factor in
boosting output. Higher log prices
forced companies to saw smaller logs
(down a 6-in. top instead of 8 in.). In-
creased utilization enabled companies
to pay more for stands of smaller tim-
ber.

Since southern pine must be dried
to minimize twisting and warping, kiln
drying capacity will limit additional
increases in production. Severe con-
straints on the South’s timber supply,
limited kiln drying capacity and cur-
rent high overtime hours worked will
restrain production.

The bottom line: no region will be
able to make up for the severe down-
turn in lumber production in the west-
ern US in 1994, when demand will
jump substantially. Lumber produc-
tion in the West will fall by at least an-
other 1.2 billion bd ft. As of
September 30, 1993, buyers had con-

tracts on only 2.6 billion bd ft of feder- _

al timber in Oregon and Washington.
Less than half of this (1.09 billion feet)
complies with President Clinton’s
“Option 9” plan to preserve spotted
owl habitat and to address other envi-
ronmental concerns. This is all that
will be available for harvest in 1994.
By contrast, buyers held contracts for

11.78 billion bd ft of federal timber in
the two states at the end of fiscal
1987.

Future timber sales will be sharply
reduced. The President’s “Option 9”
plan for Oregon and Washington calls
for selling a maximum of 1.39 billion
bd ft a year — about one— fourth of the
average annual harvest in 1985-89.
Even this proposed volume faces dra-
matic cuts because of the implemen-
tation of new ecosystem management
screening systems in non-owl forests
east of the Cascade Range. In west-
side owl national forests in California,
Oregon and Washington, annual tim-
ber sales will average 750 million bd ft
— well below the 1.2 billion bd ft origi-
nally proposed.

And because federal judges and the
US Fish and Wildlife Service must ap-
prove future timber sales, it will be
spring 1995 before any new sales are
available.

As a result, during the next 15
months there will be very little timber
added to the small volume now in the
“pipeline” to mills.

Private timber cannot begin to
make up for the loss of federal sales.
A sudden cutback in Japanese log pur-
chases last summer diverted to North-
west sawmills some of the logs that
normally would have been exported.
This helped stave off disaster for
many mills in 1993. But an improving
Japanese economy this year and cut-
backs in private timber harvests make
it unlikely that Northwest mills can
depend on export-grade logs this
year.

Last year’s stepped-up harvests on
private, non-industry lands were just
a small, one-time addition to the tim-
ber supply. Many private landowners
cut their timber in anticipation of a
stricter application of federal and
state environmental protection laws.
Between 1988 and 1992, private,
non-industrial harvests in Oregon and.
Washington rose by 700 million bd ft.
But an enormous decline on federal
lands brought the total harvest in the
two states down by 4.84 billion bd ft.

A small portion of the production
loss in the West may be offset by im-
ports from offshore. These could be
increased by 500 million bd ft from
the current level of 100 million bd ft.
But the US will still face an apparent
lumber shortfall of approximately 2
billion bd ft in 1994.

Engineered wood products — glulam.
beams, laminated veneer lumber
(LVL), parallel strand lumber,
I-beams with oriented strand board
webs and roof and floor trusses—will
replace the equivalent of at least 1 bil-
lion bd ft of that shortfall. Because en-
gineered wood systems extend
utilization of fiber, more homes can
be built with less wood.

Excess capacity in engineered
wood products plants could theoreti-
cally permit considerable additional
production - if many of the
wood-based composites such as LVL
were not also severely restricted by
fiber shortages. After 1995, greater
volumes could be manufactured from
second-growth “weed” species, but
significant increases in output are not
likely before then.

The higher lumber prices which will
result from the billion-foot shortfall
will force adjustments in consump-
tion. The trend toward much larger
houses could reverse. And nonresi-
dential builders may speed up their
adoption of non-wood substitutes — a
market traditionally less resistant to
changes.

Near-record-high lumber prices in
late 1993 show that demand has al-
ready begun to outstrip supply. Dur-
ing 1994, high levels of unsatisfied
consumer demand will assure the
continuance of record lumber prices —
and eventually may help persuade the
American public to support more tim-
ber harvesting in federal forests. But
help will come too late to moderate
the lumber-supply shortfall this year.

Doug Smyth is Director of IWA-
CANADA’s Research Dept. This article
originally appeared in the
January/February 1994 issue of

Wood Technology.

LUMBERWORKER/APRIL, 1994/7