Timber industry may struggle to keep up with market rebound
The rebounding market for Pacific Northwest logs has raised questions about the timber industry’s ability to keep up with demand, experts say.
Strong exports to Asia and the recovering housing market have boosted log prices and harvest levels since the depth of the timber downturn in 2009, according to analysts at a recent industry conference.
While current logging levels are still lower than in the mid-2000s, concerns about tight log supplies are emerging, said Rocky Goodnow, an executive at Forest Economic Advisors.
“We think we’re rapidly approaching the sustainable (harvest) yield,” he said during a recent conference organized by the Western Forestry and Conservation Association in Vancouver, Wash.
The harvest of logs along the West Coast exceeded the rate of timber growth between 2004 and 2006, he said.
During the housing bust, though, logging levels plummeted well below the tree growth rate, boosting the inventory of timber, Goodnow said.
This period of “undercutting” mitigated the possibility of a timber shortage, but the industry nonetheless faces serious constraints, he said.
Deferred maintenance and a lack of investment during the downturn has strained logging and hauling capacity, Goodnow said.
Machinery costs are high and securing financing is a challenge, since loggers generally work on six-month contracts, he said.
The dearth of jobs during the housing bust also prompted many loggers to seek employment in the booming oil and gas sector, Goodnow said.
“We’ve seen an exodus of labor from the logging and hauling sector,” he said.
The timber industry’s workforce is aging, but attracting new loggers to the industry will likely raise costs, Goodnow said.
Logging is dangerous and requires expertise, which makes it difficult for companies to quickly “staff up” when market conditions improve, said Richard Zabel, executive director of the WFCA.
There’s also a cultural bias against working in the woods, said Gordon Culbertson, Pacific Northwest manager for the Forest2Market consulting firm.
Fewer people are willing to awaken at 3 a.m. to work in the rain, while many parents discourage kids from entering the timber industry, he said.
In terms of timber supply, the vast majority of logging activity will continue to be on private lands, said Goodnow.
Litigation and environmental restrictions are likely to limit the timber from federal property in the West to 15 percent of the total supply, he said.
“We do not see any large increases coming from public timberlands,” Goodnow said.
The political battle over federal timber is often cast in a negative light, but it is a “double-edged” sword for private forest owners, said Bruce Glass, economist for the Campbell Group.
Public forests help satisfy the demand for recreational and non-timber uses, which reduces controversy and provides “social license” for commercial operations on private land, he said.
With momentum building in the domestic housing market, private forest owners want to retain their sawmill customers while continuing to profit from exports, Glass said.
Sawmills and exporters are currently competing for logs in the Northwest, which could eventually cost domestic market share for forest owners, he said.
Southern mills face less competition for logs due to rising harvest levels and the lack of a major overseas market, Glass said.
Northwest timberland owners are mindful of these factors, said Pete Stewart, president of Forest2Market.
They don’t want to be overly reliant on the Chinese demand at the risk of losing domestic buyers of logs, he said.
“You don’t want to kill the goose that laid the golden egg,” Stewart said.