Minnesota loggers lose markets as mills close down

August was a tough month for Minnesota's timber industry. The Verso paper mill in Sartell and the Georgia-Pacific hardboard plant in Duluth both shut down permanently, putting 400 people out of work.

The plant closings were among the latest blows to an industry that's been on the ropes since the last recession began. In all, six mills have closed over the past five years. That's about a third of the industry.

Some fear that they also could signal the end of the road for some of the state's struggling loggers. Among those still working are the half-dozen loggers who recently used heavy equipment to harvest trees on a 120-acre stretch of private land south of Bemidji.

Mark Benson, who co-owns Benson Brothers Trucking Inc., based in Blackduck, said the company used to have twice as many employees. But when mills started shutting down, they had to let people go.

"I would say the logging industry right now is close to a dying breed," Benson said.

The Benson Brothers sold hundreds of truck loads of balsam each year to the Verso paper mill in Sartell, one of the few consumers of balsam in the state. Verso accounted for about 25 percent of the company's business. But that market is gone.

"We aggressively bought particular tracts just for the balsam, for them," Benson said. "And now we have a lot of them in our inventory of sales that we're not going to be able to cut, even, because we're going to be short a balsam market."

The same is true for other loggers in northwestern Minnesota, he said. Some have stockpiles of balsam that now have little value.

"Several loggers are going to have to quit, because there just isn't enough market for them anymore," Benson said.

Many loggers have been operating on razor-thin profit margins since the recession, due to low demand. Timber consumption in Minnesota is down about 35 percent since the early 2000s, according to the Minnesota Timber Producers Association.

A recent nationwide survey published in Timber Harvesting magazine found that in 2010, more than half of logging companies either lost money or barely broke even. Another 21 percent were operating on only a one to three percent profit margin. They own expensive equipment they can't afford to replace.

There are only about 1,500 loggers left in the state, a number that is down about a third from a few years ago, said Scott Dane, director of Associated Contract Loggers and Truckers of Minnesota, a trade association representing more than 150 companies.

If the logging capacity continues to erode, Dane said, there's a risk the entire industry could collapse.

"The most recent mill closures actually represent a tipping point that will push some loggers over the edge and they won't be able to recover," he said. "Minnesota is losing the timber industry."

Dane said loggers holding large amounts of unmarketable balsam should be released from their contracts without penalty. But state Department of Natural Resources officials say by law that would require legislative action.

In the meantime, the state can help by giving loggers one-year extensions on their contracts, said Dave Thomas, the DNR's regional forest manager for northwest Minnesota. That would give them more time to find a balsam market.

But Thomas said it could be awhile before a new market emerges, and that would likely depend on the state's ability to attract new industry, such as ethanol, bioenergy or electricity plants.

"If we don't have something like that come in, then we are going to have some significant problems for these guys finding a market and we are going to lose a number of them that are out there," Thomas said.

It's not all bad news in the timber industry. Another company, Norbord, is investing millions to modernize its plant west of Bemidji. It's the state's only surviving producer of a fabricated building material called oriented-strand board.

Also, the Sappi paper mill in Cloquet, Minn., is undergoing a $170 million expansion that will convert wood pulp into cellulose fiber for use in making rayon textiles and other materials. It will be the first of its kind in the state.

DNR forest economist Don Deckard said that kind of innovation will be key to the future viability of the wood products industry.

"The fact is, we've got a lot of wood here in the state that right now isn't being utilized," he said. "We're looking for new ways to use it. And I think the paper companies are going to be part of that going into the future."

Sappi's new textile expansion in Cloquet is expected to come online next spring. Industry observers say there's potential for paper mills to enter other emerging markets for things like petroleum substitutes, fibers and biochemicals.

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