Loggers struggle amid timber industry slump

A few years ago there were around 350 logging companies in northern Minnesota, employing several thousand loggers in the woods each winter.

Industry observers say in just two years, nearly 20 percent of those companies have gone out of business, either voluntarily or through bankruptcy.

Clarence Johnson has been in the business nearly five decades. His small logging company in Blackduck employs eight people. For the past two winters, the business hasn't turned a profit, but expenses have escalated.

Johnson is not sure how much longer he can hang on.

"It's kind of from day to day right now," said Johnson. "It can't go on forever that way, because we're headed down a dead-end street right now. The mills weren't making a profit so they had to shut down. We're going to run into the same deal."

Johnson lost a major buyer of his wood when the Ainsworth Mill in Bemidji shut down in October. That wood all went to build houses.

Now Johnson has to find other markets, like the Blandin Paper Mill in Grand Rapids. Paper is one segment of the timber industry that hasn't been dragged down by the housing slump.

Johnson said the price he gets for his timber no longer covers his costs. Those prices are expected to plummet even further.

"We see nothing good looking ahead right now," Johnson said. "I'd say in a year from now, our markets will not have improved from what they are today, because the housing market couldn't get any worse. There's a lot of houses that are on the market and it's going to take a long time for that to get straightened out. We don't really see any blue sky ahead of us at all right now."

It's kind of from day to day right now. It can't go on forever that way...We're headed down a dead-end street.

Many truckers are also being impacted by the timber industry slump. That has hurt business at Catco, a company that provides parts and service for heavy duty trucks.

Bemidji branch manager Tony Boelman figures a quarter of his business comes from the logging industry.

Boelman said he is hoping to avoid laying off any of his mechanics. But revenues are down; he's selling fewer parts and fewer trucks are coming through to get fixed.

"It's the indirect thing, you know," said Boelman. "Ainsworth shuts down so guys aren't hauling. And when the guys aren't hauling, they're not buying fuel, so then the guy that delivers the fuel's truck is not breaking down. And on and on and on. And yeah, it's hurt our business. Thank God we don't only deal with loggers. If we did, we'd be hurting a lot worse."

A study by the University of Minnesota Duluth shows just how important the timber industry is to the state's economy. The study found the direct and indirect economic loss of just a single lumber plant closing is more than $90 million annually.

Scott Dane is director of the trade group Associated Contract Loggers and Truckers of Minnesota. Dane said policy-makers need to take immediate action to save the industry from total collapse.

Dane and others argue that one of the most critical steps is for state and federal land agencies to lower the price of timber cut on public lands. Doing so would allow loggers and mills to turn a profit. It appears that some government forest managers may be open to that idea.

Dane says if government policies on the sale of timber do not change soon, more loggers will go out of business and the industry may never fully recover.

"Once any logging infrastructure is lost, it will not come back on line," said Dane. "When a recovery occurs, you can't expect somebody to enter into this industry that's currently not in it. The capital investment is so large, and the uncertainty and risk, that people will not come into this industry from outside of it."

In recent months, the lifeline of the timber industry has been the relative stability of paper mills like Blandin in Grand Rapids and Boise in International Falls. But in just the past few weeks the price those companies pay for raw timber has dropped. Dane said loggers can't handle any more bad news.

"They can't sustain these kind of economic losses much longer," said Dane, "so unless something recovers, or legislation occurs or policies are enacted immediately, we're going to see a continued erosion, and I think it will become more accelerated in the near future."

Timber industry proponents were in Washington last week to lobby U.S. lawmakers. They want the industry included in any new stimulus packages being considered to revive the troubled economy.

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