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Lumber prices low, weak dollar attracts investments
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Lumber markets in coastal South Carolina and coastal Georgia will continue to suffer until the residential construction industry begins to recover toward the end of 2008, a forest products industry expert said Oct. 1.
Mills continue to scale back production due to an oversupplied housing market, said Scott Twillmann, senior analyst for industry market information provider Forest2Market. The crippled housing industry will keep timber prices below historical norms for at least a year.
“The downturn has become so severe, we expect to see mills with high production costs begin to shut down for extended periods, and some in the U.S. South will close permanently,” Twillmann said.
But commercial construction has not suffered as severely as residential construction, and plywood markets remain healthy compared to lumber markets, which is helping to keep timber prices out of the gutter in some areas of the southern U.S. Since lumber and plywood mills compete for the same raw material, the demand for plywood has kept stumpage - the price of standing timber - from falling even lower.
Another trend affecting the forest products industry in the coastal regions of South Carolina and Georgia, as well as the rest of the U.S. South, is the strength of the Canadian dollar, Twillmann said.
He noted the Canadian dollar has appreciated around 16 percent against the American dollar this year. The high cost of production combined with resource issues in Canada has made the South a very attractive place for investment by foreign forest products companies. Foreign companies are looking to the region as an area with plentiful resources where wood products can be produced at a lower cost and sold abroad for higher profits.
The forest products industry in South Carolina and Georgia employs more than 85,000 people with a combined annual payroll of more than $4.7 billion. Together, the two states have more than 36 million acres of timberland.
Charlotte, N.C.-based Forest2Market has developed sophisticated analytical tools to accurately forecast timber prices throughout the South.
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