People just don’t need studs like they used to.
On March 19 Stimson Lumber Co. announced the closing of two stud mills in Bonner and Coeur d’Alene as a response to nationwide struggles in the housing and lumber markets. A little up north in the Flathead, Plum Creek Timber Co., the giant of the timber industry, is running into similar difficulties.
In January and February Plum Creek laid off 18 employees at its Evergreen remanufacturing plant near Kalispell, which specializes in fingerjoint studs used in the framework of houses – the common stud is the 2 by 4. The layoffs came about six months after 14 employees were laid off at Plum Creek’s other stud mill, the Ksanka plant near Eureka. Demand is low for studs because far fewer houses are being built than in past years. Plywood mills across the West have also been hit hard in the past year, another reflection of the housing market.
“Studs are pretty much tied to the housing market,” said Jim Lehner, Plum Creek’s director of community affairs. “When the housing market is bad, it’s just tough to sell that product.”
The struggling markets are taking a little wind out of Plum Creek’s sails following a solid fourth quarter at the end of 2007 in which the company pulled in $118 million in earnings, 42 percent of the year’s total earnings and a 71 percent bump from the previous year’s final quarter. Those fourth quarter earnings followed a dismal third quarter. But Lehner said the 2008 first quarter has been hard for the nation’s biggest private landowner – Plum Creek owns 8 million acres nationwide and 1.3 million in Montana.
Three of the laid-off Evergreen employees have gotten different jobs for Plum Creek, Lehner said, with four more about to do the same. The layoffs at Ksanka last year resulted more from timber shortages and the destructive fire season than from housing woes, Lehner said. To his knowledge, none of the 14 Ksanka employees found work within the company again. Lehner said Plum Creek doesn’t have plans for more layoffs or mill closures. The company has 1,100 of its 1,400 statewide employees in the Flathead Valley.
“Markets rise and they fall,” Lehner said. “We expect that the market is going to turn around but we don’t expect that to happen until 2009.”
Todd Morgan, director of forestry research at the University of Montana Bureau of Business and Economic Research, said there is no indication the lumber market will improve measurably by 2009. At the least, he said, timber companies can hope for a gradual increase in prices, but not exactly a market upswing.
“I’ve seen some indication that 2008 might be a little bit better than 2007,” Morgan said, “but not back to the good levels.”
Morgan said some timber companies are finding ways, aside from layoffs or closures, to cope with the times. He pointed to Pyramid Lumber Co. in the Seeley Lake region, which has shifted its attention away from studs to focus on niche markets, like random length boards.
“They’re targeting a different market than that wholesale lumber market when they have to compete with very big firms,” Morgan said.
According to Random Lengths, a publication that tracks lumber market trends, composite lumber prices as of March 14 were $238 per 1,000 board feet. In 2004, during the housing boom, lumber prices soared to as high as $474 per 1,000 board feet. The yearly price average between 1995 and 2006 was $360. Last year the average price was $284 and so far this year it is less than $250 per 1,000 board feet.
The housing market downturn is one immediate problem facing timber companies, but other obstacles include harvest shortages, opposition from environmental groups, devastating fire seasons, increased fuel prices affecting transportation and other issues. Forest management, let alone profitable forest management, is tricky at this time, Morgan said.
“It’s hard to time the market to the needs of the forest right now,” Morgan said.