Show Lumber I Plywood Prices Are Split The high level of building starts over the past few months is at least being translated into increased demand for lumber and prices have strengthened accordingly At the same time however plywood prices are struggling struggling gling to maintain upward momentum THE REASON for the price split in these two sections of the timber market is the additional plywood capacity that has been brought on stream in the course of the past year making producers considerably more flexible in meeting upsurges in demand In addition a number of competing materials have made some inroads into plywood plywood plywood ply ply- wood markets For example particle board is being used increasingly to replace sanded sanded sanded sand sand- ed plywood in cabinet work and interior housing uses Nevertheless at least one major manufacturer of plywood plywood plywood ply ply- wood is optimistic about further strength in the pricing of plywood due to a substantial increase in the market for plywood sheathing As a matter matter matter mat mat- ter of fact most of the expansion expansion expansion sion in plywood usage over recent years has been a result result result re re- sult of its mounting p popularity as sheathing FIRST HALF earnings performance performance per per- by bv a number of the major forest products companies proved quite pointing The third and fourth quarters however should be marked by generally improvIng improving improving im im- im- im proving percentage results since comparisons will be with the second half totals of 1970 at which time earnings earnings earn earn- ings were penalized by depressed depressed depressed de de- de- de pressed operations in the paper making segment of the industry Also promising a considerably brighter profits picture are not only the anticipated higher high high- er levels of residential housing construction but also improvement improvement improvement improve improve- ment in wood prices during the third and fourth quarter of this year in comparison with the second half of 1970 Along these lines still further strength may well be evidenced evidenced evidenced evi evi- evi- evi during 1972 ALTHOUGH in the past the lumber industry has been marked by a generally stable consumption pattern punctuated ed by occasional short periods periods periods per per- of feverish demand developments developments developments de de- de- de over the next few years may include sustained strong markets for lumber unlike unlike unlike un un- un- un like anything the industry has experienced up to this time If housing starts reach projected projected projected targets the industry will be hard pressed indeed to meet requirements for lumber and other wood products at reasonable prices Either more timberlands must be developed or the harvest of trees on presently used lands substantially substantially increased ATTEMPTS that have been made to step up production from federal timberlands have met wih rebuffs from conservationists conservationists conservationists con con- and others interested interested in in in- in preserving our wilderness as it is Most producers producers pro pro- however do have programs programs pro pro- grams under way to boost growth rates and thereby enlarge en i enl large the harvest of trees Also major producers have been intensifying development of timber in foreign countries a move which can be expected expect expect- ed to help take care of the high domestic demand It should be noted too that advanced technologies such as highly automated sawmills can go a long way toward easing the strong upward pressure pressure pres pres- sure on lumber prices es Over the longer term it would appear that the wood producers producers producers pro pro- will be able to streamline streamline streamline stream stream- line their operations and techniques techniques techniques tech tech- sufficiently to improve improve improve im im- im- im prove on past profits per per- ALTHOUGH common stock prices of the forest products companies have drifted off somewhat from their 1971 highs they continue to command command command com com- mand rather generous price- price earnings ratios Therefore with the exception of depressed depress depress- ed Boise Cascade which may be bought for its comeback potential by those in a position to speculate the Research Department Department Department De De- De- De of Babson's Reports is not currently recommending purchase of stocks in this industrial group Such issues however are still considered as strong holds for the longer term |