Log Supply and the Lumber Market
Why the Layoffs at the Bonner Mill?
By Jonathan Weber , 5-28-07
 | |
|
When the Stimson Lumber Co. announced earlier this month that it would shut down its plywood mill in Bonner and lay off 133 workers, the company attributed the move to problems with the log supply. The Missoulian, in its initial coverage of the news, took the company’s explanation at face value - and that didn’t sit right to Matthew Koehler, head of the WildWest Institute and fierce critic of Forest Service timber management policies. Koehler feared, no doubt rightly, that such an explanation would lead people to believe that environmental groups were indirectly responsible for the layoffs, and he thought the real reasons were more complicated.
In a contentious email exchange with Missoulian news staffers and publisher John VanStrydonck, Koehler argued that the downturn in the housing market had hurt lumber mills everywhere, and that the plywood market was changing, with a different kind of composite product called OSB taking market share. A Montana Public Radio commentary by University of Montana economist Tom Power supported his view, citing plywood plant closures throughout the country and rejecting the idea that lack of logs was really the core issue.
VanStrydonck in particular didn’t think much of this argument, sarcastically dismissing both Koehler and Power and insisting, in essence, that if the company said log supply was the problem, then log suppply was the problem.
Fortunately, there are some better journalists in the Missoulian newsroom than VanStrydonck, and yesterday the paper kicked off a solid three-day series examining the deeper issues behind the closure. Today the paper features an in-depth piece by Tyler Christianson about the market forces affecting Bonner and other lumber companies, along with a sidebar about the plywood market in particular.
In the end, the Missoulian’s coverage actually supports Koehler’s argument more than it does the company’s simplistic initial explanation. Check out the fiery email thread below.
Date: Tue, 8 May 2007 08:20:10 -0600
To: pbackus@missoulian.com, john.vanstrydonck@lee.net, tyler.christensen@lee.net, Sherry.Devlin@lee.net, oped@missoulian.com, Michael.Moore@lee.net,
From: Matthew Koehler
Subject: Recent Stimson articles
Hello,
I couldn’t help but notice how recent articles about Stimson Lumber Co. that were in the Missoulian (Dec 2006 and Oct 2005 and pasted below) pinned the problems the company was facing on a slumping lumber market, falling prices, dwindling demand and foreign competition. Yet the article in today’s paper appears to place the blame on the impending closure squarely (and solely) on lack of log supply.
Yet, slumping lumber markets, falling prices, dwindling demand and foreign competition have not improved for Stimson, so one might assume that they factors (which a few months ago were cited by Stimson as main problems) contributed greatly to the announced closure. The fact that the Stimson employees have qualified for NAFTA Trade Adjustment Assistance from the U.S. Department of Labor certainly leads one to believe slumping lumber markets, falling prices, dwindling demand and foreign competition are negatively affecting Stimson and others in the wood products industry. Tyler’s article from December provided a lot of good facts and stats to back this up.
Why were these factors not explored - much less even mentioned - in today’s article? And if an industry is facing falling prices for their product and dwindling demand for their product just how does increasing supply of that product help out the company? My understanding of economics is that more supply when demand has cooled will just result in even lower prices.
......
Date: Tue, 8 May 2007 09:00:55 -0600
From: “John Vanstrydonck”
To: “Matthew Koehler”
“Perry Backus \(MIS\)”
“Tyler Christensen”
“Sherry Devlin”
“Steve Woodruff”
“Michael Moore \(MIS\)”
Actually, the local paper mill is having the same problem with the supply of logs. Supply is a problem.
From: Matthew Koehler [mailto:koehler@wildrockies.org]
Sent: Tuesday, May 08, 2007 10:34 AM
To: John Vanstrydonck
Cc: Perry Backus (MIS); Tyler Christensen; Sherry Devlin; Steve Woodruff; Michael Moore (MIS)
John,
You appear to miss my point. My point is that the article in today’s paper places blame for the impending Stimson closure squarely and solely on lack of log supply. This is strange since your paper published a few articles about Stimson recently (Dec 2006 and Oct 2005) in which the problems facing Stimson Lumber Co. were clearly identified as a slumping lumber market, falling prices, dwindling demand and foreign competition. These problems were identified by the company itself and by a wood products industry publication...not by an environmental group.
