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Show mm BETTER RESULTS LIKELY FOR LUMBER INDUSTRY Last year the wood products industry suffered through one of its severest downturns since the 1974-75 recession. This was due primarily to the slowdown in the housing field caused by the soaring interest rates, tight credit, and general weakness of the economy. Lumber and wood products are, of course, still the chief building materials used in home construction, accounting for around 15 percent of the price of a typical home. Almost one-half one-half of the total softwood lumber cut each year is used in home construction. The western lumber industry, which provides over half of the nation's wood products, was particularly hard hit, not only by the slump in housing but also by the sharp decline in exports, expecially to Japan. Hence, by the midpoint of 1980, 47.6 percent of the sawmills in the West had either curtailed production or closed down entirely. Because of the slackened demand, the prices of lumber naturally took a tumble, further depressing the industry. BETTER TIMES COMING Owing to still high interest rates, housing will undoubtedly remain in a slump for a while longer, which will further hurt the lumber companies. As the current year progresses, however, we anticipate an improving economy along with some easing in the interest (and mortgage) rate situation. As this develops, the housing industry should start to rebound. It is obvious that there is a strong demand for housing, and this will undoubtedly un-doubtedly increase further in coming years. The 25-44-year-old house-buying age group is expanding, and some estimates call for well in excess of 2 million new housing units annually to meet this demand. In view of the fact that construction has been running well below this level, there is currently a substantial housing deficit. Therefore, as building begins to revive in the period ahead, the important forest firms should do well. THE MAJORS Five of the country's leading forest product companies are Boise Cascade, Champion International, Georgia-Pacific, Georgia-Pacific, Louisiana Pacific, and Weyerhaeuser. Considering the earnings ear-nings downturn experienced by these firms lasf 'year, it would be 'logical' to expect that their'stocks might well be very depressed. But such is not the case. Overall, share prices performed reasonably well and most issued are not about midway between their highs and lows of the past twelve months. Investors have evidently been anticipating an-ticipating an improvement in industry conditions and a return to a healthier building environment. The Research Department of Bab-son's Bab-son's Reports feels that current investor in-vestor optimism regarding the top lumber companies will be justified, especailly in the latter part of 1981 and into 1982. So, hold positions are being maintained on the stocks of the foremost companies, while Champion International and Georgia-Pacific appear attractive for purchase by those interested in buying into wood products. AN IMPORTANT INDUSTRY At a time when there is so much concern over the depletion of our natural resources, it is comforting to realize that timber is one natural resource that is definietly renewable. U.S. forests currently cover approximately ap-proximately 740 million acres, of which some 488 million acres are classified as "commercial." Trees unlike coal, oil, and gas can be harvested and replaced with seedlings which, under proper reforestation methods, can grow to maturity in 30 to 40 years in the South and 60 years in the Pacific Northwest. Therefore, even though billions of board feet of lumber in the national forests are destroyed each year by fire, insects, disease, windstorms, inefficient inef-ficient logging and milling, and recently even by a volcanic eruption, this country still posseses one of the largest supplies in the world of standing softwood saw timber. |