EWP Outlook Housing slump holds back growth for engineered wood products

tTt"r ECoNoMrc RECESSToN-and

I housinc market depression-continue to do! manufacturers and distributors of engineered wood products. Forecasts for a recovery have been pushed out to 2012, forcing wood products to stay in a holding pattern against the depressed housing starts.

"While most of us have known for a long time that housing is a major portion of the business cycle, some economists and politicians are just now figuring it out," said Craig Adair, market research director for APA. "They're still wondering why first quarter growth was so anemic and why the economy is in a 'soft patch."'

Adair explained that new house construction and remodeling have traditionally made up about 5Vo of the U.S. GDP and last year it only repre- sented 2.5%b.

"A major point of economic weakness is housing, which continues to be mired in a recession triggered by excessive debt. It's becoming more evident that the remedy for housing is time," Adair said. He noted that because engineered wood products are so closely related to new home construction, it may be another year or so before the industry sees a meaningful rebound.

If there's any good news, it is that the bottom for glulam timber, I-joist and LVL production most likely occurred in 2009. Engineered wood production volumes increased in 2010 as housing starts increased from 554,000 in 2009 to 587,000 in 2010. APA's forecast is for housing starts to decline ro 545,000 in 201I and rhen rebound to 680,000 in 2012.

The outlook for glulam timber is better in 2012 than in 20ll because glulam is also closely tied to nonresidential construction and this market has been declining for a couple of years and is forecast to increase next year. North American production is forecast at 186 million bd. ft. in 201l, a decline of 5Vo. A rebound of 20Va to 223 mlllion bd. ft. is forecast for 2012.

I-joist market share is predicted to remain the same as 20 10, capturing 4OVo to 45Vo of raised floors. This is down from the sOEa mark achieved in 2008. As housing improves, I-joist market share should grow back to 507o. With a weak housing market in 201I, production of 430 million linear ft. is forecast, a decline of 9Vo, or 4l million linear ft. The forecast for 2012 is a 3OVo increase to 557 million ft.

In the structural composite lumber family, LVL production is expected to follow the demand for beams and headers and I-joist flanges. Production is forecast to decline lOVa in 2011, to 37.0 million cu. ft. For 2012, an lSVo increase is expected, to 43.7 million cu. ft.

Meanwhile, plywood and OSB are expected to hold their own in 20 I I because they are used in so many diversified markets. While housing starts may falter this year, the projected volumes for repair and remodeling, nonresidential building construction, and industrial uses are better. Overall, structural panel production is expected to total about 26 billion sq. ft. this year, the same as 2010. The structural panel outlook is for a 9Vo increase in 2O12, as all end-use markets expand.