SWEET HOME — Rebounding plywood prices signal some good news, and possibly improved job security, for the 150 workers at Weyerhaeuser's Foster plywood mill in Sweet Home.

According to numbers assembled by Random Lengths, a Eugene-based trade newsletter, plywood prices had been in a multiyear slump. But low mortgage rates have fueled a healthy market for new housing — and that in turn has meant higher prices for the Foster mill's product and new capital investments in the plant.

Whether those high prices will hold out or not is an open question. In the meantime, the Foster mill is in the throes of retooling, adding new equipment and capacity for making more product.

Weyerhaeuser spokesman Mike Moskovitz said his firm has upgraded the mill in Sweet Home significantly, adding a state-of-the-art veneer lathe to replace the 15-year-old spindleless lathe at the plant.

The new lathe will be used to peel 8-foot-long blocks of wood to make thin sheets of wood called veneer. Weyerhaeuser and other manufacturers use the veneer to make panel products such as plywood. The new lathe is expected to help the plant manufacture veneer more cheaply.

"Replacing the old lathe ensures current customer needs are met and positions us for improved competitiveness and safer, more reliable operations at Foster," Moskovitz said.

The Foster plant began plywood production in 1958 and has been upgraded over the years with new equipment. Most recently, in 1996, the original sawmill powerhouse was replaced with a steam-generating fuel cell system. The mill has the capacity to produce 300 million square feet of veneer and plywood each year and employs about 150 people.

Moskovitz declined to state how much the lathe cost, noting that it was part of the company's overall $750 million capital improvement budget.

He also refused to say whether the new investments meant that the plant would be safe from a closure in the future. Weyerhaeuser recently announced it would close three plants in the Southeast it had acquired when it bought Willamette Industries two years ago.

"It's important to mention, however, that Weyerhaeuser's decision to invest in the mill underscores our commitment to Oregon and ensures that our operations are competitive in the global market," he said.

Construction is continuing; completion and start-up of the new lathe is planned for later this month.

The most recent February numbers available for plywood prices show highs unsurpassed since October, when supplies were extremely tight, and demand improving. February prices for plywood were at $554 per thousand square feet, up from $427 in the prior month and $263 a year ago.

According to Jon Anderson, publisher of Random Lengths, while prices have flattened for plywood in recent weeks, it could take some time for a market correction, in part because the plywood industry put key investments in new capacity on hold during when prices were low.

"When prices tended to be bumping along at marginal levels both in plywood and oriented-strand board over an extended period, a lot of projects were put on hold that would have added additional capacity," Anderson said. "All the groundwork for what we're seeing recently in the structural panel markets goes back to the crummy markets of '01 and '02."

Anderson added that this is the time of year when demand is high, because the distribution system for plywood and related products has to buy up material in preparation to feed the housing markets, which have been robust for over a year and have only recently shown signs of leveling off.

The U.S. Commerce Department's Census Bureau said last month that privately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1.89 million, up 6.9 percent from a year ago but down 2.8 percent from December.

"Prices for plywood over the last several weeks have shown some signs of weakening," Anderson said. "But prices aren't likely to correct themselves overnight as long as the demand is there."