WWPA expects 2009 lumber demand will fall to its lowest level in modern history, meaning its lowest level since the end of the Second World War - a moment in time that is significant because it marked the beginning of the nation's recovery from the last ravages of the Great Depression. Millions of returning soldiers used their government guaranteed GI benefits to purchase their first homes, fueling the greatest housing boom in history. Save for the occasional recession, including a rather nasty one in the early 1970s, the housing industry has been booming ever since.

            How bad is it? WWPA predicts that only 432,000 new houses will be built this year, 20 percent of the number built in 2005, the last boom year in the current cycle and less than half of the number that were constructed last year. If WWPA's extraordinarily gloomy assessment is correct, the long recovery process won't begin until sometime next year. The association's economist predicts. 553,000 units will be built. However, he says that total home construction will not again top one million units until 2012.

            In normal times, the absolute demand for shelter - single and multi-family homes needed to service birth, immigration and replacement housing - is about 1.4 million units per year, a fact that suggests that demand for housing could reverse course quickly once the country works its way through its still growing inventory of foreclosed homes. There is ample evidence this process is underway now, thanks in large part to record low mortgage interest rates.

            Meanwhile, the West's softwood lumber industry is struggling mightily under the weight of declining demand for structural building materials. Homebuilding accounts for more than 45 percent of all lumber consumed in the U.S. That means that this year only about 5.3 billion board feet will be used, compared with 27.6 billion feet in 2005. Since reaching an all-time high of 64.3 billion board feet in 2005, total U.S. lumber demand has dropped by more than 55 percent - the steepest decline in history. As a result, western lumber production is expected to decline 26 percent to 9.7 billion board feet - its lowest level since the 1930s and a little more than have what was produced in 2005.

            Poor markets have been even harder on Canadian producers. Softwood imports are down nearly two-thirds from 2005. Many observers believe it will be years before Canada's lumber industry recovers. In western Canada only three lumber producers of any size - Canfor, Tolko and West Frazier are still in business. To make matters even worse, Interior British Columbia's industry has been further wracked by a pine beetle infestation that has wiped out millions of acres of lodgepole pine.

NAHB reported that overall housing starts fell to a seasonally adjusted annual rate of 510,000 units, due entirely to a 29 percent drop in multi-family housing starts that wiped out a big March gain in apartment and condominium construction.

"While improving interest among potential homebuyers has builders more optimistic these days, we don't want to ramp up production until sales of new homes pick up," NAHB chairman Joe Robson said in a statement that seemed to be aimed squarely at the association's anxious contractor members. "A cautious attitude about new building s definitely what's called for here, and that's what most builders have wisely adopted for the time being."

According to NAHB economist, David Crowe, April's numbers are on target with the association's belief that housing starts will bottom out sometime in the second quarter of this year. "Single-family starts remained virtually unchanged over the past three months, indicating that we are closing in on a bottom," Crowe said. "Multi-family starts, which tend to bounce around from month to month - were responsible for the decline in total starts as they readjusted following a substantial gain in February."

            Weakness in credit markets remains the underlying culprit. Very simply, homebuilders cannot get loans to acquire real property or fund actual home construction. Until more credit is available - and the existing inventory of unsold homes is worked down to more traditional levels - the housing industry will not fully recover.

            Regionally, the outlook is still very mixed. Housing starts shot up 16 percent in the Midwest in March, but declined elsewhere - 25.4 percent in the Northeast, 16.8 percent in the South and 26..3 percent in the West.

The latest to go is the company's small-log stud mill at Pablo, just north of Ronan, Montana, about an hour north of Missoula. The plant's 87 workers will be offered a severance package plus any accrued retirement or pension benefits. Most of the plants work force has been with the company for many years.

In March, Seattle-based Plum Creek- the largest timberland owner in the United States - announced that it was closing its mill at Fortine, about an hour's drive north of Kalispell. The sawmill, which originally belonged to a Eureka, Montana lumberman, had run continuously for more than 50 years.

Plum Creek's first quarter earnings report lists a $22 million loss from manufacturing operations, more than twice the $9 million loss it reported in the same quarter last year - a loss sufficient to also cause the company to warn employees at its Kalispell-area stud mill and its Columbia Falls pine mill that those plants could close too if market conditions do not improve over the next 60 days.

Thus far, company officials say they do not plan layoffs at their Columbia Falls medium density fiberboard plant or their Kalispell-area plywood facility. However, the fiberboard plant, which doubled its capacity less than five years ago, is totally dependent on chips that come from sawmills in western Montana, northern Idaho and Interior British Columbia. Just how long those mills will continue to operate in the current homebuilding climate is an open question.

Meanwhile, Plum Creek officials at Columbia Falls say they have sufficient log and chip inventories to operating - so long as there is some semblance of a market for MDF panels and plywood.

It's a tall order given the fact that most timberland within economic reach of the facility is federally-owned, and the federal government is, for all intent and purpose, no longer a factor in Intermountain West fiber markets. But rank and file union members at the facility are banking on the fact that Gov. Schweitzer - a darling in Democratic Party circles - can somehow persuade the Obama Administration to ride to the rescue.

"They need supply for the long term," Schweitzer told Missoulian reporter Michael Moore. "This is an important link in the entire timber industry in Montana."

Indeed it is. The Frenchtown mill, which currently employs 400, has been a reliable purchaser of sawmill residues for decades. As such, it has provided an important secondary revenue stream for sawmills that would otherwise have no market for their wood waste. Several observers have speculated that the loss of the Smirfit-Stone might well be the tipping point for what remains of western Montana's sawmilling industry.

            Smirfit-Stone is currently working on its Chapter 11 bankruptcy reorganization, which makes Gov. Schweitzer's success - or failure - all the more important. Although company officials refuse comment, it seems likely that the Frenchtown facility will survive reorganization if it cannot find a long-term fiber supply.

Were the Obama Administration so inclined it could easily come up with a perpetual supply of low quality fiber ideally suited to the mill's needs. Most federal forests within a 100-mile radius of the mill are either dead, dying or badly overstocked with small sickly trees that need to be removed before they wildfires overtake them.