By SCBIZ Staff

Lumber markets in the coastal regions of South Carolina and Georgia will suffer until the residential construction industry begins to recover, a forest products industry expert said Monday.

Mills will continue to scale back production because of an oversupplied housing market, said Scott Twillmann, senior analyst for industry market information provider www.forest2market.com. 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,” said Twillmann. He predicted the downturn would ease up by the end of next year.

But commercial construction has not suffered as severely as residential construction, and plywood markets remain healthy compared to lumber markets, which is helping keep timber prices out of the gutter in some areas of the southern United States. Because 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 coastal South Carolina and Georgia, as well as in the rest of the U.S. South, is the strength of the Canadian dollar, Twillmann said.

According to Twillmann, the Canadian dollar has appreciated some 16% 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.