Western lumber industry, wrestling with export lag, looks to upturn

It is probably an understatement to say that it has been a bad year for the Western US forest products industry. But if the lumbermen can get through a slump in exports, the end of 1980 should look much better than the beginning, industry spokesmen say.

To a business already hit by the worst housing construction slump in 35 years , the destruction belched from Mt. St. Helens in Washington State in May and June served as an angry exclamation point as it made giant toothpicks of leveled forests at its base.

Actually, the volcano's devastation had little economic effect on the region's wood products industry. But the eruptions seemed to underscore the troubled times. The heavy damage to the nation's home builders had been done earlier by soaring mortgage rates.

Now lumber and log exports, which posted increases last year, are headed for declines in 1980, further dampening prospects for the forest products business. Both volume and price are expected to post lower averages this year.

Log shipments logs overseas in 1979 amounted to 3.426 billion board feet, up from 2.988 billion in 1978. Average value last year was $456.58 per thousand board feet, up 31.1 percent from 1978. The December 1979 average value was $520 .95, which indicated the rising trend during the year. Experts predict 1980 volume at 10 to 15 percent lower, while prices decline 5 to 10 percent.

Exports of softwood lumber, grown primarily in the Western states of Washington, Oregon, California, and Alaska, rose sharply in 1979 to 1.745 billion board feet, from 1.354 billion in 1978.

"Much of the increase was to Japan, which took 640 million last year alone, an increase from 407 million the previous year," a Portland forest products analyst says.

He believes lumber exports will be down about 10 to 15 percent this year, although the Western Wood Products Association looks for a total close to 1979 's. The trade group's forecast for log exports calls for a 10 percent decline -- just under 3.1 billion board feet.

First-quarter 1980 log export figures bear out the pessimistic outlook for the year. Shipments in the first three months this year fell to 860.2 million board feet, from 896.7 million in the comparable 1979 first period. Exports were sharply down in last year's fourth quarter, then rebounded in the 1980 first quarter, but not enough to make up the slack.

Brighter first-quarter results came from overseas shipments of softwood plywood and softwood lumber. The plywood volume gained 10 percent, to 120 million square feet, through March of this year. "There was a substantial increase in southern yellow pine plywood out of the Southeastern US, which really accounted for most of the improvement," reports Burrle Elmore, editor of an industry newsletter published in Oregon. Softwood lumber exports were 23 percent higher in this year's first quarter, to 500 million board feet.

Even though some exports are down, the overseas business has been an important support to the US domestic wood products business. Asked whether 1980 is shaping up as one of the most difficult years for the forest products industry, he replies, "I hope we don't see one that is any worse."

"This is worse than it's ever been," sighs Robert Anderson, director of market research and economic services for the American Plywood Association. At one point in April, 77 percent of the 111 Western plywood mills were closed or had cut back operations. In the middle of that month, 48 mills shut down and 38 trimmed operations, actions affecting 12,950 workers.

Mr. Reseburg finds a ray of hope through the gloom, figuring the only way to go is up. "We've been scraping bottom and we should start seeing some improvement as the year goes on," he says.

One of the bright spots is California, the biggest domestic market for lumber produced in the Western US. Declining interest rates on mortgages stirred renewed home building there, as well as Texas.

But in the heavy industrial areas of the North Central and some of the Northeastern states, where there have been substantial plant closings and job layoffs, "people aren't going to be out buying homes at any interest rate," Mr. Reseburg declares.

But the decline in mortgage rates is a breath of hope for the forest products industry.

"We should see a considerably healthier industry toward the latter part of summer," he adds. Mr. Russell is estimating US housing starts of 1.1 million this year, down from 1.7 million last year.