Spokane Journal of Business

Timber industry assisted by the rallying housing market

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The wood products market is showing signs of recovery in the coming year, due in part to an uptick in new home construction in the second half of 2012.

Shawn Church, editor of Eugene, Ore.-based Random Lengths, a publication that tracks lumber prices, says 34 percent of its readers expect between 800,000 and 900,000 housing starts nationally in 2013, according to a survey conducted earlier this year. Twenty-two percent of survey respondents believe that number will be even higher, nearing 1 million, an improvement compared with past years, Church says.

This year, he says, the number of home starts nationwide looks to finish in the high-700,000 range.

"Further growth in housing is being widely forecast, with a greater share in multiunit projects," he says, adding that on the whole, the wood products industry is upbeat.

Despite rising demand, wood product suppliers haven't ramped up fully to fill that increased consumption as of yet, he says.

"Lumber is a true commodity that reacts to the principles of supply and demand," Church says, adding that demand has been relatively tight this year.

Northwest Farm Credit Services, in a forest products market snapshot released Sept. 30, projected that lumber prices will show seasonal weakness, but increase steadily during 2013, and said log prices have remained stable over the course of this year.

Despite demand outpacing supply, Church says some lumber harvesters and mills still are leery about increasing production.

"They need to have some certainty that bringing back a shift and restarting a mill is going to last," Church says.

Most that have continued operating during the economic downturn have added some shifts and increased hours this year, he says, but harvesters remain hesitant about starting back up.

Spokane-based Potlatch Corp., which owns more than 1.4 million acres of forestland in Idaho, Arkansas, and Minnesota and operates six manufacturing facilities in the U.S., projects lumber and log prices will firm up next year.

Potlatch experienced higher-than-anticipated demand for manufactured wood products through the first three quarters of 2012, the company said in its third-quarter earnings report, released Oct. 22. Potlatch projected fourth-quarter increases in lumber sales as buyers gear up for construction in 2013 on the heels of a slowly recovering housing market.

Potlatch reported wood-product revenues of $86.7 million in the third quarter, up from $83.6 million in the year-earlier quarter.

Clearwater Paper Corp., the Spokane-based tissue and paperboard products maker, reports it will start seeing between $35 million and $40 million in cost savings beginning in 2013 in connection with its acquisition of Cellu Tissue Holdings Inc. Clearwater Paper acquired the Alpharetta, Ga.-based tissue manufacturer in December 2010.

A new paper machine at its Shelby, N.C. facility is expected to be operational by the end of this year, the company says in its third-quarter earnings report.

The company reported net income of $19.1 million, or 80 cents a diluted share, in the third quarter of this year, up from $8.6 million, or 37 cents a share, in the third quarter of 2011.

—Jessica Valencia

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