Are you saying that the problems Stimson faces with a slumping lumber market, falling prices, dwindling demand and foreign competition no longer exist? That would certainly be news to those in the wood products industry. And someone should certainly let the folks at the US Dept of Labor’s Trade Adjustment Assistance program know too since these are the factors that are used to determine assistance through that program.
Why you are defending the paper’s choice to not let your readers know about the problems Stimson faces with a slumping lumber market, falling prices, dwindling demand and foreign competition in context of the announcement of the closure of the plywood plant is a mystery to me and I believe it does a disservice to your readers. I fail to see how your readers benefit from only knowing a small part of the total story.
From the Missoulian Dec 15, 2006:
The national drop in production is bringing lumber supplies back into balance with lower demand created by a drop in new housing starts, said Shawn Church, an editor at Random Lengths Publications, which reports on the forest products market from Eugene, Ore.
“Stimson is not alone,” Church said. “There are mills throughout North America cutting back production and it’s simply a result of a need to adjust supplies to a lower level of demand.”
Lumber companies had ramped up production in 2004 and 2005 to meet historically high demand for housing, with levels topping 2 million housing starts. However, the National Association of Realtors said total housing starts for 2006 will drop more than 12 percent, to 1.82 million units, and 2007 will likely see an additional 15 percent decline to 1.54 million units.
From the Missoulian Oct. 16, 2005:
“We face dwindling market demand and pricing.” - Stimson CEO Andrew Miller
Date: Tue, 8 May 2007 16:19:27 -0600
From: “Perry Backus \(MIS\)”
“The closure is the result of chronic, long-term log shortages in western Montana relative to the milling capacity in the region. At the time of the announcement, the plywood plant imported 60 percent of its’ wood requirements from veneer plants on the west coast and Canada.”
That’s a direct quote from Stimson’s news release about the closure of the plant. Jeff Webber reiterated that information to me in a telephone conversation as did the union representative. Neither one mentioned anything about slumping market conditions. That information wasn’t mentioned in the company’s news release either.
I realize you have an extensive background in the wood products industry. Your website said you worked for a lumber company while earning your high school teaching credentials in history and english. Perhaps you should offer them advice on how to make an operation pencil out when you have to import more than half of your raw materials from hundreds of miles away. I’m not an economist, but I would guess that even in a good market, it might be difficult for a lumber mill to compete when they have to import raw products from long distances.
I also appreciate all of your advice on how to write an article. I’ll be certain to file it away.
Perry Backus
Date: Wed, 9 May 2007 13:28:31 -0600
To: pbackus@missoulian.com, john.vanstrydonck@lee.net, tyler.christensen@lee.net, Sherry.Devlin@lee.net, oped@missoulian.com, Michael.Moore@lee.net
From: Matthew Koehler
Perry,
The personal digs at me aside, have you ever thought that perhaps Stimson Lumber Co. and the wood products industry have a vested political and economic interest in blaming the pending shutdown of the plywood plant solely on lack of log supply and not on other, more important and complex factors? Have you noticed how in w. Montana any talk of “lack of log supply” inevitably turns into we need to log more our national forests? Have you ever seen the timber industry’s 18 wheeler with the names of mills that have shut down over the past twenty years painted on the side, with the inference that these mills shut down because of environmentalists...even though the true is far more complicated than that allegation? I can guarantee you that in the coming weeks organization’s such as our will be blamed in LTE’s, guest columns and maybe even an editorial for the closure of the Stimson plywood plant, so you’ll have to excuse me if I’m trying to make sure that the news media accurately portray’s all of the real, complex economic factors that contributed to the closure.
The fact that you have written me back insisting that lack of log supply was the one and only factor in the closure of the Stimson plywood plant because the corporation said it was true in their press release is rather bizarre. That’d be the equivalent of a reporter insisting that there are WMD’s in Iraq and for proof offering up a press release from the Bush Administration that says it’s true. This is almost like the punch line to a bad journalism school joke.
