A slowdown in home building is likely to end the record run enjoyed by lumber manufacturers over the past four years.
The Western Wood Products Association, which represents lumber manufacturers in 12 Western states and Alaska, said in its forecast that lumber demand fell in 2006 and is expected to slow further during 2007.
A decrease in housing construction is expected to reduce lumber demand in 2006 by 3.2 percent to 61.9 billion board feet, compared to the all-time high of 63.9 billion board feet recorded in 2005. The slide in demand will continue into 2007, with WWPA forecasting total lumber use at 57.1 billion board feet, a decrease of 7.2 percent.
The WWPA expects new housing starts will be down nearly 9 percent in 2006, and fall another 10 percent to 1.69 million in 2007. Residential construction is the largest market for lumber, accounting for more than 40 percent of the lumber used each year.
The association said the volume of lumber used in repair/remodeling is anticipated to decrease as well, though not as sharply. WWPA anticipates repair/remodeling use of lumber to fall 2.6 percent in 2006 and nearly 6 percent in 2007.
“While home prices will still fall in some areas, we think that housing starts and home sales are nearing a sustainable rate,” said Kevin Binam, the association’s chief economist. “But construction is going to be lower than we’ve seen in the past few years and that will mean less demand for lumber.”
Lumber imports are forecast to fall as demand slides, though volumes shipped from Canada will fare better than those coming from other foreign shippers. WWPA estimates Canadian imports will be down 1.4 percent in 2006 and off another 6.1 percent in 2007, slipping below 20 billion board feet for the first time in three years.
Non-Canadian imports will see larger declines, decreasing 11.7 percent in 2006 and 18.6 percent in 2007 to 2.28 billion board feet.