Slow downs and mill closures

[Chico]

I agree with Ron Yes you'll get some movement overseas But when it said and done we'll still control our own destiny I don't think that companies will be as wide open as they once were with buyouts etc but I think we'll come back strong .. So. America and possibly Russia are the only two countries with enough  natural resources for the long haul besides us and they already have all the tech they need in most areas and where they don't they are quite satisfied to do things the way they have in the past.. Also as Ron says Most of the third world countries don't have enough technical people to support some of the leading edge equip. I'm not saying they stupid or anything like that It's just a diff mindset in some of these places > It used to be easier to go into some places hire a cheap crew buy cheap resources and get rich .Those opportunities are few and far between now because people have become more aware of what they can do on their own and a lot of foreign countries have some stipulations that are pretty tough on bring any foreign equip into their country and have very high Tariffs, 
JMO
Chico

[Ron Wenrich]

I see those mills for sale, and most of them are fairly old technology.  I don't see this as a technology drain.  If anything, our technology will improve when markets come around and these older mills are replaced by better and more efficient equipment.  

[SwampDonkey]

I agree with Ron, most of them that closed up shop here were old dinosaurs, 90 years old. We had way too much capacity here in NB anyway to sustain all the mills. Even my grandfather with grade 8 education said many of them will close up. The last 25 years was a real big boom time around here. They were cutting timber off lands that had never been silvicultured. It was not top quality, it was old, and piece size was small.  Much of it was touched by the budworm or lupers, the hardwood is fringe wood and never really managed for sawlogs. 99% of each site was clearcut, with very few sites following a selection system. Most stands, if not all, were ever thinned before. The concept of silviculture and it benefits is only about 60 years old in this country, not even a full rotation yet.

[jrdwyer]

It's hard to keep up with the number of sawmills closing. Sad that it always seems to be boom and bust in many industries.

Anyway, here is a link to a news article about a new "wood procurement facility" aka sawmill to open in Pine Bluff AR. Ties, barbecue chips, wood pellets, and animal litter are their products. Good news for the area!

http://www.pbcommercial.com/articles/2009/03/29/news/news1.txt

[Ironman]

I have customers calling me asking me to help them sell their sawmills.  One paid over $2m, for their sawmill less than ten years ago and was willing to take $125k.  This is a very high production Salem Sawmill.  Compared to what a lot of the 3rd world is using, these mills are state of the art.

Most of these mills are going to South America, Africa and Eastern Europe/Russia.  They use them to produce industrial lumber, ties, blocking, beams for use domestically and flooring for import to the US and Europe.  These are beautiful, exotic hardwoods that are being introduced to North America at prices that compete with anything made here and the quality is really ridiculous.

I have a customer in Central America that works for the government there processing hurricane timber from the coastal national forests.  His job is to keep people working, harvesting the logs, grading and selling them on the open market to create some income for the areas where he works.  That aspect of his work is not profit oriented other than providing jobs and as much income as possible.  His sawmill which he owns seperately, buys some of the logs at the prevailing rate (peanuts) and processes it into beautiful flooring, moulding and trim and ships it to Louisiana by the container load where he has purchased a warehouse.

Right now he can buy production capacity for his mills with pocket change.  This is not good for the American logger and sawmiller.  He is based in Nicaragua and he can send product here for almost nothing.  We don't need to discuss his cost of production which again is practically nothing.


Jesse


www.ironmart.com

[jrdwyer]

So governments are giving away their trees from national forests in central America for free to promote jobs in their home countries? It is hard for private landowners  or sawmills in the USA to compete with that!

Funny when we attempt to pass legislation requiring steel or concrete or bolts for road projects to come from USA sources the world cries foul. Trade is definitely not free or fair.

I hope the sawmill industry survives here. With no sawmills, there will be few markets for landowners to sell their trees to and thus little incentive for management.

In the long-term, higher fuel costs will make the long-distance transporting of low value goods (like basic furniture and flooring) uneconomical. This happened last summer and will happen again. In addition, if proposed legislation requiring container ships to clean up their stacks (no bunker fuel) passes, we will see fuel costs double for ocean going vessels as #2 diesel is twice as expensive as bunker fuel.

I agree that consumers have been quick to accept and embrace tropical hardwoods for flooring, but mostly because the price is about the same as domestics. My brother and sister-in-law bought stained Peruvian hickory for their new wood floors, but I seriously doubt they would have if the price was 30-50% higher than domestics. Domestic hardwoods are really not very expensive. I purchased 500 sf of #1 common unfinished red oak R&Q in 3"-7" widths and 1-8' lengths for only $3.30/sf delivered to my home in Evansville, IN in 2005. Shipping by LTL was 10% of the total cost.

