Timber Prices High, but Forest Industry Slowing Down

February 5, 2008; Charlotte, NC

Wet weather and plywood mills have kept timber prices elevated in northern Louisiana despite the struggling housing market, but the weakening economy is expected to pull prices down in the spring, an expert in the forest products industry said Tuesday.

Timber prices have been falling throughout the South as the slowdown in residential construction reduces demand for lumber, said Daniel Stuber, operations manager for industry market information provider Forest2Market. But, demand for timber in northern Louisiana has remained strong because the plywood market has been resilient and rainy conditions have made logging difficult, restricting the supply headed to mills.

However, the market is slowing. Two plywood mills in Logansport, La., and Springhill, La., have already shut down as a result of reduced industrial activity. Other sawmills have cut production because of weak lumber demand.

“Many mills in the area are reducing their consumption in response to the crisis in the housing industry and its effect on the economy,” Stuber said.

As a result, lumber and plywood mills will search for smaller and cheaper logs to reduce raw material costs. This will put them in competition with the pulp and paper industry, which has been healthy.

The decrease in lumber production has caused a shortage in wood chips – a lumber byproduct used in pulp mills. To make up for the loss, pulp mills have been purchasing smaller logs that would otherwise have been used for lumber production.

“For now, landowners’ best opportunity to get a good price for their timber is to sell smaller logs because of the increased demand from the pulp and paper industry,” Stuber said. “ Prices for larger, more valuable logs are going to fall, and they won’t rebound until the housing industry recovers.”

The forest products industry employs more than 23,000 people in Louisiana with an annual payroll of more than $1.3 billion.

Based in Charlotte, N.C., Forest2Market has developed sophisticated analytical tools to accurately forecast timber prices.