Demand for lumber will rise 11% in 2010 from this year and mills are expected to increase output by 8%, the first recovery after five years of losses, the Western Wood Products Association (WWPA) predicted Thursday.

The Portland, Ore.-based group's newest forecast predicted that "2009 should be the bottom for mills, with lumber demand dropping to the lowest point in modern history."

Lumber demand will grow to 34.5 billion board feet from the 31 billion board feet expected to be used this year. The 2009 total was less than half the amount consumed in 2005, when demand for lumber peaked. WWPA based its increase in 2010 demand in part to an expected rise in housing starts to 668,000. Housing typically accounts for 45% of annual lumber consumption, the group said.

In response to the increased demand, Western mills likely will produce 11 billion board feet of lumber in 2010 while Southern mills will product 12.6 billion board feet. That's an 8% increease for both regions. WWPA believes imports from Canada will climb 18.8% to 9.4 billion board feet.

"Given the unprecedented downturn, recovery for the lumber industry is unlikely to follow the same path as it has in the past," WWPA quoted its economist, David Jackson, as saying. "The challenge for mills will be adjusting to a 'new normal' for the future."

For 2009, WWPA estimates only 7.2 billion board feet of lumber is being used in new construction, roughly a quarter the amount used in 2005. Another 11 billion board feet of lumber--26.6% less than in 2008--is being used this year for repair and remodeling.

On the production said, Western lumber output is expected by year end to show a 21% decline to 10.2 billion board feet, the lowest level since the 1930s. Southern U.S. mill production has declined to 11.6 billion board feet, while lumber imports from Canada have fallen 32% to 7.9 billion board feet.

"Both lumber demand and production should follow a slow upward trend in the coming years as the economy recovers and home construction regains strength," WWPA said. "However, it may be some time before lumber demand approaches levels seen earlier this decade."