Here is a link on the correlation between fuel costs and global trade:

www.yaleglobal.yale.edu/about/pdfs/oil.pdf

[Chico]

We've been up against those kind of things a long time with stumpage paid by the governments and  govt run companies  that run regardless of profit. Our prob is we're afraid to put tariffs on prods that we should because someone will get upset about it.
Chico

[Ron Wenrich]

So there's some countries coming in here and buying some unused mill equipment.  If they didn't buy it here, they would buy it from some other place.  And, if there wasn't any available, they would simply have it built in another country (China). 

Things have changed.  What worked 5 years ago doesn't work today.  I remember people that said the red oak market was here to stay.  They managed their forests for red oak, and centered whole industries around it.  But, guess what.  The red oak market is gone.  It won't be back for a long time.

Our housing market is gone for the time being.  Its not going to come back until there is a better market.  Until then, the American lumber business is going to struggle.  Those mills that were not producing efficiently or were to top heavy with debt are going to fall by the wayside.  If we can't find a local market, why should I think that tropical markets are going to overwhelm our local market?  The market has contracted.  Inventories must be reduced to meet demand. 

If our markets improve and they do import more wood, then those countries will have better prosperity.  Better prosperity for them means that they will increase their own markets through increased demand, and their prices will go up.  Tariffs are a tax on the consumer.  Is more government involvement really the answer?

[Ironman]

Guys,

I'm not trying to preach doom and gloom.  I'm just trying to give some real examples of what I am seeing in my markets, with my customers.  I think that loggers will continually have to adjust their focus in terms of the industry they serve.  Pulp has been good for a long time, for a lot of loggers.  Lumber has been good for a long time for a lot of loggers.  Industrial timber is still pretty good for a lot of loggers and regional sawmillers.

I think that the best new opportunity that I have seen is pellet mills and pellet wood for home and commercial heat and power generation.  It is something loggers can produce with a relatively small investment and deliver to retail customers for maximum return.  This is the fuel wood market but with the added benefit of having a retail ready product that consumers will want.

Right now the average rural homeowner in the US is paying $2.25 at least per gallon of propane or home heating oil.  It takes 100 gallons per season to heat a typical us home of 1700 sf.  The savings is ridiculous compared to home heating pellets, even if you add in the cost of installing a new pellet stove.

These are the markets that I think loggers need to start looking to.  We can compete with the price of propane, heating oil, coal and natural gas.  Those products bring hundreds of dollars per ton and wood is a better alternative for many reasons including the whole renewable fuels movement that is gaining so much momentum.

Jesse



www.ironmart.com

[gunman63]

100 gals to heat a home for a season,must a misprint.

[SwampDonkey]

You could multiply that by 7 or 8 around here. In January this year it would've took 400 gallons. And I'm talking imperial gallons which is 4.54 litres versus US gallon at 3.86 litres. My tank is a touch over 900 litres. At about $0.90/litre it adds up fast. I wouldn't know where the grocery money would be coming from. ;D

[thompsontimber]

I think you might be on target in regards to the pellet market Jesse, and there is a bit of clamoring amongst the logging ranks on the topic, but seems most are pretty scared to test the waters when already leveraged to the hilt and paranoid about what might be hitting us next. 

As for the slowdown, we finally were able to move a little pine pulp back to Bowater, but now we are restricted from hauling beyond the tight market restrictions due to their financial situation.  Folks can't afford to sell very much pending payment because word has come that payment may be delayed 6-10 weeks due to restructuring and reorganization following bankruptcy.  And of course, in such a scenerio there is always the added fear of whether you will be receiving payment at all.

[SwampDonkey]

In my experience, there has never been a saved mill that has undergone bankruptcy protection in NB. The marketing boards always paid the wood cutters, but boards have absorbed $millions in mill failures. Not even the government would give a woodlot owner a dime for default on wood payment.

In other news, one of the sawmills being upgraded is in a bit of a spat with the union. The union couldn't get their big pay increases, so the union leaders/bosses came to the job site and told everyone to go home. That's how they work around here. They would rather not work at all than have a wage freeze or small cut in pay. So, go on wellfare I guess. :

[Ron Wenrich]

Ironman

What you are now describing is what I'm talking about.  Those older mills and even newer mills can go to overseas companies and still not effect our markets.  Markets are dynamic, which means that they keep on changing.  Keeping the same gear means you try to address the same markets.

Pellets can be a good move, if you have the markets.  The other side of this slowdown is going to look vastly different.

[Bill_G]

Yes markets will change,some mills will adapt,some will get out. No market stays great forever. Years ago everyone was selling Rock Maple to Japan,no end in sight until Japan did not want to bowl anymore. Then in the eighties the Middle East was buying all kinds of Hemlock, then that stopped. The problem is alot of mills get caught up in a rut with one market and think it will last forever, just like Red Oak.. I think your going to see a big change in the lumber industry on the other end of this mess and mills that adapt quickly will be in good shape. There will be markets and trends will change as they always have, just need to hang on, be efficient and learn to adapt. Don't forget about how much of our sales are out of this country.

