Housing Sector Forces Mills to Cut Production, Timber Prices Falling

March 4, 2008; Charlotte, NC

Timber prices in western South Carolina could reach historic lows this summer, prompted by closures and shift reductions at area mills, an expert in the forest products industry said Tuesday.

Mills throughout the South have felt the sting of the crippled housing market and reduced their lumber production, said Daniel Stuber, operations manager for timber price information provider Forest2Market. A lumber mill in Conway, S.C., has cut its operations from two shifts to one. In recent months, mills in Summerville, S.C., and Estill, S.C., also reduced production in response to market conditions.

“Additional curtailments and permanent closures are possible as mills struggle with weak lumber demand,” Stuber said.

The entire forest products industry is slowing down and bracing for prices to bottom out in June and July when the housing industry is expected to hit its lowest trough. Mills, faced with higher production costs and reduced lumber demand, can’t sell lumber for what they need to turn a profit. As a result, the price of standing timber has fallen.

But, landowners are beginning to withhold their tracts. They’re waiting until the market recovers in order to get a better price for their timber.

“Mills are doing everything they can to stay in business,” Stuber said. “They will continue to operate on the supply in their yards, and they’ll buy timber if it’s feasible. But if they can’t cut production costs through lower raw materials, they’ll start cutting shifts.” 

Prices for pulpwood are also expected to drop in the upcoming months. The pulp and paper manufacturing industry has remained healthy because of strong demand, but the weakening national economy will force the industry to reduce production.

The forest products industry employs more than 28,000 people in South Carolina with an annual payroll of almost $1.6 billion.

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