Why the Lumber Industry and ETF May Cry ‘Timber!’

As the homebuilding business deteriorates, the lumber industry may be crying out “timber” as stacks and stacks of wood sit in lumber yards across the country, giving distress to this specialty exchange traded fund (ETF).

Low Prices. Lumber prices have stalled at their lowest price in 18 years, and small towns within the Northwest are seeing an industry disintegrate as they watch plants close and citizens lose their jobs. Scott Jagow at Marketplace speaks to Andrew Miller, CEO of Stimson Lumber, about the state of the industry from his point of view.

What’s to Blame? For the most part, plant closings and job losses are all due to the declining housing market and the fact that new homes are not being built. Stimson has closed five plants over the past year and a half, due to reduced pricing due to reduced demand.

Loss of Support System. The problem is that lumber industries are usually the support systems in small, rural towns, where lumber is produced. Economics aside, it puts tons of stress on these small communities.

What It Takes for a Turnaround. Miller believes the main change within the industry, and with the economy at large, is that people will get paid for their managerial skills, their decisions and their business plans. For the past decade, all you had to do was show up and turn on the lights. People are going to have to get creative, know their business and know how to generate capital.

• Claymore/Clear Global Timber Index (CUT): down 13.4% over past three months