Montana's Forest Products Industry.

• Author: Keegan III, Charles E.
• Position: Brief Article - Industry Overview - Statistical Data Included

Operating Conditions

After relatively high prices during the first two months of 2000, lumber prices fell sharply in mid-March and remained low for the rest of the year (Figure 1). Declining prices were due to a combination of factors, including:

* High production brought on by increased worldwide milling capacity and unfulfilled strong market expectations at the start of the year. Lumber inventories rose, and prices fell.

* Higher interest rates and a weaker U.S. economy.

* A strong U.S. dollar.

In addition to a weaker market situation, Montana's forest products industry--already struggling with limited timber availability --was hit with the summer's wildfires and increases in electricity rates. Wildfires caused forest closures for much of the summer, forcing some mills to temporarily cut back production in an effort to stretch log yard inventories. The closures also forced loggers out of the woods for much of the third quarter--normally one of their busiest seasons--although some did find work in firefighting activities. Furthermore, unprecedented increases in electricity rates for mills that purchase their electricity on the spot market led to additional curtailments in production at Smurfit-Stone Container Corporation in Frenchtown and the Louisiana Pacific particleboard plant in Missoula.

Sales, Employment, and Production

Total sales value of Montana's primary wood and paper products in 2000 was about $1.1 billion--down about 15 percent from $1.3 billion in 1999. Estimated forest industry employment was 10,600--a decrease of 300 workers from 1999 (Figure 2). Temporary curtailments contributed to the employment declines, as did the permanent closure in July of the American Timber Co. sawmill in Olney.

Montana's lumber production was just over 1.20 billion board feet in 2000, down 10 percent from 1.34 billion board feet in 1999 (Figure 3). Plywood production also decreased, falling 9 percent from 640 million square feet in 1999 to about 580 million square feet in 2000. Although production for many other wood products manufacturers, such as millwork, was also down in 2000, not all components of the wood-using industry saw declines. The log home industry and some secondary manufacturing sectors saw production, sales, and employment increase or stay roughly the same in 2000. Wood furniture manufacturers, which are not generally included in the forest products industry figures, saw an increase in production and employment.

Outlook

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