Sawmills on the U.S. West coast face lull in Chinese lumber demand, while log exports drive raw material prices to 2005 building boom levels, industry leaders say

LOS ANGELES , November 14, 2011 () – Sawmills on the U.S. West coast are facing a lull in sales to China, but are continuing to struggle with raw material costs that have been inflated by the sharp increase in log exports, according to a report by The News-Review.

China is the largest foreign customer for Oregon lumber producers, but while log exports have benefited loggers and timberland owners, they have put the squeeze on sawmills. Bob Ragon, executive director of timber advocacy group Douglas Timber Operators in Roseburg said the current situation was a "mixed blessing," with a negative effect on milling infrastructure, but positive for loggers and landowners.

According to figures released by the USDA Forest Service's Pacific Northwest Research Station in September, log exports from Oregon, Washington, Alaska and Northern California increased 79% in the first six months of this year to 982.2 million board ft. (mmbf) from 548.6 mmbf in the same period last year. Oregon supplied more than half the logs, at 518.5 million board feet, up from 265.5 mmbf in the first half of 2010.

The increase is leading to what industry experts say are record log prices at almost double normal levels, according to The News-Review's report.

Exports to China began to slow a few weeks ago, but demand is expected to lift again in the spring. The volatility is adding a new element of uncertainty to the wood products industry, and raising questions over whether the country will be a dependable customer.

Ragon, and others in the industry, say exporting manufactured wood products, instead of logs, would triple or quadruple employment throughout the industry. Currently the ratio of log to finished goods exports is around 10:1, they say.

The president and CEO of Lone Rock Timber Co., Toby Luther, said log prices currently compare to building boom levels in 2004-5, but low domestic sale mean mills can not pay those high prices.

Swanson Group of Glendale was due to begin temporary shutdowns on Monday affecting its four mills and 700 workers. When the company announced the curtailments, company President Steve Swanson blamed foreign competition for logs.

Jim Dudley, log procurement and marketing manager for Roseburg Forest Products, said his company had experienced similar price pressure and noted that most West Coast manufacturers are suffering losses. But Dudley noted that, while foreign competition had been difficult to compete with on the manufacturing side, it had helped to keep the logging infrastructure in place, which will be important if domestic demand increases.

Dudley added that, if logging on federal lands was increased to even one-fourth of what it was 20 years ago, mills would have a steady supply of timber, as the industry is now almost entirely dependent on logging from private lands.

The primary sources of this article are The News-Review, Roseburg, Oregon, on Nov. 13, 2011 and figures issued in September by the USDA Forest Service Pacific Northwest Research Station, Portland, Oregon.

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