Montana Sawmills Struggle in First Half of 2010

By Beacon Staff

Montana’s timber industry may have had a small bump in business in the first half of the year, but production and employment numbers are still well off from where they were two years ago, according to a recent report from the University of Montana.

Todd Morgan, director of forestry industry research at the university’s Bureau of Business and Economic Research, determined the state’s lumber production increased by roughly 11 percent between this year’s first two quarters.

Lumber production is also up by about 20 percent from last year’s figures, coming in at 256 million board feet compared to 212 million board feet in the first half of 2009.

Wood panel production is also up by about 20 percent from the first half of last year, the report states.

But Morgan noted that this year’s numbers are only 69 percent of what they were two years ago and less than half of 2005’s figures.

“Montana lumber production figures for 2009 were the lowest they have been since the end of World War II,” Morgan wrote in the report. “So, these modest increases are not very significant.”

Chuck Roady, general manager for F.H. Stoltze Land and Lumber, said Morgan’s report mirrored Stoltze’s production experiences this year.

“We had a little bit of a bump where things got better in the second quarter but, boy, it just dropped off the table after that,” Roady said.

The slight increase in activity was most likely caused by a large reduction in inventory by most lumber mills in response to the recession, followed by a slight increase in demand this year, Roady said.

But once that demand dried up, the market largely disappeared, he said.

“I think in general people are still very leery; there’s not a lot of buyer confidence,” Roady said. “There’s still a lot people out of work and they’re not going to spend money on lumber.”

At Plum Creek Timber Co., Vice President of Northern Operations Tom Ray said the company experienced a similarly small increase in production.

“Our production was up slightly in the second quarter as we saw somewhat better demand for our products,” Ray wrote in an e-mail interview. “It was less than what we produced in 2008.”

Statewide lumber mill employment and wage figures painted a similar, grim picture when compared to two years ago. The 2010 Montana mill employment figures are down 45 percent from 2008, which the report describes as a “relatively poor wood product market year,” and employee income decreased by 50 percent.

Mill jobs also dropped this year, dipping to 1,560 in the second quarter, which is about 6 percent less than the first quarter and 23 percent lower than 2009’s second quarter.

And though production wages had a 2 percent increase from the first to second quarter to $14.3 million, wages are down 23 percent from last year’s second quarter.

Employment levels at Plum Creek have been stable for the first half of 2010, Ray reported, as have wages.

The Smurfit-Stone Container and previous Plum Creek mill closures are beginning to affect employment and wage figures, the report states, and any more increases that may occur for the rest of the year will most likely not make up for last year’s job losses.

Roady said that Stoltze has kept its employee count and wages steady during the recession despite a drop in business, but he was unsure how long that practice could continue.

“It’s a little bit scary doing that, but we’ve stuck with it,” Roady said.

The lumber industry is also headed for its slow season as the weather begins to cool and construction halts, which coincides with predictions from the Plum Creek and Stoltze that low numbers will persist for the rest of the year.

Roady said he understands the recession’s effect on people’s checkbooks and described buyers as cautious and exacting. This helps keep project costs down, he said, and showcases how the market changed since the valley’s construction boom earlier in the decade.

“The buyers are very specific and buying no more volume than they need,” Roady said. “I understand it, but we sure feel it.”