The consultancy that believes demand for more than 1 billion board feet of visually graded Southern pine lumber could be affected in coming years by potential changes in design values for the species now also believes the change will have markedly differing impacts on the region's timber mills.
Forest Economic Advisors (FEA) says the biggest hurt will be felt by mills that, because of finances and/or geography, won't be able to install equipment enabling them to grade their Southern pine products by machine rather than visually.
"Many of these mills will find it difficult to obtain the necessary financing for the purchase and installation of an MSR machine (about $1 million) in the current economic climate," the Westford, Mass.-based group says in a new supplement to its report on this issue it FEA released Nov. 29. "Other mills may be poorly located with respect to cost-effective access to high MSR-yield lumber. Therefore, if market conditions remain weak in 2012, the proposed changes in Southern pine design stresses will have serious consequences for a number of dimension sawmills--particularly smaller mills--for which MSR is not an option."
This crunch could come if the American Lumber Standards Committee (ALSC), a quasi-governmental agency that oversees lumber standard-setting groups, approves a proposal by the Southern Pine Inspection Bureau (SPIB) to reduce three key design values attributed to the wood by 22% to 39%. Truss and joist companies as well as framers and general contractors rely on these design values--which deal with issues such as bending, tension, and compression--to make certain they are building certifiably safe structures.
ALSC first thought about deciding on SPIB's proposal at its October meeting, but after a number of groups sounded the alarm regarding that idea, ALSC announced it would hold another hearing on Jan. 6. It could vote then to accept SPIB's proposal, but a loose coalition of interests is fighting back.
On Dec. 16, an ad hoc group calling itself the Southern Pine Design Value Forum sent a report in which it urged ALSC to trust the wood already in use, slow its consideration of changes, and open up the review process. And the next day, the Structural Building Components Association--a group whose members would be most severely hurt by the change--suggested ALSC at its Jan. 5 meeting announce what SBCA termed a "proposed" rather than a "final" decision, one that groups like SBCA then could appeal.
FEA's analysis stresses that the impact of reducing design values for Southern pine will depends on the products it's used in. For instance, it estimates the changes won't affect 35% of the board feet used in making roof trusses because that wood is used in web members, which typically don't need to have hiigh tension and compression values. Likewise, roughly two-thirds of the Southern pine used in rafters wouldn't be affected, but potentially 100% of the wood in floor joists would.
Notably, the design value changes affect only the Southern pine products that are graded visually. Today, only 1% of the Southern pine milled gets machine-stress rated, largely because MSR-rated wood costs more and in part because some growths of Southern pine can't pass the slightly higher stress tests that MSR imposes on the wood compared with what a visual grade stamp implies.
If the design values get reduced, FEA now believes there will be a 15% decline in demand for visually graded Southern pine, leading in turn to 5% to 10% lower prices for that type of lumber. Twenty of the 127 dimension sawmills currently operating in the South have MSR machines, so they'll be able to switch over and gain from MSR-rated wood's increased popularity. But for many of the others, the reduced value of visually graded lumber will make things tough; FEA estimates that a mill producing 100 million board feet of visually graded Soiuther pine will see its revenues drop by $1.3 million to $2.6 million.
"Faced with a potential revenue loss of this magnitude, and given that MSR is not an option, the mill would have to (1) absorb the loss, or (2) pass on the loss to timber suppliers, or (3) shut down," FEA wrote. "Given our forecast for slight improvement in demand and prices, we expect to see a mix of all three of these outcomes, with most mills continuing to scrape by as they did in 2011. However, if market conditions do not improve, many more mills will be forced to shut down."