Layoffs at Flathead Plant
Plum Creek Feels Squeeze from Housing Woes
By Myers Reece, Flathead Beacon, Guest Writer, 3-26-08
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| Lumber is stacked around the Plum Creek remanufacturing plant in Evergreen where 18 employees were recently laid off. - Lido Vizzutti/Flathead Beacon | |
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People just don’t need studs like they used to.
On March 19 Stimson Lumber Co. announced the closing of two stud mills in Bonner and Coeur d’Alene as a response to nationwide struggles in the housing and lumber markets. A little up north in the Flathead, Plum Creek Timber Co., the giant of the timber industry, is running into similar difficulties.
In January and February Plum Creek laid off 18 employees at its Evergreen remanufacturing plant near Kalispell, which specializes in fingerjoint studs used in the framework of houses – the common stud is the 2 by 4. The layoffs came about six months after 14 employees were laid off at Plum Creek’s other stud mill, the Ksanka plant near Eureka. Demand is low for studs because far fewer houses are being built than in past years. Plywood mills across the West have also been hit hard in the past year, another reflection of the housing market.
“Studs are pretty much tied to the housing market,” said Jim Lehner, Plum Creek’s director of community affairs. “When the housing market is bad, it’s just tough to sell that product.”
The struggling markets are taking a little wind out of Plum Creek’s sails following a solid fourth quarter at the end of 2007 in which the company pulled in $118 million in earnings, 42 percent of the year’s total earnings and a 71 percent bump from the previous year’s final quarter. Those fourth quarter earnings followed a dismal third quarter. But Lehner said the 2008 first quarter has been hard for the nation’s biggest private landowner – Plum Creek owns 8 million acres nationwide and 1.3 million in Montana.
Three of the laid-off Evergreen employees have gotten different jobs for Plum Creek, Lehner said, with four more about to do the same. The layoffs at Ksanka last year resulted more from timber shortages and the destructive fire season than from housing woes, Lehner said. To his knowledge, none of the 14 Ksanka employees found work within the company again. Lehner said Plum Creek doesn’t have plans for more layoffs or mill closures. The company has 1,100 of its 1,400 statewide employees in the Flathead Valley.
“Markets rise and they fall,” Lehner said. “We expect that the market is going to turn around but we don’t expect that to happen until 2009.”
Todd Morgan, director of forestry research at the University of Montana Bureau of Business and Economic Research, said there is no indication the lumber market will improve measurably by 2009. At the least, he said, timber companies can hope for a gradual increase in prices, but not exactly a market upswing.
“I’ve seen some indication that 2008 might be a little bit better than 2007,” Morgan said, “but not back to the good levels.”
Morgan said some timber companies are finding ways, aside from layoffs or closures, to cope with the times. He pointed to Pyramid Lumber Co. in the Seeley Lake region, which has shifted its attention away from studs to focus on niche markets, like random length boards.
“They’re targeting a different market than that wholesale lumber market when they have to compete with very big firms,” Morgan said.
According to Random Lengths, a publication that tracks lumber market trends, composite lumber prices as of March 14 were $238 per 1,000 board feet. In 2004, during the housing boom, lumber prices soared to as high as $474 per 1,000 board feet. The yearly price average between 1995 and 2006 was $360. Last year the average price was $284 and so far this year it is less than $250 per 1,000 board feet.
The housing market downturn is one immediate problem facing timber companies, but other obstacles include harvest shortages, opposition from environmental groups, devastating fire seasons, increased fuel prices affecting transportation and other issues. Forest management, let alone profitable forest management, is tricky at this time, Morgan said.
“It’s hard to time the market to the needs of the forest right now,” Morgan said.
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Comments
The dollar is weak, and imports are getting more expensive as the dollar drops in value. Much of the price per barrel of oil is about dollars not being worth much, and daily it takes more dollars to buy a barrel of oil.
The dollar is weak because we have a lot of national debt. And the spillage onto the private sector has proven to be toxic. That causes those who buy our debt to discount it more and more, thus driving down the dollar's value.
Have no fear. The lumber industry is winding down because of many reasons. In Oregon, the feeder rail lines that take lumber to far away places are in serious disrepair. So the rail line from Tillamook on the coast to Portland is flood damaged beyond repair, thus stranding several high production sawmills without rail service. A ton of freight moves 50 miles on a gallon of diesel by truck, and 320 miles on a rail car the railroads now claim. Long distance lumber trucking is no longer viable due to fuel costs. So the answer for now is to haul it on a truck to a reload to rail, which increases cost due to the truck and loading costs, a paper trail, and then the unloading of the truck, loading several truck loads onto a rail car, and forwarding the load.
