Tornado cleanup and diesel prices pile additional challenges on loggers

Published: Monday, May 16, 2011, 6:30 AM

By Jeff Amy, Press-Register

The last few years have been bad enough for loggers, with a crippled housing market undermining timber demand.

But now the squeeze is tightening. Today's highly mechanized logging industry gulps diesel fuel as it cuts and hauls trees. As diesel costs have risen, loggers have been unable to win higher prices from mills or get landowners to take significantly less for trees, chopping away at loggers' profits.

"It just keeps getting worse," said Chuck Reynolds of Woodrow Reynolds & Son Timber Co., a Chatom-based wood dealer. "There's no light at the end of the tunnel."

Now the forestry industry in Alabama and across the South faces an additional challenge: Finish a labor-intensive clean-up of forests left tangled by last month's tornadoes before logs rot, and at a time when it's not clear how a glutted market will absorb the wood.

Many loggers are getting out of a money-losing business. Reynolds had five crews with 45 employees a year ago, but auctioned his equipment at the end of 2010. Now he brokers timber sales between landowners and mills, contracting with others to cut the trees.

"I just felt like last year was the time to get out of it, so I started downsizing," Reynolds said.

Others, having borrowed to buy expensive equipment, have trouble shutting down if they can't repay their loans.

"We all keep trying to work because we have a debt to satisfy," said Mitchell Presley of Mid Star Timber Harvesting in Toxey, which employs 64 people. "The only way you're going to get rid of that logging capacity -- you call it attrition, but it's bankruptcy."

Diesel fuel prices above $4 a gallon may push more people to the exits. Presley said that a $1-a-gallon increase in diesel can increase the cost of operating one logging crew by $8,000 a week.

"We don't have anybody to pass that cost on to," he said.

Some factors make the squeeze worse right now and in this region.

Mills normally buy large supplies of logs in the fall, because wet winter weather can restrict tree cutting. That was particularly true in the wet winter of
2009-2010. When lumber demand briefly spurted last spring and sawmills tried to ramp up production, log prices shot up in the Southeast.

Trying to prevent a similar supply crunch this year, mills bought more wood in fall 2010. But loggers worked all through a dry winter this year, keeping supply steady when mills are normally using their own giant log piles. That created the current glut.

Loggers also say that in southwest Alabama, Georgia-Pacific LLC's purchase of the Alabama River pulp mills in Monroe County made it the market's dominant buyer. Georgia-Pacific, an Atlanta-based unit of Koch Industries, also runs a tissue mill in Pennington, a linerboard mill in Brewton, and another pulp mill northwest of Lucedale.

"G-P now has almost monopolized the industry by buying out their competition," Reynolds said. "They can direct wood from other places to that spot and not get in a bind."

Georgia-Pacific declined to comment.

Some Alabama loggers have looked to the Legislature for relief. Rep. Ron Johnson, R-Sylacauga, has introduced a bill that supporters say would give loggers a fuel surcharge. The bill is opposed by Alabama Forestry Association and appears dead, said state Sen. Marc Keahey, D-Grove Hill.

The association's Chris Isaacson said the real problem is falling demand, including the long-term decline of paper mills.

"We don't believe this bill addresses the underlying issue," he said. "We feel like it interjects the state into contracts between private parties."

Other southwest Alabama loggers have hired a lobbyist, Andre Reed, to try to negotiate higher prices from mills.

Loggers argue that, instead of paying the lowest possible price, mills should aid them in bad times to guarantee a steady supply of wood. Mid Star's Presley warns that there's no guarantee companies would rush back into the industry even if demand and prices rise. For example, Presley said that he doubts he would
borrow more to increase capacity at Mid Star.

It was across this desperate market landscape that tornadoes tore on April 15 and April 28. The Alabama Forestry Commission estimates that the twisters knocked down 12.2 million tons of trees that were worth $258 million when they were standing.

That's a lot of wood for a state that consumed 30 million to 35 million tons last year, Isaacson said.

Gov. Robert Bentley named a task force to try to recover as many of those logs as possible. Storm cleanups are costlier and more labor-intensive than regular tree-cutting, because salvage loggers can't use many machines meant for standing trees.

A similar task force after 2004's Hurricane Ivan helped loggers scoop up 41 percent of damaged tonnage. Only 24 percent of the value was recovered, however, because many big logs normally used for lumber were so weakened by wind that they had to be turned into pulp or fuel for boilers.

The tornado cleanup may be more difficult because trees may have been swirled into rat's nests by the storms instead of all falling in one direction as
sometimes happens in a hurricane.

But one of the biggest questions is how to pay for salvage logging, with the wood market so much weaker than in 2004.

Tommy Thompson, who buys wood for Louisiana-Pacific Corp. and is leading Bentley's task force, said there may eventually be demand for lumber, plywood and oriented strand board for rebuilding, but that won't happen until people have money in hand.

"The timber is going to be produced in the next several months and the market isn't going to jump up that quickly," said Thompson, who works out of Louisiana-Pacific's shuttered OSB mill south of Thomasville.

Isaacson said mills are being asked to buy the wood even if they already have plenty.

"They have told me they were going to do everything they possibly could to provide a market," he said.

He's also exploring other ideas, such as grinding up chips and exporting them to Europe. High ocean freight rates could dampen that business.

Isaacson said landowners are "probably not going to get much of anything" for downed wood, which actually makes Presley hopeful. "It put timber on the ground that a landowner has no choice but to sell," he said.

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