The wood products industry in Northwest Montana has been struggling to keep its head above water ever since the national recession sunk the housing and construction markets. And despite regional timber groups’ predictions of an increase in demand for next year, some in Montana say that forecast may be a distant lifeboat for the industry.
At the end of November two major timber market groups, the Western Wood Products Association and RISI, predicted 2010 would be the turnaround year for the sore lumber mills in northwestern states.
For mills in the Flathead, forecasts of higher demand offer hope, but officials say they will remain wary until they see a turnaround in their own timber orders.
F.H. Stoltze Land and Lumber Company Manager Chuck Roady said economic indicators point in the direction of a market turnaround, but the current one is still a steady stream of historic lows.
“We’re certainly hopeful that they’re right in their predictions,” Roady said, maintaining optimism. “We’re hopeful that we’ll see that increase in 2010.”
Tom Ray, vice president of Montana operations for Plum Creek, said the forecast is good news for the industry and that his company will have a better idea about how demand increase will affect its mills in Evergreen and Columbia Falls in the spring.
“We’re hopeful that we’ll see some moderate recovery next year,” Ray said. “We don’t expect changes in shifts, but maybe more hours.”
Ray said Plum Creek expects a full housing industry recovery to take years, but he said its repair and remodeling market has been increasing.
With timber prices at all-time lows, the WWPA said in its forecast that the turnaround may be modest in comparison to previous boom years. However, an increase is better than a decrease, the report points out.
If the positive forecast does come to fruition, states in the interior West may have trouble accommodating increased demand, according to Todd Morgan, director of forest industry research at the Bureau of Business and Economic Research at the University of Montana.
It will be up to Montana’s mills and landowners to help fill the predicted increased timber demand, something they have struggled with for the past 20 years, Morgan said.
“We’ve been gradually losing mills, even when markets were good,” Morgan said, adding that state mills rarely follow national trends in lockstep.
Morgan said the outlook is good for states on the coast or in the south, where private companies largely own the forests. But inland states with a lot of federal land are in a different situation.
Getting permission to cut timber on federal land is a much more onerous process than logging private acres, Morgan said, because environmental reviews and litigation slowing down permits. Many Montana mills still work on private land, but their production depends on demand and tree numbers, which may be low after the building rush and high wood prices earlier in the decade, Morgan said.
“It just takes time to grow trees, especially here in the interior west,” Morgan said. And though the Flathead is a prime growing spot for trees in Montana, the area still has trouble competing with the quick re-growth of trees in coastal states, he added.
However, Morgan, Roady and Ray agreed that an increase in demand could only help after the markets bottomed out this year. In 2005, the average price for a thousand board feet of western Montana Douglas fir was $462.75. So far in 2009, the average price is $265.
Production has dropped significantly as well. With all tree species taken into consideration, Montana produced over 1 billion board feet in 2005 with demand remaining solid. Lumber production from January to September 2009 was 303 million board feet with low demand.
All timber-producing states have experienced a similar nosedive in production. However, the WWPA is predicting 668,000 new housing projects in 2010, a 21 percent increase over 2009. Housing projects are expected to top 1 million by 2012. According to RISI, which Morgan said is usually more optimistic in its market predictions, 2010 will see 883,000 new housing projects next year.
Another good sign for U.S. domestic wood production is the import slowdown. International wood purchases from Canada, Brazil and others are down, Morgan said, giving American timber companies a better shot at filling future demand.
And even if market gains are modest in 2010, Morgan said it is a good starting point for a slow recovery. Roady also kept a “glass-half-full” approach, an attitude he considers a necessity.
“I hope we keep going,” Roady said. “I hope they’re right.”