Western Oregon BLM Federal Public Forestlands:

Number of Mills and Jobs Decline By One-Half While Milling Capacity Increases by One-Quarter

1995 was the first year of the new normal for the Oregon wood processing industry. It was the first year of the Northwest Forest Plan and of the Eastside forest screens and stream protection measures, all of which were new government policies that resulted in significantly less logging coming from federal public forestlands in Oregon. Since then, 53% of Oregon' primary wood-processing facilities have closed, with a 53% loss of jobs. However, the remaining mills can process 25% more logs in 2012 than in 1995. Milling capacity increased for a variety of reasons. Some of these mills, who cannot compete with mills in Shanghai and Tokyo for private Oregon logs, seek to increase logging of older forests on federal public forestlands. There is too much milling capacity for either domestic lumber demand or for available log supply.

Any one paying any attention to the Oregon wood products industry during the last quarter century knows this story: A lot of mills have closed and a lot of jobs have been lost. The conventional narrative is that it is due almost exclusively from the decline in the amount of logs available from federal public forestlands in Oregon. This conventional narrative is incomplete and therefore misleading. While federal log output within the range of the Northern Spotted Owl has significantly declined from it’s peak in the late 1980s and early 1990s, other factors were at play that also contributed to the decrease in the number of Oregon wood processing facilities and lumber and wood processing jobs, including but not limited to:

(1) log exports;

(2) overcutting of private timberlands;

(3) weak domestic housing market;

(4) increased milling efficiencies (automation); and

(5) timber-processing capacity increases.

The take-home message of this paper is this: While the number of mills and jobs have declined significantly, the timber-processing capacity of the remaining large softwood sawmills has increased significantly.

From the abstract of Oregon Softwood Lumber Industry 1995-2012: Fewer Mills and Jobs, but Larger Timber-Processing Capacity:

While the number of all Oregon primary wood product manufacturing facilities and lumber and wood products jobs both decreased 53% between 1995 and 2010, between 1995 and 2012 the timber-processing capacity of the remaining large softwood sawmills increased 25% above the industry's 1995 levels. Large-capacity Oregon softwood sawmills have a milling capacity far in excess of current and likely domestic demand. These mills also are generally failing to compete with mills in China and Japan for Oregon private logs. Because they are being buffeted between low product prices and high supply prices, these mills seek to increase federal logging levels (federal logs cannot be exported and are thus significantly less expensive to domestic milling operations) from federal public forestlands. Production (utilized capacity) has declined dramatically with the collapse of the American housing bubble, but milling capacity has not (yet).

As to which mills are most vulnerable to not making it through the next inevitable shake-out, there are two categories at risk:

• Stud and dimension lumbers mills that rely on smaller logs, but they are simply more milling capacity than demand; and

• Nine mills with an obsolete business model that requires large logs from large trees that come from old forests that are no longer socially acceptable to log.

You might find these tables from the report interesting.