Costs rise, prices fall, mills suffer
from housing market's downturn
As record numbers of home foreclosures hit the U.S., local sawmills are feeling the impact of lower domestic demand, higher production costs and greater global competition than ever before.
Don Buck, sales manager at Shenandoah Hardwood Lumber in Buena Vista, said the lumber market is the tightest it has been in 25 years.
"It's a situation that veteran lumber people have never seen before," Buck said. "It's very much like the perfect storm."
According to the Hardwood Market Report, production at eastern U.S. sawmills dropped as much as 8.5 percent in 2007. Rockbridge County sawmills produce primarily red oak, white oak and poplar hardwoods, as well as smaller amounts of maple and walnut. Those woods are used for flooring, trim, cabinets and furniture, which have all been affected by the slower housing market.
People buying trim wood might be looking at types of woods that Rockbridge County doesn't produce. Karen Stanley, an area forester with the Virginia Department of Forestry, said people are choosing finer grained woods such as bamboo and eucalyptus over oak now.
But many people are no longer in the market for wood of any kind. In late 2006, homeowners with subprime mortgages began defaulting on mortgage payments. According to RealtyTrac, by the end of 2007, 2.2 million homeowners had filed for foreclosure and millions of families had to move out of their homes.
Will Harris, owner of North Fork Lumber in Goshen, thinks the lumber market is suffering from irresponsible lending and borrowing in the housing market.
"[The housing market] was a damned disaster waiting to happen, and it happened," he said.
North Fork Lumber produces railroad ties, floorboards and logs for log homes. Floorboard prices have dropped, but Harris said the log home business has dried up completely. In past years, Harris had 12 regular customers buying logs, but now none of those customers is buying because of the slow housing market.
Shenandoah Hardwood Lumber has kept up production, but Buck said costs are rising and prices are falling. The biggest expense for the industry is fuel, which affects every step of production, from harvesting trees to milling and shipping them.
At the same time, Buck said, U.S. sawmills are having to lower their prices to remain competitive. Even though China, Malaysia and Vietnam are readily importing lumber from the United States, the market is heavily overstocked, meaning U.S. sawmills have to sell their products at the cheapest possible prices. Shenandoah Lumber exports about half its kiln-dried lumber.
Buck and Harris are both looking for niche markets to help them stay competitive in the tougher lumber market. One strategy is to sell packets containing unique colors, grades and dimensions to appeal to customers with specific needs.
"We're having to work a lot harder to get the sales in this market," Buck said.
The lumber industry affects sawmill workers and foresters, truckers, carpenters and contractors. While higher costs and lower prices will put a strain everyone, Harris believes things will be back to normal in a year or two.
"It's a cyclical industry," he said. "We'll weather the storm."
Produced by
Washington and Lee
journalism students.
Lead Supervisors:
Prof. Brian
Richardson
Prof. Phylissa
Mitchell
Editing supervisor:
Prof. Pamela Lucke
Technical supervisor: Michael Todd