Timber prices rally; trade group foresees demand

Prices in the depressed lumber industry have risen recently, as production has fallen to meet demand and dealers have begun restocking inventories.

A trade group forecasts rising demand next year.

"It's simple supply and demand coming together," said Shawn Church, editor of the Eugene trade publication Random Lengths.

The publication reports the recent price of framing lumber was up 9.7 percent from a year ago and the cost of structural panels was 2.6 percent higher.

"I think it's a situation where production has worked its way down to the low level of demand historically," Church said. "Also, retail inventories across the country have been worked down to bare-bone levels. Distributors and dealers are having to come into the market to replenish those bare-bone inventories more frequently."

Many mills have struggled through the recession. The collapse in the residential building market and U.S. financial crisis have pushed lumber demand to its lowest level in modern history.

If mills ramped up production now, they might set the stage for prices to fall again, Church said.

"But it's hard to say what the producers will do and how quickly some of that idle capacity out there can be brought back," Church said. "It's a balancing act for the industry. It always is, and it's that much trickier these days in tough times."

Earlier this month the Western Wood Products Association, a Portland trade group, said there were signs of an industry recovery next year.

It estimates that Western lumber production this year will be about 10.2 billion board feet, down 21 percent from last year.

For next year, the association predicts lumber demand will rise 11 percent to 34.5 billion board feet, housing starts will increase 21 percent to 668,000, and Western mills will produce 11 billion board feet of lumber, up 8 percent from 2009.

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Information from: The Register-Guard, http://www.registerguard.com