Industries in transition

Fewer logs will be turned into 2-by-4s at Inland Northwest sawmills this year, following an anticipated slowdown in U.S. home construction, industry officials predict.

Most of the nation’s lumber supply is used in new homes or remodeling projects. With the number of housing starts expected to taper off in 2006, lumber output at Inland mills will drop by 5 percent, according to projections from the Western Wood Products Association.

Still, market dynamics leave little room for complaint. U.S. lumber consumption reached an all-time high of nearly 64 billion board feet last year – or roughly enough wood to build 40 million tract homes. Lumber consumption has set records for four consecutive years.

Though lumber use is expected to drop by about 2 percent this year, 2006 is still expected to be among the best years on record, said Butch Bernhardt, spokesman for the Portland-based Western Wood Products Association. Domestic producers, however, are vying with imported lumber for market share.

Inland Northwest sawmills ship much of their product to the Midwest and East Coast, where they compete head-on with softwood lumber from Canada. In November, the U.S. cut back punitive tariffs on Canadian imports in response to a NAFTA ruling. The two countries have tussled over lumber imports for decades.

The tariffs did little to stem the tide of lumber from Canada, which continues to set records, Bernhardt said. Imports from Europe and South America are also increasing. Since the U.S. is one the world’s largest lumber consumers, everyone wants a piece of the market, he said.

Fueling domestic producers’ angst, a mountain beetle outbreak in north central British Columbia has killed thousands of acres of lodgepole pine stands. The provincial government is ramping up timber harvests in an effort to process dead trees before they lose commercial value.

A string of mild winters has allowed the beetles, which are endemic to the forest, to flourish. According to estimates from the B.C. government, the beetle epidemic has killed trees in an area the size of New Brunswick, with no end in sight.

Partly as a result of the beetle outbreak, Canadian lumber production is expected to continue increasing, Bernhardt said, fanning domestic producers’ fears about a “wall of lumber” heading south.

Those fears are exaggerated, according to Doug Routledge of the Council of Forest Industries, a timber trade organization based in Prince George, B.C

Mills have added third shifts or weekend crews to process the dead logs, but the ramp-up has been gradual, as opposed to a sudden surge, Routledge said. Producers are also looking for new products to make out of the dead lodgepole to keep from saturating the lumber market, he added.

“The wall of lumber that keeps getting referred to really isn’t happening,” he said. “The increase is pretty much at its peak now, and the new capacity is being built for alternative wood products.”

“Denim” log homes are one of the new uses emerging for the wood, Routledge said. The dead trees get a fungus called blue stain, which discolors the wood, but makes a distinctive-looking log home. Companies are also turning the dead wood into pellets for heating. Normally, the wood would be too expensive to process into pellets, but rising heating costs in Europe have created an export niche, he said.

Some of the logs are also being exported to other countries for processing, including the United States. That volume remains fairly small, however, due to government restrictions log exports, Routledge said.