In my original message to the Missoulian, I simply stated that I couldn’t help but notice how recent articles about Stimson Lumber Co. that were in the Missoulian (Dec 2006 and Oct 2005) pinned the problems the company was facing on a slumping lumber market, falling prices, dwindling demand and foreign competition, yet the article in yesterday’s paper places the blame solely on lack of log supply.
Don’t you feel like that’s a fair question for someone in the public to ask, especially since the problems of a slumping lumber market, falling prices, dwindling demand and foreign competition were identified by the corporation itself, union rep and by a wood products industry publication in recent articles in your paper? These weren’t factors that I pulled out of thin air or made up. Are these no longer problems facing this plywood mill or the wood products industry?
Senator Tester was interviewed today on KUFM saying something to the effect that he was told by a Montana timber industry lobbyist a few years ago that the amount imports from Canada (and other countries) is so serious that the MT timber industry couldn’t even make it if they got logs for free.
We have nothing at all against the hard working people of the Stimson mill. But I also know that unless the public and decision makers understand all the complex factors that are at work here, we will not be able to find solutions.
For example, is any plywood mill in the US doing well? My understanding is that none are, with one main reason being that the relatively newly developed OSB (oriented strand board) is replacing much of the plywood use in this country. The reason for this is quite simple. It’s my understanding that plywood is made by shaving thin strips or “plys” of veneer from large logs (ie old-growth). These logs are called “peeler logs.” Well, most of the “peeler logs” have already been cut down over the past 40 years. Maybe this is why the company has to import 60% of its veneer from the West Coast (ie more productive growing conditions to grow big trees) and Canada (more productive growing in BC and also more access to large tracks of big trees).
Meanwhile, OSB is made in basically the exact same fashion, except that instead of using large sheets of solid wood veneer from large trees, thousands of 3 and 4 inch long strands of solid wood are combined to make each sheet of OSB. So, technology has been developed that basically has made plywood an obsolete, inferior product. Is this maybe why Stimson is able to maintain production at the stud mill at Bonner, while the plywood plant is closing?
Also, as was reported in the Missoulian on Dec 15, 2006 in Tyler’s article, “Lumber companies had ramped up production in 2004 and 2005 to meet historically high demand for housing, with levels topping 2 million housing starts. However, the National Association of Realtors said total housing starts for 2006 will drop more than 12 percent, to 1.82 million units, and 2007 will likely see an additional 15 percent decline to 1.54 million units.”
One of the main uses of plywood is for home construction. Given that OSB has replaced much of the demand for plywood and given that the National Association of Realtors (as reported in the Missoulian) said 2006 housing starts will drop by 12% and 2007 is projected to see an additional 15% decline in housing starts, do you suppose that this has had any impacts on the plywood industry and Stimson in particular?
I don’t claim to have all the answers to these questions, but I know enough to know that simply regurgitating the information contained within the Stimson Lumber Company’s press release hardly comes close to telling the whole story here. Why don’t you call someone like Dr. Thomas Power, chair of the University of Montana’s Economic Department and an expert on natural resource economics, and get some answers (243.4586 or tom.power@mso.umt.edu).
All we have been asking with the Missoulian’s coverage of these issues is for objectivity and balanced and factual reporting. That hardly seems like too much to ask for.
Sincerely,
Matthew Koehler
Date: Wed, 16 May 2007 08:46:49 -0600
To: pbackus@missoulian.com, john.vanstrydonck@lee.net, tyler.christensen@lee.net, Sherry.Devlin@lee.net, oped@missoulian.com, Michael.Moore@lee.net
From: Matthew Koehler
Subject: Dr. Power on Stimson Plywood Plant
Dr. Tom Power, Chair of the Economics Dept at the University of Montana
Montana Public Radio Commentary - May 14, 2007
Stimson Plywood Plant Layoffs:
Politicizing Layoffs in Wood Products
Last week the Stimson plywood mill outside of Missoula announced its impending closure, laying off its remaining 140 employees. In 2005 that same plywood mill reduced its production and workforce by 119. These job losses were especially painful because many of the workers had been employed at the mill for several decades.
