Slow downs and mill closures

[Tillaway]

I don't know what it is like in your area but the North West is entering a timber recession that will rival and may exceed 1981.  The mills cutting dimension lumber in my local area have virtually stopped buying logs not under long term contract.  That means small landowners have no market and when when the PO's they have run out they are done shipping logs.  Lumber prices FOB mill are below prices in 1981 when adjusted for inflation.  Purchasers of Oregon State timber are now bleeding pretty bad.  Three of them are losing their markets, these folks are log brokers, and shutting down all their logging operations come the end of the month.  The mill log buyers are telling the logging company owners and crews to "not buy anything big".

The hardwood mills are starting to follow the softwood mills lead.  Most have their log yards plugged from paying insanely high prices up until about 6 weeks ago.  Now they have all but completely taking logs.  One mill in Washington is still taking logs but only until the end of the month.  It does not look like a very happy holiday season.

The softwood mills are operating on reduced hours and have eliminated shifts completely.  Some mill workers are getting only about 20 hours a week.  Next week at least one local mill will shut down through Thanksgiving.

This doesn't look good.

[Left Coast Chris]

Its pretty bad down here too.  Sierra Pacific has slowed down also.  They are pretty diversified by building windows, doors, and make power poles.  They recently started doing some land developing also. 

They are used to fluctuating markets.  Hopefully they can ride this one out.  Sooner or later the housing demand will have to increase since the population is growing and imigration is not shrinking eh?

[Gary_C]

I posted this about two weeks ago:

Conditions are getting rather ugly around here. One large western Wisconsin mill was just shut down by their bank. Supposedly they were $9-12 million in the hole and still digging. Banker sent his men out and terminated all workers. He also went out to all active logging jobs and told the loggers to drop everything right where they were and have their equipment out within 30 minutes. Land owners were not getting paid for logs already hauled.

Another large mill in northern WI has shut down their largest mill. I know they own some DNR contracts that are not being cut.

Also one small mill in Minnesota is fighting with another mill. Seems one mill has told private landowners that his competitor has screwed some landowners with the help of a MN DNR Forester. The DNR Forester is threatening to sue but I don't think the state will allow it.

Yes, things are bad right now.

On the pulp side, the LP plant in Hayward (OSB and building siding) has shut it's doors untill the first of the year. The paper mills are still running well but getting too much wood offered so you can only get quota for about a third of what you ask for and at rock bottom prices.

At the same time those mills are buying up every timber sale they can get. They all expect this will turn around within the contract time (usually five years) and then they will have cheap raw material already purchased.

Hope they are right.

[thecfarm]

That is not sounding very good.Have not heard or read anything like that yet up here.I might read about a slow down in the papermill just about this time of year,but it useally picks back up.

[stumpy]

What are the major factors causing this?

[Gary_C]

The biggest reason for the slowdown in this area is the severe housing slump. About two years ago the pulp mills were fighting over the pulp wood supply and paying outrageous prices for stumpage. Then OSB prices crashed. In Jan 06 OSB prices at the mills went from $15 per sheet to $4. One large OSB plant shut down 3/4 of their capacity because the logs in their yard cost them more than they would be worth if the made them into OSB. 

The paper business has been steady, but the paper mills are slashing the prices they pay and putting all suppliers on strict quotas.

The hardwood mills have had to face not only much lower prices but very limited demand. They are having real problems moving truckloads of red oak and even maple. So in desperation they are trying to cut for pallet parts and there is little money in that.

[Woodhog]

Here in the Canadian Maritimes this is old news.

Forestry has been non profitable for a few years, massive mill closures.

I work in the logging end and sold my equipment last spring, while I could still sell it.

Equipment trader magazines full of skidders, forwarders, processors.

A lot of the operators have gone west to the Oil Patch where they can make loads of money compared the pittance earned in the woods around here.

A lot of truckers have also gone out west.

The principles they have been applying, go big, produce more product look a bit silly now as the largest mills file for bankruptcy protection one after another.

This industry is on the brink of total collapse around here.

Some day they will learn and do things like ship out pre packages houses instead of ship loads of raw lumber for others to make the bucks on.

The woods are getting more quiet and peaceful every day.

[sawguy21]

Ugly here too. The coastal mill workers settled their strike but a lot have no job to go back to. Pope and Talbot have filed for creditor protection which puts 5 or 6 mills around the province in jeopardy. Our orders from local mills have dried right up.

[beenthere]

What are the major factors causing this?

Stumpy
I'd suggest might be due in large part to the swing to a liberal Gov't being voted in; makes the business outlook bleak. The very loose control on housing loans happening for many years, and the influx of illegals (not legal immigrants) and loose social programs, combined make the industry being wise when  investing in a lot of inventory that they might have to hang on to during some down-turn times.
Just an un-educated guess on my part.      It seems all a chain reaction to the mood and swing of the voters. And more to come. 

[Ron Wenrich]

Its not a liberal vs conservative thing.  We're in a super credit crunch.  Bankers caused it by taking super risky loans.  Consumers caused it because they believed the line that salesmen were giving them that they could buy with zero down.  Businessmen caused it because they looked at the near term profit and believed it would continue forever.  Government caused it because they keep on living outside their means and felt that China and Saudi Arabia would underwrite their debts forever.  Government also cut interest rates in order to bail out bankers, consumers and businessmen, only to find the dollar crumble against other currencies.  The rest of the world has lost faith in the US dollar.

