Forest products industry strong despite roller coaster year

An aerial view of one of Idaho Forest Group’s mills. Visible is one of the company’s cranes, which allows IFG crews to stack logs higher, making better use of limited horizontal space, and can be used to create a berm to protect residential neighbors from excess noise and dust.
(Courtesy photo)
PreviousNextBy CAROLINE LOBSINGER
Staff Writer | October 28, 2020 1:00 AM

SANDPOINT — It’s been a roller coaster ride in recent years for the forest products industry.

Before the Great Recession, the housing industry averaged 2 million new housing starts a year before dropping to as low as 1.4 million starts during the economic crisis. While things improved, things weren’t back to previous levels when the pandemic hit. Housing starts dropped in half — to about 800,000 when adjusted for seasonal variations in April.

“People were scared, kind of put things on hold, didn’t know what was going on,” said Tom Schultz, vice president of resource and government affairs for Idaho Forest Group.

Based in Coeur d’Alene, IFG operates facilities throughout the region, including five sawmills in Idaho and another in Montana, and a finger-joint facility in Athol. The family-owned company is one of the country’s largest lumber producers with capacity for more than a billion board feet per year selling both locally and internationally.

Timber and logging were deemed essential industries, which meant mills were able to stay open and loggers remained in the woods and continue to work — no small thing given the industry’s financial footprint.

In the region, Associated Logging Contractors of Idaho officials estimate the forest products industry directly employs more than 16,400 people with an estimated 14,800 people holding down support jobs connected to the industry. Average annual wages for logging and hauling jobs range from $28,950 to $63,840. Of the products sold, 90 percent were exported out of Idaho and added $793 million in sales and $2.2 billion to the state’s gross domestic product.

When the pandemic hit, the forest products industry saw prices plummet — down about 40 percent, Schultz said, as people pulled back due the resultant uncertainty and confusion caused.

In that period, timber production was curtailed due to that uncertainty.

“We saw over a billion board feet of production between Canada and the U.S. that was curtailed during this time, where people weren’t sure what was going on. They start shutting things down — they were about not being able to move their products,” Schultz said. “So, you go from pre-pandemic to pandemic in April, March-April timeframe and things went upside-down real quick.”

As people required to stay home looked for things to do, home repairs and renovations were among activities topping the list of activities. Home improvement stores such as Lowe’s, The Home Depot, Ziggy’s, and Menards saw huge demand with lines in the spring sometimes winding around the store and waits to get inside as long as an hour and a half. That demand saw Lowe’s and The Home Depot record some of their strongest quarterly sales growth in several decades.

“So what we see is people are home, they’re working on their homes and the word they use is repair and remodel,” Schultz said. “So the repair and remodel business just started really picking up and what we saw is the demand for products for homes — whether that was lumber or MDF or plywood — but that demand really started increasing.”

However, the supply wasn’t always there because many had curtailed production in the early days of the pandemic. That lead to higher prices as demand outweighed the limited product that was available.

“There was just significant demand, and the supply wasn’t available as robustly as maybe what people desired and you have this imbalance,” Schultz said. “So what happens when you have high demand and lack of supply, prices go up … we saw an increase in price for lumber and other products up as much as they had dropped.”

Where prices had dropped by 35-40 percent when the pandemic hit, things “turned around immediately” and lumber prices escalated because of that supply and demand imbalance.

In recent months, people are looking to move from larger, more populated areas to Idaho from elsewhere on the West Coast to larger cities such as Chicago. Reasons are varied but the result has been a demand for wood products that “has just escalated” — not just in Idaho and the Intermountain region but throughout the country.

“The homebuilders have actually raised this issue with Congress and others, expressing that they’re concerned there’s not enough supply and that’s impacted the cost of a new house,” Schultz said.

As that balance between supply and demand shifted, prices for lumber products increased sharply before beginning to make their way back down, he noted. While some areas of the country have seen prices for certain lumber products drop as much as 40 percent, those declines haven’t yet been seen in the Intermountain region.

“But the prices we have now aren’t going to hold indefinitely,” Schultz said.

“Because of this supply-and-demand imbalance, prices went up. Now what we see now is prices are starting to come back down,” Schultz said. “What we know is every time prices go up, they come back down and many times when they come back down, they come back below where they started.”

