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Sawmill Industry In Arkansas Sees Historic Decline

6 min read

(For a breakdown of Arkansas timber and paper industries, click here.)

The once-buzzing sawmill industry in Arkansas is currently operating at its slowest clip in more than half a century.

That’s according to several leaders in the business who say sawmills are closing down or cutting back production at a rate like never before, with no end in sight until late 2008.

John Ed Anthony, chairman of Anthony Timberlands Inc. of Bearden, says not many people realize the dire situation many operations are facing.

"The lumber industry, wood products industry, lumber and plywood industries – they’re all at absolutely catastrophic levels," Anthony said. "I’ve been around for 50 years, and not once has it ever been as dire as it is right now. I can’t stress enough how volatile it is right now."

The number of sawmills in Arkansas has been steadily declining for the past quarter-century, but before now, that was simply a reflection of modernization and consolidation and didn’t indicate a struggling market.

In 1983 there were more than 1,200 sawmills – 677 primary and 541 secondary – in operation in Arkansas. At last count in 2006, according to the Arkansas Forestry Commission, there were just 420 total sawmills buzzing in the state, dramatically down from the 1993 total of 536.

But Production Up

But just looking at the tape doesn’t reveal the tale. Despite the steady decrease in numbers of wood-processing plants, actual production increased, and Arkansas rose to become the third-largest timber harvester in the country.

"Though we have fewer sawmills now, we process more wood currently than we have in previous years," said Rebecca Montgomery, a field audit supervisor for the Arkansas Forestry Commission. "The number of large mills has increased over the years, and mill capacity has increased over the years due to advances in technology. So, though mill numbers have declined over the years, we really have gained production through technological advances."

According to the U.S. Census Bureau, Arkansas ranked No. 7 in 1993 in lumber output, but jumped to No. 3 and trailed only Oregon and Washington in output in 2006.

"Over the years there’s been a lot of consolidation among foresting companies, not only in Arkansas, but all over the country," Anthony said. "Modern technology and business models have changed, like every other industry, and a lot of the little family operations have fallen by the wayside or sold to bigger players."

Anthony says the industry globally, not just in Arkansas, is as bleak as it has been in his 50 years in the business. And because of the downswing, mill closings and layoffs are now a reflection of slowing production.

Though the decrease in the number of sawmills in the state traditionally didn’t reflect bad market conditions, the industry’s current slump is the reason behind several closings.

"And if they’re not closing down, they’re definitely slowing down and cutting back on shifts and operations," said Matthew Pelkki, associate professor of forestry in the School of Forest Resources at the University of Arkansas at Monticello, where he holds the George Clippert Endowed Chair. Indeed, the state’s sawmills are currently in flux – "not just in Arkansas, but nationally and internationally as well."

Georgia Pacific announced on Halloween that one of its plywood mills at Crossett would be idled and 300 of its workers laid off.

The Buddy Bean Lumber Co. Inc. in Glenwood shut down indefinitely in April. J.P. Price Lumber Co. of Monticello, which was in its start-up phase, has curtailed production. Potlatch Corp.’s Warren operation shut down temporarily and has now cut back to just one shift. International Paper at Leola cut back production by a shift.

"The list goes on and on," Pelkki said.

Anthony said two pine mills his company operates in Bearden and Malvern have largely curtailed production, and experts don’t see an end to the slowdown until late 2008.

"A lot of these mills are not your little beside-the-road operations that you’d think would be the most likely to go," Anthony said. "These are extremely efficient, lean, modern, high-volume operations that employ hundreds of people, and they just aren’t seeing the demand."

Housing to Blame

Most everyone in the industry agrees that as housing starts go, so goes the timber industry.

The real estate boom that boosted sawmills to record production during the first half of this decade has gone into a dramatic spiral that echoes throughout the timber industry.

Housing starts in September slowed to the weakest pace in 14 years and were 19 percent lower than a year ago. Housing permits and home sales continued to fall, and foreclosures reached a high of nearly 244,000 in August.

The decline in housing starts and permits coupled with the oversupply of existing housing and falling lumber prices is not a good mix for sawmills.

"Housing starts are certainly the main contributing factor," Anthony said. "The housing boom in recent years created a huge oversupply of raw building materials, and shrinking starts have dramatically decreased demand."

Anthony said lumber pricing is also at a 15-year low and continually declining.

Pelkki said most sawmills had record years from 2001 until 2006 because of low interest rates, a booming housing market, the Iraq war forcing the government to purchase plenty of wood and the rebuilding necessary after the historic hurricane season of 2005.

"The wood products industry modernized and expanded production, and now we’ve had this collapse and we’ve got a lot of excess capacity of solid wood products," Pelkki said. "So the sawmills are basically cutting back on the one thing they can – labor costs."

Chip Off the Block

The current production slump, like most industry lulls, trickles down to several areas of the overall economy but especially affects some within the timber ranks.

The state’s paper mills largely rely on sawmills to provide "residuals," the chips and scrap left over from turning raw timber into lumber, to use in the paper-making process. And when sawmills are curtailing production at the current dramatic rate, that means fewer leftovers are getting passed along to the paper mills.

"When those wood products facilities suffer or shut down temporarily or permanently, it does have an effect on us and puts added pressure on our team to be flexible enough to make the kinds of adjustments in the marketplace," said Max Braswell, communications director with Domtar Industries Inc. of Montreal, which operates a paper plant in Ashdown. "We still have to get that fiber, so they have to be able to make those adjustments and get it in here."

Ben Myane, group manager of wood and fiber procurement at Domtar, said the plant traditionally likes to keep a 50-50 mix of wood chips from sawmills and roundwood – a length of cut tree – that goes into the paper-making process. But since production has slowed, that mix has shifted.

"And so there has been a downsizing in solid wood, mostly on the pine side, so what we have to do since we do buy roundwood is go out and increase our roundwood purchases," he said. "We’ve pushed and tried to increase our tree-length end of the mill to offset some of the loss of chips. So, yes, we have pushed up tree-length receipts, and what that does is maintain a bigger roundwood inventory here at Ashdown that protects us during winter months."

The bottom line, according to Braswell, is that the company has to work a little harder to get products into Ashdown for making paper.

"It’s just an ebb and flow that we have to adjust to," he said. "No doubt things are a little easier and economical when the sawmills are operating at full steam."

 

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