The wood products industry anticipates some market improvement next year, continuing a recent month-to-month trend, but expects the gains to be small, compared with the depth of the trough from which companies in that sector are trying to climb.

"In normal times, the gains that we've seen this year would be fairly good, but given where we've come from, it's a recovery but it's a slow one," says Robert "Butch" Bernhardt Jr., spokesman for the Portland-based Western Wood Products Association.

Lumber production in the western U.S. is up 7.4 percent so far this year, and orders are up 6 percent, Bernhardt says. He adds, "We're coming, though, from a more than 40 percent decline."

Western mills are on track to produce a little over 11 billion board feet of lumber this year, but that's down from 19.3 billion board feet in 2005, he says.

"It's certainly reflective that housing simply has not come back," Bernhardt says.

U.S. housing starts probably will climb to a little over 600,000 this year, which is up from 554,000 last year, but well short of the 1 million starts that in years past were considered weak, he says, adding, "Now, the expectation is we won't get up to 1 million housing starts until 2012."

Spokane-based Potlatch Corp., which has about 1.5 million acres of timberland and also operates mills, has shown resilience despite the forces affecting the industry. It posted third-quarter net income of $18.1 million, which was down from $45.8 million in the year-earlier quarter, but said its still positive performance reflected improvements in the economy. It also said it's well-positioned as it moves into 2011, with more than $71 million of cash and short-term investments on its balance sheet.

Meanwhile, Clearwater Paper Corp., the big Spokane-based maker of tissue and paperboard products that was spun off by Potlatch two years ago, is in the process of acquiring Georgia-based Cellu Tissue Holdings for $502 million.

That transaction will include four tissue-converting facilities and seven paper mills. Clearwater has said it agreed to buy Cellu Tissue to boost its national presence as a private-label tissue maker. It, too, reported solid, but lower, third-quarter earnings.

Shawn Church, editor of Random Lengths, a Eugene, Ore., publication that tracks lumber prices, says that despite some upswing, "It's still pretty gloomy. This year has seen lumber production continue to be reined in, with the industry cautious about overproducing."

Random Lengths' reported composite price for framing lumber has averaged $284 per thousand board feet through the first 11 months of this year. That's up from full-year annual averages of $222 last year and $252 in 2008, but still well below most of the previous 10 years, when it ranged from $311, in 2003, to $423, in 1997.

Random Lengths' composite price for 1,000 square feet of structural panel also showed a strong gain, averaging $327 through November, compared with yearly averages ranging from $259 to $408 in the previous five years. The last two months, though, that price for structural panel has slumped to $277, the lowest level of the year.

—Kim Crompton