Forest Products Industry's Cataclysm Postponed Again

Article excerpt

By Bill Virgin

Seattle Post-Intelligencer

SEATTLE _ Like the bearded curbside prophet warning passersby of the impending end of the world, the Pacific Northwest forest products industry has for the last several years been telling all who will listen that the apocalypse is coming.

Environmental restrictions on cutting timber on government and private lands, combined with resurgent domestic and foreign economies (creating stronger demand just as supply is decreasing), will bring a firestorm of closed mills, laid-off workers, soaring log and lumber prices and wood-frame houses priced far beyond what consumers can pay, the industry has warned.

Indeed, there have been some hard times in the woods, but doomsday has not arrived. Prices retreated from peaks set early in the year. The pace of lumber and panel mill closures wasn't as brisk in 1993 as it was during the previous four years in the Pacific Northwest, according to data compiled by industry consultant Paul Ehinger. Home sales were influenced more by falling interest rates.

Has the cataclysm been postponed again?

"I think we're still a year away from a real crunch," said Stephen Ericson, a partner in Shelton Structures International Inc., a manufacturer of glued laminated beams. "We'll be able to sneak through next year."

"It's a question I haven't been very good predicting," added James Geisinger, president of the Northwest Forestry Association in Portland, Ore.

But Geisinger said the remaining federal timber (source of 55 percent of saw logs in Oregon, 23 percent in Washington) already sold will be cut by the middle of 1994.

And what then? "I don't think it'll happen with a big bang _ mills will close a shift" as they deplete what timber they have, he said.

The market is already sending signals it sees supply problems ahead. Even though December is a relatively slow period in the industry, prices in Random Lengths' framing lumber composite price index hit $506 per thousand board feet last week, just below the record highs set last spring in the midst of a buying panic.

"Here we are in the dead of winter and we're having record prices," Geisinger said.

No one factor contributed to easing the supply crunch in the Pacific Northwest last year. Export volumes dropped sharply as the Japanese tried to cut inventories of logs, freeing up wood for domestic consumption. Private landowners, worried about future restrictions on cutting trees on their land, accelerated sales of their logs. In Oregon the estimated sustainable harvest from private lands not held by timber companies is 600 million board feet a year; Geisinger said the cut has been running 400 million board feet a year higher than that.

More logs were available from state-owned lands in Washington because of an export ban. Some logs also came from federal forests east of the Cascades. And companies worked their way through inventories of logs cut on federal lands before the environmental battles.

But there's a danger that many of those factors could be absent in 1994. The Japanese, for example, could start buying logs again. "The Japanese have a propensity for buying in herds," Ericson said.

"If (the Japanese economy) should ever pick up, a lot of currently available logs will not be available," Geisinger added.

Meanwhile, mills with federal timber under contract can stretch that supply only so long. Geisinger said the inventory of federal timber under contract in Oregon and Washington is about 1.1 billion to 1.2 billion board feet. Five years ago, Geisinger said, the figure was 12 billion.

"Most companies kept two to three years of usage under contract," he said. "Now we're down to a twelfth of that. …