Gypsum wallboard prices are slowly recovering from a spectacular collapse that drove them from a record high in early 2000 down to 1996's price levels, according to the federal Bureau of Labor Statistics. Prices fell 35% between a peak in February 2000 and a low point in June 2001, says BLS. Since then, prices have started to rebound and are 16% above last year's depressed level. But they have only returned to where they were in 1997.

ENR's 20-city wallboard price peaked at $236 per thousand sq ft in the first quarter of 2000, after increasing 36% the previous year. ENR's price then fell 20% over the next two years before recovering in 2002. At $203 per thousand sq ft, it is now 8% above last year's level. "Wallboard prices are definitely starting to trend up," says Sam Nicholson, vice president of pre-construction services for Framingham, Mass.-based Perini Corp.'s building division.

(Source: Bureau of Labor Statistics)

The recovery in wallboard prices comes with demand holding at last year's level. Through July, wallboard shipments totaled 17.5 billion sq ft, up from 17.2 billion sq ft for the first seven months of 2001, according to the Gypsum Association, Washington, D.C. "We expect to meet in 2002 last year's wallboard production figures of 29 billion sq ft," says Shannon Bass, an association spokesperson. The difference is that there is now less supply chasing that demand. Last year, Chicago-based USG Corp. closed two plants and Georgia-Pacific, Atlanta, idled six. This year, USG closed an additional plant, while Georgia-Pacific idled two more, says the association.

The curtailment of capacity had an immediate impact on prices. USG recorded $503 million in net sales of wallboard for its second quarter 2002, $83 million more than last year. It credits wallboard pricing for the leap in revenue. For the second quarter, USG's gypsum wallboard prices averaged $102 per thousand sq ft, a 41% increase over 2001, according to company filings to the federal Security and Exchange Commission.

Centex Construction Products Inc., Dallas, says that its sales volume for second quarter was down 4% compared to 2001. However, the company still reported a 38% increase in wallboard revenue due to higher sale prices, averaging $92.53 per thousand sq ft, a 60% jump over the same period last year, according to its SEC filings.

However, the rebound may be short- lived, with higher prices and steady demand already luring some capacity back. In July, the BLS wallboard price index fell 3.3%, and ENR's prices held steady through August and September.

In a sign of producers' willingness to crank capacity back up, Georgia-Pacific in June opened a new $35-million wallboard manufacturing plant in Las Vegas. "The area's tremendous growth in the residential and resort sectors is definitely appealing," says Barbara Squires, a Georgia-Pacific spokesperson.