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The Honolulu Advertiser

Posted on: Friday, May 14, 2004

Record prices fuel revival of plywood industry

By Rukmini Callimachi
Associated Press

SPRINGFIELD, Ore. — A year ago, Steve Killgore walked into his mill's cafeteria, a white-collared executive entering the den of some of the timber industry's most bitter workers.

The plywood economy was in freefall. The county assessor had served the mill with foreclosure notices for failure to pay $800,000 in back taxes, and rumors of bankruptcy were rippling through the lunch room.

"One out of three of you will be let go," Killgore, the president of McKenzie Forest Products, told the men in the cafeteria, steadying himself against the door.

It was the lowest point in his career, said Killgore, a man whose great-grandfather logged the mountains in eastern Oregon with a team of mules.

By last November, Killgore's company was out of the red, one of 34 mills in the Pacific Northwest that has been revived by an unprecedented increase in plywood prices.

Last May, the price of 1,000 square feet of plywood sold for $392, according to Random Lengths, a trade publication in Eugene, Ore.

By June, the same product sold for $435, and in August, prices topped $500. Prices reached an industry high of $650 in November — a record that was broken in the first part of this year, with the latest peak at $735.

"That's the highest price in the history of this publication. It's the highest in the history of the industry," said Shawn Church, editor of Random Lengths, which for 60 years has tracked weekly price averages for different forest products.

The plywood renaissance is a direct result of the booming housing industry, which represents 70 percent of the plywood market. Last year, builders broke ground on 1.5 million single-family homes, a building industry record. Also, houses are bigger than they used to be, said Michael Carliner, an economist with the National Association of Homebuilders, based in Washington, D.C. He said the average home last year was more than 2,300 square feet, up from 1,600 square feet in 1973.

Lumber prices are so high that they are tearing the profit out of new construction, Carliner said.

"There's 300 wood panels in an average home. The wholesale price used to be $6. Now it's $17," Carliner said.

In Springfield, a city surrounded by mills, the resurgence marks the first time in recent memory that the manufacturer, not the builder, called the shots.

"You can hear the sense of panic in people's voices when they have a job to fill and they can't find the wood in time. When you have 10 of them on hold, you know it's time to raise the price," said Josh Gibeau, sales manager for McKenzie Forest Products.

For many in the plywood industry, the dramatic recovery is not a time to brag, but an opportunity to recover.

"We've just come out of a horrible period. People are just healing up," said Allyn Ford, president of Roseburg Forest Products, America's largest plywood manufacturer.

Since 1989, 35 of Oregon's 60 mills have been shuttered and 6,000 jobs have been lost — a decline brought by the listing of the spotted owl as an endangered species, which resulted in the closure of vast reaches of Northwest forests to logging.

But the turnaround has allowed Killgore to pay the Lane County assessor, replace broken machinery and recoup $3 million in environmental cleanup costs.

Still, many caution that the wave is about to crest.

"It's a bubble," Ford said. "I live in hope. But in my old age, I have come to learn that you cannot sustain this level of activity."