The Stimson Lumber Company said “The closure is the result of chronic, long-term log shortages in western Montana, relative to the milling capacity of the area.” That is part of the timber industry mantra that all job losses in wood products are due to the National Forests not authorizing sufficient timber harvests from our public lands or environmentalists using the courts to block timber sales. In that sense, Stimson is simply trying to get some political mileage out of its workers’ misfortunes.
[Full commentary not included here - NW editors]
Subject: RE: Dr. Power on Stimson Plywood Plant
Date: Wed, 16 May 2007 09:28:27 -0600
From: “John Vanstrydonck”
To: “Matthew Koehler”
“Perry Backus (MIS)”
“Tyler Christensen”
“Sherry Devlin”
“Steve Woodruff”
“Michael Moore (MIS)”
Hey Matt, sounds like you and Dr. Tom have the same world view. Both you and the good Dr. seem to be claiming that Stimson lied when they stated the reason for closing the mill. Unless you were in their deliberations when they decided to close the mill, or know someone who was, you have no basis to claim that the lack of raw materials was not the reason they closed the mill. If you have some credible inside information that our reporter is not aware of, you should pass it on.
Like this story? Get more! Sign up for our free newsletters.
Comments
However, by far the most disturbing element in this exchange is the fact that Missoulian reporter Backus takes Stimson's press release (and corporate talking points) at face value and runs with it unquestioningly, and THEN USES THESE TO DEFEND HIS LACK OF RESEARCH on the topic in his email to Mr. Koehler-
Quoting Backus' reply to Koehler: "[I used in my story] a direct quote from Stimson’s news release about the closure of the plant. Jeff Webber reiterated that information to me in a telephone conversation as did the union representative. Neither one mentioned anything about slumping market conditions. That information wasn’t mentioned in the company’s news release either."
Here we are again reviewing Journalism 101: corporate press releases and statements by industry flacks do not inherently constitute factual information, unless and until they are verified independently by a reporter. Even readers without journalism school background know full well that reprinting press release info verbatim without the very basic followup reporting we're taught to do in Journalism is not only sloppy and lazy, it's also in this case verifiably misleading.
If this were a standalone incident, I'd be less discouraged. But Mr. Backus' history of biased language is lengthy (beetle-killed trees were recently noted to be an "angry red," for instance), and his trust in industry press releases is not matched by a similar trust of enviro group press releases. I wonder why, and wish for better.
This stenography is the analogous abdication of Fourth Estate duty (the crucial function which led the Founders to give Press Freedom its own unique clause in the First Amendment) that has us stuck in a disastrous quagmire in Iraq (see for example, Judith Miller's uncritical pre-invasion NY Times stenography of Bush adiministration claims).
Now with its new series, the Missoulian basically concedes all of Koehler's points, but does so without admitting or acknowledging that's what they're doing (and, I'm guessing, without the warranted apologies from Backus and Vanstrydonck).
Remarkable.
As for Backus responding via email that he only regurgitated the press release and looked no further I find it not very surprising. But disturbing. Perhaps he figured it a "slam-dunk" and looked no further.
The truly hard-core enviros like Koehler, though sincere I'm sure, can be mind-numbing annoyances after short exposure. Mostly their rants can be relegated to god-awfully long e-mails and friendly Web sites such as this one.
Thank God for the mainstream media and its efforts to cut through all the crap that comes from both sides.
I know a lot of people find Matt Koehler's style of advocacy very annoying, and I personally have mixed opinions about it. (For the record, I know Matt only slightly). I have many times been on the receiving end of all kinds of advocacy and I know it can sometimes be tiresome. But that is no excuse for lack of professionalism.
Lumber industry threatened by glut of unsold homes
Thursday October 23, 2008
By Timothy R. Brown, Associated Press Writer
JACKSON, Miss. (AP) -- The glut of homes in foreclosure, vacant, or stuck on the market has the nation's lumber industry hanging on by a limb.
Since housing starts hit their peak in mid-2005, demand for lumber used in floors, home frames, and cabinets has declined sharply, and experts say the number of unsold homes would need to significantly decrease before homebuilders commit to building new ones.
