PORTLAND (AP) - After scores of plant closures and more than 20,000 jobs lost since 1990, the forest products industry enjoyed some merciful relief last year.

The industry produced a rare, if tiny, employment gain statewide. Oregon lumber production was on track to reach its highest level in 14 years. Mill closures slowed.

By all appearances, the once-dominant industry has finally found a measure of stability after a radical restructuring that came after sharp restrictions in federal forest logging in the early 1990s.

Last year, more efficient mills, a home-building spree and moderately higher harvest levels helped the industry catch its breath.

That's progress in a state struggling to mount a recovery from a recession that launched a nation-leading job crunch, especially in manufacturing. Unfortunately, experts say, employment stability, and not growth, may be the best Oregon can expect from the timber business - and that's only if the industry keeps honing its tactics.

The industry still faces rigorous challenges, most notably to find ever-more-exacting efficiencies and product innovations to counter awesome competition from other U.S. regions and countries. In addition, some of the industry's improved conditions - especially a home-building bonanza driven by low interest rates - could wither in 2005.

Even in a record year for U.S. housing starts and lumber consumption, major producers in 2004 used new technologies, more than new employees, to meet demand for more two-by-fours. Oregon is the nation's top plywood producer, yet plywood is steadily losing market share to oriented strand board, a cheaper substitute largely produced in several North American regions but not in Oregon.

Competitors as far away as New Zealand are chipping market share from the full array of Oregon-based producers.

"I don't know of another Oregon industry that faces stiffer competition worldwide," state economist Tom Potiowsky said.

Even the competitive semiconductor industry, he said, comprises just a handful of major players, dominated by Intel, Oregon's largest private-sector employer. By contrast, hundreds of companies in dozens of nations make lumber.

Timber industry survivors describe themselves as more nimble and resourceful after the 1990s cataclysm. But if they are to hold onto their current foothold, they say, they must go further along one of two paths: Chase pennies-per-unit economies by competing in global commodity markets, or try to exact bigger price premiums by offering niche products and branding.

An industry report, prepared by Vancouver, Wash., consultant Eric Hovee and issued by the Oregon Forest Resources Institute in June, outlines potential initiatives.

The report calls for the industry, now more geared toward compromise than warfare on environmental issues, to look for ways to market Oregon forest products as eco-friendly.

Companies also could forge more relationships with builders, furniture makers and other secondary wood users to design products, the report said.

Such efforts might help rural Oregon cling to its timber employment, said Richard Haynes, economist for the U.S. Forest Service in Portland. But growth is unlikely.

"Stable would be the best you could hope for," he said.

With mounting housing construction in 2004, Hampton Affiliates churned out 1.4 billion board feet of lumber - enough to cover 32,140 acres with 1-inch-thick boards. The big Portland-based lumber producer made about 1.26 billion board feet in 2003.

But Hampton, which expects to rank among the top five U.S. producers for the year, accomplished the 10-percent annual production boost with about the same number of employees: 1,600.

"A lot of technology is going into the sawmills," chief executive Steven Zika said. "As we've gotten better, we've been able to put more into the technology to get more out of each log."

Because most companies' two-by-fours are virtually indistinguishable, commodity lumber producers such as Hampton generally cannot charge customers higher prices than their competitors do.

Instead, they must run a relentless race to lower their costs - a contest that rewards companies using technology to replace workers.

"That's the unfortunate part of being more efficient," Zika said. "Some of the efficiency makes the mills run better, but some of it eliminates jobs."

Some new devices have let mills trim the jobs most likely to cause worker injuries, such as sorting lumber as it is cut, known as "pulling green chain," said Allyn Ford, president of Roseburg Forest Products. Sawmill workers now are more likely to toil in front of computers than touch studs flying across production lines, he said.

At the same time, technology is replacing some of the highest-paying mill jobs. Among them are workers who grade lumber, typically by stamping it to indicate its quality and regularity. Such judgment requires substantial skill, said Haynes, the Forest Service economist.

Computers are beginning to replace those jobs, often providing a more consistent product, Ford said. Such consistency, combined with the strength and clear appearance of Douglas fir, is giving Oregon producers an edge, he said.

"A retailer doesn't want you to go through a lumber bin and sort out and get the one that you like," Ford said. "They want you to take the one off the top because they're all the same. The average consumer demands wood that looks nice."

With heightened product quality, commodity producers have a better chance of satisfying the rising expectations of big-box retailers, which command about 20 percent of lumber distribution, Ford said. Those companies increasingly want manufacturers to supply marketing and other support for the products they buy - services that are easier for domestic producers rather than foreign producers to provide.

"That's pretty difficult for someone in China or Chile," Ford said. "You can just sell a few products and disappear, but you're not going to get a high margin on that item."

Yet, any substantial employment growth for Oregon lumber producers may not come without some equivalent boost in harvesting, Ford and Zika said.

The Clinton administration's pledges of significantly more harvesting on federal forestlands have not been realized, and the Bush administration doesn't appear likely to fulfill the promises soon.

"If you want to have more jobs, you have to have more timber," Zika said.