Article by DK Knight
Co-Publisher/Executive Editor
Special thanks go to all logging business owners who took valuable time to participate in Timber Harvesting’s recently completed five-year Logging Business Survey. I sincerely appreciate your willingness to take part.
This comprehensive study is important in that it attempts to measure the standing of the nation’s logging force, to highlight new or ongoing issues and trends, to denote market shifts, and to provide loggers a forum for offering ideas and/or expressing opinions.
The survey summary article begins on page 18. I urge you to spend some time with this report, which contains good news and some not so good.
The Good Side
Loggers’ improved financial footing across the last 60 months is the good takeaway. For a majority, profits increased, the result of greater demand/higher production, better compensation, and the 2015 skid in fuel prices. The resilient logging force, albeit thinner in number, generally was encouraged during the 2012-2015 period, prompting some businesses to expand and some new entrants to roll the dice. Lots of new equipment—higher priced, more complex, longer lasting, and oh so productive—was purchased and put to work. This, combined with the low RPM housing recovery, along with dampened log/lumber exports and the shuttered mill here and there, effectively offset the recession-induced logging capacity shortfall.
The Other Side
The fog and drizzle takeaways include high operating costs not related to fuel, such as those linked to equipment, parts and service; market woes; insurance; transportation issues; delivery quotas; labor; and regulations. Other frustrations that surfaced: slow turn times at mills; timber quality/availability/price; lack of long-term contracts; and, for some, recent cutbacks in logging/trucking rates.
Last year’s falling fuel prices were a godsend to loggers and truckers, but for many in several states those lower costs have recently been blunted by a decline in demand for most all types of logs and wood fiber, leading to debilitating quotas. And fuel costs are creeping up again. Going into spring, most all mills had more than adequate inventories—some were overflowing—and had slowed deliveries. Some had cut prices; others had indicated that cuts were on their way. On the pulp and paper front, further price cuts may have accompanied scheduled spring maintenance downtime, which in some cases was extended from two weeks to three or more.
Market Fallout
As to markets, some scattered new ones opened in the last five years. However, much like the static population in my home county, where it seems a different man leaves every time a baby is born, it seems like an established market shuts every time a new one opens.
The Northeast appears to have been hit the hardest of late. The situation is especially stark in Maine, where suppliers continue to absorb one hit after another. A mild winter, combined with cheap, abundant fossil fuels, sharply reduced demand for wood fuel and pellet feedstock. In Maine and elsewhere, some pulp-paper mill co-generation facilities have converted to natural gas, at least partially. Even the demand for firewood was down. Covanta’s two idled wood-fired power plants may not re-fire, even with newly approved state subsidies, and the future of ReEnergy’s two wood-fired power plants may be questionable.
Maine’s pulp and paper mills, a major segment of the state’s $8 billion wood products industry, have been in a freefall, even though Woodland Pulp continues with its $120 million expansion. When Madison Paper Industries shuts its Madison mill in May it will be the fifth paper mill in the state to close in two years. That leaves six such mills operating in the state.
Elsewhere, Verso recently shut its coated papers mill at Wickliffe, Ky. and WestRock shut its mill at Coshocton, Oh. In 2013 IP closed its mill at Courtland, Ala. Also in recent years, Minnesota’s pulp and paper industry has been impacted by mill closures.
Market shifts and instability also contribute to logger trepidation. All the collective developments in Maine have created an imbalance in the state’s wood consumption, as hardwood pulp use now dominates. It’s just the opposite in southeastern Virginia and eastern North Carolina, where only pellet plants want hardwood pulp. And recently, a large paper mill in southwestern Arkansas converted to 100% softwood.
Ironically, in those aforementioned areas of Virginia and North Carolina, where logging capacity concerns were paramount only a few years ago, loggers in early May were reeling from tight quotas and deep rate cuts linked to overcapacity. “By mid summer the price for delivered pine pulpwood may be down to $25 a ton,” lamented a high production Virginia logger recently. “That would be down $10 from the high of last fall.” He added that previous stumpage price commitments to landowners only made his situation worse.
On the positive front, new or expanding markets are emerging in Calhoun, Tenn.; Shelton, Wash.; Louisville and Newton, Miss.; Corrigan, Tex.; Springfield, and Eugene, Ore.; Grayling, Mich.; Greenwood County, SC; Halifax, Sampson and Rockingham counties, NC; Dierks, Pine Bluff, and Clark County, Ark.; and Williams, Ariz.
Insurance costs of all types, especially auto for trucks and trailers, general liability, and in some cases workers comp (read truck drivers), continue as another key issue.
Another pull-down factor is transportation, which is challenging enough with the shortage of qualified, insurable drivers, federal regulations, state DOT inspections, and local restrictions.
Yet another sore spot for many is finding and keeping dependable, productive, loyal employees. When found, such employees must be paid well and otherwise provided for; else they are gone.
Hang in there guys. Remember, every storm runs out of rain.