Sawmills Face Hard Times

As furniture companies move to China, lighter demand has forced some sawmills to cut staff and shorten operations to only three days a week.

RALSTON, Pa. (AP) - Flecks of fine sawdust float like powdery snow around Bill Brooks' lumber yard after his saws slice through fresh logs.
That is, when the saws are actually in use. Workers operate them just three days a week now because many of his longtime customers—furniture- and cabinet-makers—moved their plants to China, lightening demand.
Though he's had to cut his full-time staff in half from 50 to 24 in the last 18 months, Brooks considers himself fortunate. Dozens of others mills in the state have closed or have been bought out in recent years.
As the nation's largest producer of hardwood lumber, Pennsylvania is a bellwether for an industry facing challenging times.
Production nationally is down 25 percent since 2000 to just over 10 billion board feet, according to the Hardwood Review, a Charlotte, N.C., publication regarded by many in the industry as the standard-bearer for economic forecasts. The publication predicts production will fall to 9.5 billion by the end of 2007.
Pennsylvania mills produce just over 1 billion board feet of hardwood lumber, or roughly 10 percent of the U.S. total, according to the state Agriculture Department. The state's hardwood industry generates more than $5 billion in sales.
Production since 2000 has been fairly constant in Pennsylvania, which is considered to have some of the best hardwood forests in the country. But the number of mills has declined by about 20 percent since 2001 to just more than 300, state figures show.
And that might be a generous estimate. An industry in which many deals are sealed with handshakes is filled with small, family-owned outfits. Some shops may simply be run by several workers sawing in a spare barn when times are good.
When things slow down, those saws sit idle.
''There are so many of these small ones that I don't even know about,'' said George Barrett, editor of the Hardwood Review. ''Many of those have disappeared.''
Brooks has owned his mill, considered average-sized for the industry, since 1980.
''To give up a business is like giving up one of your children. That's tough. It's really tough,'' Brooks, 66, said as he stood in a warehouse filled with neatly stacked piles of lumber waiting to be sold.
The tough times are largely blamed on the trickle-down effect of dozens of U.S. furniture and cabinet manufacturers in the last several years moving overseas, particularly China, said Paul Lyskava, executive director of the Pennsylvania Forest Products Association.
Wages are lower there. While wood must be exported to China, the United States is far from the only—or cheapest—supplier.
Some timber heading to China from places such as the Amazon and Africa might be derived from illegal logging, several congressional lawmakers fear. Sen. Ron Wyden, D-Ore., is a lead sponsor of a U.S. Senate bill introduced last week which he said would crack down on illegal logging.
''China and Asia have completely changed the landscape of the forest products industry in Pennsylvania and the United States,'' Lyskava said. ''The sawmill sector is losing a tremendous amount of its customer base.''
Other factors are taking a toll, too.
Sawmills must pay for tracts of timber to harvest long before they sell the resulting lumber, meaning they can overpay. Nearly 60 percent of lumber production costs are in the costs to buy timber—tying up capital on logs that may not be harvested for a year, the Hardwood Review said.
Practicing price controls is important, many business owners said, and the cost of timber could possibly fall with demand declining and more unbought lumber sitting in warehouses.
Many mills hope to make money with more efficient practices, and by selling every part of the log.
At Brooks Lumber, the best wood is cut into different-sized boards. Lesser-quality timber might be used to make pallets or railroad ties. A conveyor carries some large shavings to a mulch pile. Finer, smaller shavings are captured to sell to farmers as barn bedding.
Some businesses have invested in high-tech saws that can make more precise cuts. Others are catering to customers with more specialized orders.
''We can't afford the waste,'' said Ron Andrews, president of Deer Park Lumber Inc. in Tunkhannock.
Still the industry overall has historically been slow to change, Barrett said. Those that do change stand a better chance to survive, though having the capital to invest in upgrades again becomes an issue, he said.
There are factors sawmills cannot control, like the housing industry slump. Business from remodeling jobs helps, but not as much as a thriving real estate market, many sawmill owners said.
Products made of red oak, one of the most abundant species of hardwood in the eastern U.S. forests, have declined in popularity, the victim of the changing tastes of consumers.
Red oak used to be the wood of choice for kitchen cabinetry, but today's generation of consumers ''wants something different from what their parents had,'' said Steve Jones, vice president of sales for Ron Jones Hardwood Sales Inc. in Union City.
Brooks and others also complain that are too many regulations to follow before purchasing timber. Some permits may cost as much as $500, they say.
Barrett points back to grabbing a bigger share of the export market as a way to get healthy. About 15 percent of the nation's hardwoods go abroad, but that should increase to 30 percent, he estimated.
But getting a stronger foothold overseas might be tough, especially for smaller sawmills that may not be able to afford to send sales representatives overseas.
Promoting Pennsylvania hardwoods to overseas companies is part of the job of the state's Hardwood Development Council, established in 1988.
A positive, they note, is that the value of furniture lumber exports from Pennsylvania to mainland China has risen nearly tenfold since 1999 to $19.8 million, according to council statistics.
Still, even the largest sawmills don't feel secure. Weaber Inc., based in Lebanon, does most of its sales domestically, though there is growing business in Europe, said company president Galen Weaber.
''Challenging might be a good word for the foreseeable future,'' said Weaber, whose company has 600 employees. ''This is not going to change any time soon. We got some real challenges ahead of us.''
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