We haven't noticed any problems at our hardwood mill.  We never bought anything on credit, so we don't have to work in order to pay the bills.  I have been expecting something to burst, but it hasn't.  I can sell all the ties that I produce, all the pallet stock, and anytime I need to sell grade lumber, its just a phone call away.  We haven't switched markets even when times were good.  Now that times are bad for other people, we are still selling to those established markets.  Our faithfulness in our buyers is now being repaid.  We have also given our buyers what they need at their specs and haven't tried to skin them on grade or quality.  As others fall to the wayside due to debt load, we can take over theiir marketplace.

Now, prices have dropped.  I predicted red oak prices to drop about 5 years ago.  It had run its course and was getting a little long in the markeplace.  Veneer prices have also dropped and grade on both lumber and veneer has stiffened up.  You have to buy stumpage accordingly.  There is always someone who wants to sell timber.  Consultants continue to sell in an economic slump.

This past week we sent 13 loads of logs out for export.  2nd and 3rd cut white oak at a price that was better than what we could get if it was sawn into lumber.  We also exported some tulip poplar veneer.  These were all through independent log buyers.

Firewood remains brisk, farmers need sawdust, and there hasn't been any dropoff in the need for chips.  So, I can't really complain.  I know its a lot worse in other places, but I still see log trucks on the road.

[Texas Ranger]

This weeks Random Lengths gave the reason in great detail, with a graph showing the housing slump/cratering.  Texas like the rest of ya.

[SwampDonkey]

For years they have preached that the guy at the stump has to increase efficiency. They are as efficient as they can ever be. Even the most modern mills are closing doors along side mills that have never upgraded in decades.

Some operations continue because they are very diversified. These operations are not only in the forestry business, but many other sectors and can seem to make money when others can't pay the power bills.

In the Maritimes as well as most other areas of the country we have over capacity and rely on exports. When exports fall, mills close and prices hit rock bottom. Maybe we should let our wood grow to 18 inches for awhile instead of trying to make a profit with 4" wood.  Maybe we simply have too many mills producing for the export market. Maybe some of those need to close and make way for value added products that can be sold domestically and close the door on imported cheap knock offs or at least give me a choice. Just because we have billions of acres of forest doesn't mean we have to manage every square inch for lumber and pulp production. I think it should be managed for domestic needs first before we think of those outside our borders. 

[woodmills1]

things are pretty bad here

cant sell low grade hardwood logs, worth more as chips or firewood

oil is so high that everything is affected  making firewood better

housing market in the dumps so pine is worth nothing unless very fine

pine and oak pallet very near equal in log market

maple falling fast from its historic highs



however been very very busy making cut to order lumber so somewhat protected personally

[Dave Shepard]

We don't have many sawmills left around here, the ones that are still in business are holding steady. There have been four paper mills closed in a ten mile radius this year, something like 300 jobs lost.


Dave

[thedeeredude]

Why are so many paper mills closing across the country?

[Ron Scott]

I' m told that it's due to a poor and decreasing paper markets due to the increased use of electronic mail and processed paper being imported from China.

[sawguy21]

Why are so many paper mills closing across the country?

They also are not getting the pulp and hog fuel they need from the sawmills that are shutting down.

[solodan]

Its pretty bad down here too.  Sierra Pacific has slowed down also.  They are pretty diversified by building windows, doors, and make power poles.  They recently started doing some land developing also. 

Well Chris, SPI has three mills within a half hour of me and I don't think I have ever seen their log yard so full. They are still running 3 shifts a day at the one closest to me in Standard. They have cut the price on logs, cause they don't really need them. On average SPI saws 3 million feet a day. They have also been into real estate for some time now. Red Emerson is the largest private land owner in North America. He surpassed Ted Turner sometime around 2000. I think he can ride this slump out, and somehow I have a feeling he will aquire more land through all these slow times.  Slow times are not necessarily slow times for everyone.

[Cedarman]

Loggers should position themselves for the turnaround.  It will come. Either the demand for logs will go up because the economy improves or $100 oil will make forest products in demand for biofuels.  Right now there is a glut of wood relative to demand.  In a perverse sense doesn't it make sense that we let the tree huggers lock up all the state and federal wood thereby decreasing the amount of timber available? I can remember a New England company telling loggers to sleep at the woods so they could log cheaper.  Cut costs! 

Landowners and loggers are price takers.  The only way to higher prices is less available trees,(helps landowners)  Or too few loggers (helps loggers).  If a lot of loggers sell their equipement, when the turnaround comes, those in business will be able to cherry pick their jobs and be in a position to argue price.

We have more cedar in the yard than at anytime in history.  I am now turning people away.  Calls keep coming in and we are as busy as ever.  So far there has been no price resistance in our niche markets.  Right coast seems to be hungry for cedar.

[snowman]

I started logging in 72 and quickly learned that logging is boom or bust.Trick is save your money in the booms for the bust that will surly follow.Most of the time it's economic forces. The clintoon reign of terror was the exception. In that case mill closures were policy.Loggers in unemployment line was the goal.