Glenn Hughes, a forestry expert with the Mississippi State University Extension Service, said many loggers are faced with difficult decisions. A global economic slowdown, tight credit, and the housing bust are hitting sawmills hard and shutting down logging companies.
"Boy, surviving this downturn. I have talked to a lot of people who have been in the business for many, many, years -- this is probably the roughest they have seen it," Hughes said.
The brutal economics of the housing crisis don't appear to be letting up, continuing to drag down demand for both hardwood lumber, for floors and cabinets, and softwood, used in home frames.
Even if home buyers miraculously returned to the market to purchase unsold homes, Al Schuler, a research economist with the USDA Forest Service, says it may be a little too late to lift up the lumber industry because the inventory of unsold homes is "a huge number."
"We are going to be building smaller houses. We are going to see lot more 2,000 square-foot homes rather than 5,000 square foot," he said.
------------
Timber industry falls on tough times
Friday, October 24, 2008
ASTORIA (AP) - A spokesman for Oregon forest owners and wood manufacturers says the economic meltdown is going to be harder on the state's timber industry than was the early 1980s recession that caused a major shakeout.
Ray Wilkeson, legislative director of the Oregon Industries Council, also said the situation caused by the nation's weak housing market will get worse before it gets better.
"The worst thing is we don't really know when we're coming out of it," he said. "There are more foreclosures predicted."
The crisis has brought home construction to a virtual standstill and decreased the demand for lumber.
"Until the housing market stabilizes and the oversupply of housing is absorbed, we'll see new construction stay pretty bleak," he said. "There's only limited demand for the product at a very reduced price."
"Nobody really wants the lumber right now," said Steve Zika, chief executive officer of Hampton Lumber. "Prices are at historic lows.
--------------
Lumber outlook calls for big skid
By the Associated Press
April 13, 2008
SPOKANE - The drop in new home construction has timber industry experts predicting a staggering drop in U.S. demand for lumber.
Compared with record lumber consumption in 2005, this year’s demand is expected to drop by 19 billion board feet, industry leaders told several hundred logging contractors at the Intermountain Logging Conference here on Friday.
The sum is roughly equal to the annual output of sawmills in 12 Western states.
“We’ve never seen a decline like this in the history of the industry,” Butch Bernhardt, spokesman for the Western Wood Products Association in Portland, told The Spokesman-Review newspaper in a phone interview.
----------------
"Market prices are depressed and don't currently cover the costs of production," - Plum Creek Vice President Hank Ricklefs
Plum Creek to close plant in Kalispell
By the Missoulian
September 24, 2008
Saying market prices are so depressed they no longer cover production costs, Plum Creek Timber Co. will close its finger-joint stud manufacturing plant in Kalispell for the remainder of 2008.
---------------
SNIP: “This is strictly market- related. This is the worst lumber market, comparable to the market in 1978. We are getting extremely low offers. In fact we are getting to point where we’re not getting any offers. The economy is so bad and you see that whether it’s a bank or General Motors or whatever it is, the economy is bad.” - Ken Verley, Tricon Timber Inc., president
Tricon Timber lays off night shift as economy worsens
Sept 21, 2008
Facing a decline in sales, Tricon Timber Inc. in St. Regis was forced to lay off about 18 employees. The move, cutting a late night shift from the plant’s operations, was announced during a mandatory meeting with employees Wednesday.
--------------
Forestry is in worst slump since 1980s recession
By Vaughn Palmer
Vancouver Sun
September 17, 2008
Finance Minister Colin Hansen last week conceded to one discouraging note in his generally optimistic take on the state of the provincial economy.
"The downturn in the forest sector is certainly unprecedented," Hansen told reporters at the release of the quarterly update on the budget Friday.
"I think you'd never find a case where the volume has dropped off as fast as it has."
The finance minister was referring to the volume of timber harvested from Crown land, a key measure of economic activity in the provincially managed forests.
---------------
Housing starts at 17-1/2-year low
Wed Sep 17, 2008
WASHINGTON (Reuters) - Construction starts on new homes plunged to a 17-1/2-year low during August as builders scaled back sharply to try to cope with the worst slump in U.S. housing since the Great Depression.