A slide has closed the Willamette Pass (Natron Cutoff) UP line from Eugene to Chemult. The tunnels on the railroad to Coos Bay are no longer safe, and that short line has been closed. The loss of rail infrastructure is not a new deal. It is just the cancer that was the Southern Pacific management for the longest of time maturing to where it is killing organs of the system. One wonders if the Union Pacific, the successor to the SP by purchase, can hold its own and repair its way to viability. Nevertheless, the vast forests of the West are becoming as isolated as they once were, before transcontinental rail service and a Congress setting rail rates to unify the commerce of the country into an integrated transportation system for the good of all made it profitable for lumber to ride the rails to eastern markets.
I see unit trains of lumber with Canadian power and cars, sitting on the UP sidings along the UP mainline in the Willamette Valley, headed south. Dedicated trains making the trip from the BC interior sawmills to LA and Vegas to fuel home building in the desert. That is NAFTA commerce. The US is getting that wood and the US lumber industry is getting the wood put to them. But the suffering won't last too long. Capital abhors a vaccuum, and big money will come along and buy Plum Creek for a song, and it will become Plum Sauce Noodle Company and the lumber and logs will find their way to Asia. There will come a time when Russia regains control of Siberian assets once more, and the Chinese robbing Siberia of logs and lumber will come to an end. Their owning so many dollars will make it happen. It will be time to pay the piper. All those Harbor Freight dollars will be coming home.
You should take out your hankie when the USFS allows the best of your area to burn uncontrolled on advice from Govt auditors who think private property owners should be fighting the fires to keep them from destroying their combustibles. That the fires originate on public land makes no difference. Public land assets have NO value to the Government. None. Show me one paper, one report, that the USFS or BLM makes an estimate of the asset value or income loss from any one fire. They will come up with one if a theft is involved, or if someone else destroys
Govt property. But never when they do it themselves.
The public wildlands, untended for the first time in 10,000 years, are changing into something not imagined by their litgating protectors. The uncontrolled fires are going to take vast areas of private property with them in the intended conflagrations. There is a huge difference in how things are treated by humans. They protect things with high value, and thus the aboriginals carefully burned fuels to preserve an open forest that provided a diversity of products they needed to exist, to live, to survive. We are so rich today, that forests are an amenity meant only to look at, and thus we now allow them to incinerate, falsely believing not having the hand of man involved in their fate or existence will ensure that they will be there forever. Urban myths backed by huge tax forgiven fortunes will not preserve or conserve those forests. Say good-by to them. Visit them if you get the chance. The odds are that they won't be there the year after next or the year after that, nor will they have been replaced. When you purposefully burn forests of 500 year old trees, they won't be there again for at the least, 500 years. You can't get there from here in the present state of mind. Rain Man Forestry will not work. So take out your hankie now. In time, you won't even know what is missing.
In no way was the land distribution in the West supposed to be weighed heavily towards public ownership. But that is what happened. So the land was managed to provide for the local economy first. Anyone could purchase house logs, get a permit to get rock, graze livestock, buy timber for resale or cutting lumber. 25% or 50% (BLM) of the gross receipts for fees, rents and sales were to go to the county of origin to suppport local schools, roads and government. Now that has become a broken promise. So gradually, public land has passed from being a rural economic asset to an urban amenity asset, which is more liability than asset to the rural economy. A place for the wealthy to cavort. Refuge from the madding crowd and urban stimulus overloading, with the locals paying the bills of civilization and governance without help from the majority land owner, Uncle Sam, or the seasonal users. A blueprint to failure scripted by a Congress 3000 miles away. That economic devolution removed the synergy with public timber that made private timber work through economic cycles. That is gone, and with it will go the private side as you have known it.
I have no idea what the Plum Creek longterm plan will turn out to be, but REITs and Real Estate Sales companies are a fact of life with them right now. You might not have liked them as loggers, but that could have been the best of all worlds compared to an unknown future. They could put together a deal with whoever this week's owner of the paper mill in Frenchtown is, and start hauling trees to be chipped for pulp, stripping their land because that is a better alternative than watching it burn with comingled USFS land which is the most recent experience. They will produce cash flow, and they will cut trees, sell lots, mine minerals, do whatever to survive. Managing the forest for growing trees will not be a priority. Too long term now, in a world of fast change and vanishing land ethic. They are going to go for the value there now. Public policy has driven them to short term planning. They are going into survival mode.