The “roller coaster year” — with prices up, then spiking upward and now starting to drop gain — has many in the forest products industry feeling a little uncertain, Schultz said.

“I think right now everyone is a little anxious,” he added, “anxious because we’ve seen these kind of things where prices go up and they come back down and we’re on the downside of that slope.”

While the industry has adjusted accordingly, and demand remains high, industry officials are keeping a close eye on things. Much of what may be driving that demand is the low interest rates — as low as 2 1/2 percent for a 15-year mortgage — with many either looking for a new home or remodeling their existing home.

“You see with homes on the market, there is bidding that begins immediately,” Schultz said.

It’s not uncommon when a house comes on the market, to see sellers get multiple offers and be able to pick and choose from large number of hopeful buyers. “It’s very much a seller’s market,” Schultz said.

The other piece of the puzzle is availability of logs. Typically with the industrial landowner base, supply comes at a consistent pace. On the non-industrial side, the market is very price sensitive so that as the price increases, more private landowners — those with maybe 10, 50 or 100 acres — opt to take action.

“Maybe that’s how they’re going to pay for their kid’s education, so they want to move when the prices of logs is maybe a little higher,” Schultz said. “We’re probably seeing a little more activity on the non-industrial side of things right now [as a result]. On the state and the federal sales, the state has done a very good job of continuing their sale program.”

There has been a “little bit of impact” on preparation on coming timber sales during to COVID-19-related restrictions and social distancing guidelines.

“As [the Forest Service has] tried to manage for COVID, I think it has impacted somewhat the environmental analysis that they can do so but they’ve done a good job to date,” Schultz said. “We do forecast that there could be some potential impact in the future. How much that is, I couldn’t tell you.”

The field remains a popular one with strong interest in programs such as those offered at the University of Idaho’s College of Natural Resources, where Schultz serves on the board of directors. While enrollment is down at the university overall, the college has seen increased enrollment.

“I think there’s still lots of desirability for people to work in the industry,” he added.

Within the forest products industry, there are different skill sets for those interested in forestry, working in a mill, or any of the other fields that fall within the industry as a whole.

“What we see happening, though, on the mill side, as we have more and more innovation and more technology, we’re going to require people who have a greater level of skills,” Schultz said. “So [we’ll need] more engineers, more technicians, we actually see that as pretty darn exciting as we go into the future.”

And as technology continues to evolve and use of robotics and technology continues to increase, the timber products industry is going to require more of a skilled workforce than maybe it has historically.

“We think that is a positive, we think it’s good for the economy, we think it’s good for the workforce,” Schultz said. “We’re actually bullish on people coming into the industry.”

It’s not uncommon for workers in one area of the forest products industry, such as a mill, to seek certification to boost their skills while still a part of the workforce. Apprenticeship programs also are popular — whether the youth are still in high school or hav recently graduated.

While interest remains high for jobs in much of the industry, there is a national shortage for truck drivers.

The forest products industry, especially in the Intermountain region in particular — eastern Washington, North Idaho and western Montana — is strong.

“I think there’s a commitment from the companies that are here, that we’re here to stay,” he added. “I think … there’s a good raw material supply and we think there’s strong demand for the products that we produce, nationally and internationally. I think we’re well positioned to compete with the Canadians and others that may try to import into the U.S.”

The industry, as always. remains focused on sustainability of the resource, similar to farmers nurturing their crops for the best harvest, Schultz said.

“It’s the same thing with forestry, if you don’t take care of the land and reforest and fertilize if necessary, you’re not going to have a crop in the future” Schultz said. “So sustainability is key to us and we’re producing a renewable resource. As people are concerned about climate change or carbon issues or forest fires or catastrophic wildfires, one of the best things we can do is manage our forests sustainably.”

The industry works collaboratively with everyone from environmentalists and conservationists to county commissioners and the public, Schultz said. Idaho Forest Group is deeply committed and works to ensure all voices are heard and that it supports agencies trying to manage their own land base.

“I think that’s a key piece, not to lose in all of this,” Schultz said. “This industry works within a renewable resource and we are for sustainability, whether those lands are private lands, whether those lands are public lands.”

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