This year should mark the low point for the wood products industry, and signs of recovery should be seen in 2010 following multiple years of distress, those in the industry say.

In its newest forecast, the Portland-based Western Wood Products Association says 2009 should be remembered as the bottom of the economic trough for lumber mills, with demand having dropped to its lowest point in modern history. While lumber markets are expected to improve in 2010, the recovery will be slow for western U.S. mills, the association says.

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

Housing starts, a key for the lumber industry, are projected to have plummeted 39 percent this year to 551,000, the lowest volume since 1945, the association says. Housing starts are forecasted to grow 21 percent next year to 668,000, it says.

"We don't expect housing starts to exceed 1 million units before 2012," Jackson says.

Mark Benson, a spokesman for Spokane-based timberland and lumber company Potlatch Corp., says, "We believe we've seen the bottom of this market. The trend is in the right direction (now), but the next several months are going to be a kind of wait-and-see as to how much improvement we'll actually see."

Meanwhile, Clearwater Paper Corp., the pulp and paperboard company spun off by Potlatch a year ago, has had a good year fueled by tissue operations, says spokesman Matt Van Vleet. Clearwater focuses more on making tissue sold under private labels at grocery chains, as well as paperboard for cartons, packaging, cups, and other uses.

The company does, however, operate one lumber mill, at its sprawling Lewiston, Idaho, complex, and that mill, like others, is suffering the effects of low lumber demand, Van Vleet says.

"As the home building industry goes, so does our saw mill," he says.

Shawn Church, editor of Random Lengths, a Eugene, Ore., publication that tracks lumber prices, says prices aren't back to what mills have considered healthy levels, but are up from the bottom of the trough.

Random Lengths' reported composite price for framing lumber has averaged $219 per thousand board feet through the first 11 months of this year, down from full-year annual averages of $252, $284, $327, and $387 in the previous four years. Random Lengths' composite price for 1,000 square feet of structural panel has averaged $258 through November, compared with yearly averages of $292, $298, and $315 in the previous three years.

"Producers have squeezed production down to a level that meets historically low demand," Church says.

Still, "There's more optimism this year than there was at this time last year," Church says. Last year, retailers and distributors had larger inventories than now, but have shrunk them to "bare bones" levels, and producers also have shrunk their output, he says.

"There's a better sense that supply and demand are now equal, and that gives traders a better sense that the market holds better prospects," Church says.