[glgdiggs]

As peak oil becomes a noticed reality free trade will be a myth. The shipping of raw materials to value added suppliers and reshipped as finished products will be cost prohibitive. Last summer at the height of oil pricing a container from europe cost as much as $8000.00 shipped to an east coast port, 4 years earlier it was $1200.00. IKEA is building a plant in Danville, VA to build book cases because " you can build it here for less than the shipping cost from Poland" and that will be true for almost everything as oil prices rise again.

[crtreedude]

As peak oil becomes a noticed reality free trade will be a myth. The shipping of raw materials to value added suppliers and reshipped as finnished products will be cost prohibative. Last summer at the height of oil pricing a container from europe cost as much as $8000.00 shipped to an east coast port, 4 years earlier it was $1200.00. IKEA is building a plant in Danville, VA to build book cases because " you can build it here for less than the shipping cost from Poland" and that will be true for almost everything as oil prices rise again.

Yes, I would have to agree. Though I will say that just last year I shipped a container from baker (20 footer) for much less than 8000, in fact, I don't remember it being particularly shocking.

But that was Costa Rica, not Poland.

Free trade isn't a factor if transportation costs are cheap. And of course, if you can process the wood and get it to the end user for less than oil costs, you got a winner - until the EPA decides burning pellets is too polluting - hopefully the systems are clean burning.

Another thing to realize is that a lot of the materials that have replaced wood use a lot of energy to create.

[SwampDonkey]

Another thing to realize is that a lot of the materials that have replaced wood use a lot of energy to create.

Wood does to, but it's free from the sun as long as it's glowing up there. ;D

[crtreedude]

Another thing to realize is that a lot of the materials that have replaced wood use a lot of energy to create.

Wood does to, but it's free from the sun as long as it's glowing up there. ;D

Yes, but I assume the cost to cut a tree up is a lot less than for example forge metal 2x4s.

[SwampDonkey]

Depends on whose making the forged 2 x4's and who cutting the trees.  :D

[SwampDonkey]

Abitibibowater filed for bankruptcy protection in the US yesterday and will be filing today in Canada.

http://www.cbc.ca/money/story/2009/04/16/mtl-abitibi-0416.html

[Woodhog]

Abitibi-Bowater filed for bankruptcy protection in the US yesterday and will be filing today in Canada.

Maybe big is not better? (unless your company starts with a capital "I"...............)

[crtreedude]

One thing I am finding here in Costa Rica though the sawmills and sawyers are just about idle, we are pretty busy. That is because we can sell directly to the client. There is still some construction going on and of course, after the construction is finished, there is cabinets and furniture. It is keeping us busy for sure.

Since we have it all, from nursery to end product, we save a lot of taxes. Costa Rica has a value added tax, so every time you improve something, you pay tax. But, as long as it stays under our "roof", there is no tax until the final sale. This can be for us a savings up to 50%! It gives us a big advantage.

And, we can control the quality, and use a higher percentage of the wood. Also, since we take the long view, once we have a client, we never lose them and on top of that, they tell their friends.  8)

Value added production, for us, seems to be alive and well.

[Ron Scott]

Weyerhaeuser Cuts Dividend, Closes Mill

July 7 – The Puget Sound Business Journal reported that Weyerhaeuser Company has announced plans to close its lumber mill near Taylor, Louisiana, putting 39 people out of work. According to the company, the mill is being shut down because "demand for wood products continues to decline due to a slowdown in the housing market."

For more information, visit the Puget Sound Business Journal website.

E-Forester

[jim king]

To blame the developing countries is a mistake , the US was one at one time and gained its place in the world being one.  In general the ineficiencies we have in the third world more than compensate for the advantages.  China maybe the exception as the prices are apparently controlled by the value of their currency and basicly slave labor controlled by the elite.  I have not been there so I may be mistaken.  We in the third world have laws that you as American loggers and processers would start a reveloution over.  These laws kill competiveness and profitability.  Thanks to the WWF, Grennpeace  and other leaches.

In the States we have simply learned to live beyond our means. you may have guessed that I am from both sides in this as an expatriate American living in a third world country.    Do we really need to pay $100,000 for an old house that initially cost $10 K to build.  There is no inflation .  Yes or no ?¿.

The world is getting smaller and is globally competitive and those who want to be a part must adjust.  The market is not going to adjust to a certain group or country or philosophy but to competivines and quality.

Dont mean to offend but what I have said is reality.  I would certainly be willing to participate in any discussion about this , I think it would be benificial and informative to all.  After 25 years plus living in the armpits of the world I think I can shed a lot of reality on the subject.

I can terll you for sure that there are no governments in South America giving away logging rights, to the contrary , it is a cash cow.  We have more taxes per bf etc than in the States.  I see a lot of bad news from northern Wisconsin, I am from 60 miles NE of Minneapolis just outside of Balsam Lake.  I say that as part of my future defense from you guys just to show that I do know a bit about both sides.

Jim