Story Discussion By Greg Garrison / The Daily News | Posted: Monday, May 3, 2010 10:15 pm
Truck driver Craig Lovingfoss tosses a strap over his lumber load at the Simpson Lumber Company's sawmill. Simpson has been running at full capacity since Jan. 1 after curtailing production last year.
A 2009 wall calendar hangs outside Rick Wood's office door at Simpson Lumber Co.'s Longview sawmill.
Fifty-six squares are highlighted in yellow, representing days the mill didn't run. A few more weeks are shaded in blue, marking when the plant cut back from two shifts to just one.
In all, 136 shifts didn't run last year, as the sawmill operated at 67 percent capacity.
"Worst year ever," says Wood, the plant manager, who has worked at the Third Avenue facility since 1996. "Hopefully, that will be the worst I'll ever see in my career."
Wood and other industry managers are cautiously optimistic about a gradual recovery for the lumber industry after the housing collapse sent prices and demand for wood products plummeting to historic lows last year. The lumber market showed signs of improvement through the first quarter of this year. But it was fueled in part by a housing tax credit that expired last month, and two bugaboos that drove prices down still are a problem — unemployment and high foreclosure rates.
The Simpson plant, which employs about 85 full-time workers, has been running at full capacity since Jan. 1.
Last week, Weyerhaeuser — Longview's second-largest employer — announced earnings in its wood products division had improved by $60 million over the previous quarter, although it is still operating at a loss. Weyerhaeuser executives said they expect their wood products sector to return to profitability in the second quarter.
Creeping back
Lumber prices are creeping back up after dropping to lows that haven't been seen in decades. Douglas fir lumber, which dipped to $347 per thousand board feet last May, has climbed back up to an average of about $463, according to Mike Fiery, a timber market analyst for North Carolina-based Forest2Market.
"Prices have seen a big increase," said Fiery, who thinks Douglas fir could reach $500 per thousand board feet in the next few months.
Demand also has shot up. Lumber orders increased 19 percent through mid-April, according to Butch Bernhardt, spokesman for the Portland- based Western Wood Products Association, an industry trade group.
"The increase is welcome," Bernhardt said. "But we're still far from any sort of sustainable recovery from what we just experienced."
It's going to take a long time to rebound from the dramatic losses of last year, when unemployment and foreclosures ballooned and demand for new homes collapsed.
About 554,000 new homes were built in 2009, the lowest annual total in the U.S. since 1945. By comparison, about 2 million new homes rose in 2005.
Since that high period in 2005, annual lumber production at the roughly 165 western U.S. sawmills has plummeted from 19.3 billion board feet to 10.3 billion, Bernhardt said.
Companies and workers have felt the consequences.
As many as 15 western U.S. sawmills shut down completely over the last two years. Just about every facility curtailed production, and many cut back to almost half capacity, Bernhardt said.
Weyerhaeuser laid off 19 workers last March at its Longview sawmill, which opened in 2008.
Tacoma-based Simpson avoided layoffs at its Longview mill, but all those days off meant a 25 percent pay cut for most of its workers.
"Last summer we hit some real historical bottoms," Fiery said. "When you talked to people, they weren't very happy to be in the industry."
Demand still 'anemic'
Despite the encouraging start to 2010, experts warn that recovery is several years away and there still are plenty of reasons to be concerned.
Demand has increased, but that may be a result of wholesalers' need to finally replenish supplies after going months without ordering lumber.
"Inventories in the distribution system were bled down to zero," said Jon Anderson, publisher of Random Lengths, a Eugene, Ore.-based trade publication that follows the wood products industry. "Now we're in rebound mode, but it's not great."
Anderson said even the most optimistic forecast of 700,000 housing starts for this year would be far from what is needed for a successful turnaround.
"That's still anemic at best," he said.
Housing starts may not climb back above 1 million until 2013, Bernhardt said.
"A lot of fundamental issues that led to the decline in housing really haven't been fully resolved," Bernhardt said.
New home construction and remodeling will lag until joblessness — now at 9.7 percent nationally — drops, he said. Also, he added, so many houses are vacant due to foreclosure.
"Until you start soaking up some of that excess inventory, there's not a lot of incentive to build new houses," Bernhardt said.
Fiery expects to see lumber prices drop slightly now that the $8,000 tax credit for new home buyers has run out. He said the credit, and its extension through April, helped give the industry a boost.
"I would expect that when that thing runs out, we'll start seeing prices drop off again," he said.
Anderson said with all the uncertainties, many companies are taking a wait-and-see approach.
"Under the current climate, anybody operating a sawmill has a lot of decisions to make as far as reopening a mill, adding a shift, et cetera," Anderson said.
Wood, the Simpson plant manager, said morale is improving among his workers, but he makes an effort to keep things in perspective.
"When I talk to my crews, I use caution," Wood said. "I don't see a full recovery in our industry until at least 2011, and maybe not until 2012."
|
