CHARLOTTE, NC--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 closings. 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 timber 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 were flat.
"We expect 2011 to bring modest growth for the industry as well," said Daniel Stuber, Forest2Market's Director of Operations, a result of a gradually improving housing market. "Our economic outlook shows housing starts at an annualized rate of 625,000 in 2011, compared to 2010's 587,600. Though that may not seem like a large increase, it does mean the worst is behind us. In 2012, we expect starts to top 760,000."

Residential construction will improve for two reasons, according to 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 just won't be worth it, regardless of the price. Second, the recession proved that base demand for new homes is roughly 500,000. Having passed this threshold in 2010, we expect continued growth."

Despite improvements in residential construction, Forest2Market's forecast does show a brief 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.

About Forest2Market

Headquartered in Charlotte, N.C., Forest2Market® is a neutral third-party source of market price information and supply chain expertise for the forest and wood products industries. Forest2Market's products and services are based on transaction data, not answers to survey questions.

SOURCE: Forest2Market

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