OK you have heard all the “experts” say housing is coming back. Economists, brokers, Realtors all have been predicting the housing Markets is starting to show signs of life from “it’s good in certain pockets” to “generally the overall market is improving” to ” the inventory of available homes is the lowest it’s been in years”. All just speculative words. We all know housing is a huge job engine. It is driven our economy for decades. So if housing is getting better like the “experts” say, where are the jobs?
Cameron McWhirter at the Wall Street Journal reported on Friday that “Plywood Becomes Hot Item as Housing Market Recovers” In this article McWhirter reports that growing demand and tight supplies have driven up the price of plywood by 45%. A higher price for plywood is one thing but this time it’s being followed up by investment in upgrading productive capacity. Georgia Pacific the largest supplier of Plywood indicates they have already boosted capacity with additional shifts and other smaller fixes. Now they must invest as they want to increase their softwood plywood and lumber capacity by 20%. They will do this by revamping and expanding current facilities across the Southeast. This expansion is expected to cost around $400 million over the next three years.
Boise Cascade the second largest producer of Softwood plywood has added workers and shifts to its plants and isn’t reporting any major expansion plans at this time. Given that Boise Cascade just became a public company on Feb 6th of this year, this is understandable. It should be noted their stock is up 60% since the IPO as of Thursday 3/21/13.
During the great recession, Production of softwood plywood has dropped from 16.3 Billion Square Feet in 2005 to 8.6 Billion Square feet in 2011. The American Plywood Industry has done an amazing job of matching production of plywood to consumption avoiding the huge drop in price that accompanies a gross oversupply. Peter Butzelaar a Vancouver consultant for International Wood Markets Group is quoted as saying that during the past five years, “a lot of capacity has either been removed or idled with the housing market collapse“. We have finally reached the point where price and demand have reached a level where companies want to and are willing to expand. Businesses in the US have always been willing to expand in order to meet demand. But the demand has to be there first or the investment is too risky. It’s nice to see that we have finally reached the point that expansion is prudent and necessary, at least with plywood.