Wednesday, September 17, 2008

Timber industry struggles as lumber demand drops

The timber industry is facing problems on three fronts: rising fuel prices, a struggling housing market and the decreasing value of lumber. Companies have been forced to lay off crews and put others on quotas. Wayne Sheets of The Inter-Mountain in Elkins, W.V., writes "Most officials in the business seemed to agree that the industry might 'bottom-out' and begin a slow recovery in late 2009 and 2010." (Sheets photo shows tree cutter David Mace at work for Gibson Logging)

The timber industry is facing a downturn because there is less demand for its products, and those products are costing more to transport. "The fuel situation is really hurting us," Donnie Nottingham, a mill manager at Inter-State Hardwoods, told Sheets. "The cost of getting logs to the mill has more than doubled at a time when demand is down and the price of lumber has gone down because of a lack of demand. Our shipping costs have also nearly doubled over the past six months."

There are other consequences to the downturn. Many in the industry are also having problems making loan payments on the equipment required for operation. "While I don't know the exact numbers, I suspect at today's costs, one can easily tie up over a half million dollars or more in equipment for a small logging operation," an official at Frank E. Wilson Lumber Co., who wished to remain anonymous, told Sheets. "Most people don't have that kind of money so they go out and borrow money from the banks. Then the economy hits a slump like we're in now and the first thing you know he can't make the payments on his equipment and, even though banks are notorious for working with people to help them save their business, eventually they have to foreclose and there goes the logger."

Some in the industry are remaining afloat by using their equipment in other industries. By using their logging trucks in other capacities and diversifying other aspects of their operations they hope to remain afloat through this difficult period. (Read more)

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