DULUTH — “Totally devastating” is how one logger describes the hits the timber industry in Minnesota has taken over the past few years.
Mark Ruter, owner of Ruter Logging LLC in Buyck, near Orr, said he’s been in the business for about 33 years and that the conditions of the industry are terrible: “I’ve never seen anything like it.”
Independent loggers — hit with high fuel prices, a sagging housing market and the closure of mills — are struggling to hang on, and some are getting out of the business altogether.
“Ten percent of the logging work force has left the industry” over the past two years, said Scott Dane, executive director of the Associated Contract Loggers & Truckers of Minnesota, located in Biwabik. “The industry is hunkered down, focusing on whatever they can to survive. They’re not even making money, just hoping to survive.”
Dane said that while hard numbers are hard to come by because of the independent nature of the business, he estimated that there are about 300 contract loggers in the state, mostly in northeastern Minnesota. “There are many more looking to get out,” Dane said.
OSB shutdowns hit hard
When three oriented-strand-board (OSB) mills shut down, that hit the industry hard. Demand for OSB, which is used in home construction, lagged as fewer houses were being built. “One of the biggest challenges was Ainsworth [shutting down] in Bemidji on top of it all, and that brings the issue back to the forefront,” Dane said. “A reduction in demand for finished as well as raw material — the shutdowns bring a 25 percent reduction in demand — affects the supply side.”
Ainsworth said it would reevaluate the Bemidji closure later this month. In August, it closed its Grand Rapids OSB mill permanently, after it had temporarily shut down in September 2006. About 190 people were laid off.
Loggers are dealing with the slowdown in different ways, Dane said. Some are holding off on replacing equipment, which can cost $175,000 to $200,000 a year. “Guys that have it paid for are probably in the best position,” Dane said. “They can park it and not lose money as a result of it.” Equipment dealers are feeling the pinch because of the slowdown as well, Dane said. “They’re putting more into repair.”
Because of the slowdowns and closings, the loggers who are still in it are now competing against each other for a smaller group of buyers. “The pie is only so big, so any time a producer goes to another mill, he’s displacing another guy, which compounds the problem,” Dane said. “The actions loggers are taking are a survival strategy to try to stay in business until the industry recovers or new markets are developed.”
“It’s probably as slow as we’ve ever seen it,” said Gary Olsen, president of Hahn Machinery Inc. in Two Harbors. Hahn deals in logging equipment and other heavy machinery, and Olsen said he’s been in the business for more than 30 years. Olsen said his business has opened a brokerage, which buys up machinery from people getting out of the business and sells it online.
Paying more for fuel
High fuel prices hit loggers hard. The logging equipment requires fuel — “sometimes 100 to 140 gallons a day,” Olsen said — and with diesel over $4 a gallon and companies not reimbursing transport costs, many loggers are just squeaking by.
“They’re just not getting enough for the product,” Olsen said. “If anything, people are changing the scale of operations from a crew of five to a crew of three. Or from five machines to three machines. Or they go to something more fuel-efficient. They’re doing what they have to cut costs.”
Many have touted biofuels as a savior to the market, whether it’s switching to harvesting firewood, an energy-producing biomass plant or other biofuel options. Cleveland-Cliffs LLC, better known for its taconite operations, has a 70 percent stake in Renewafuel, which is involved in producing small cubes made of wood, switchgrass and other plant materials to be burned as fuel. Biomass operations would burn the branches and other debris left behind after timber logging for energy.
“I think [the transition to biofuels] might be the new primary forest product,” Dane said. “It has the potential to absorb displaced demand from the OSB market. We just need to make it profitable for loggers to participate in. We’re seeing marginal returns from current bioenergy, but that’s changing.”
Incentives would help shift to biomass
While Dane said it could take a $250,000 to $400,000 investment for a logger to buy new equipment suitable for biomass harvesting, he added that incentives — such as the Iron Range Resources’ decision to make the purchase of bioenergy equipment eligible for business development loans — can help.
Olsen said the equipment purchase is necessary for those wanting to switch: “Instead of handling logs, you’re essentially handling haystacks. You can’t get a payload because there’s no density.” He said fuel costs would still be an issue as well. “If you’re close to the yard and you don’t have a 100-mile haul, you can probably do it. That truck rate eats it up.”
Rutar, of Rutar Logging, said that covering the haul is a big challenge, no matter what the load is.
“The rumor is that gas prices are going down, but not [diesel] fuel. There’s politics involved in that. The Renewafuel is close, and we’ll bring [wood] there, but they don’t want to cover the haul.”
Rutar also pointed out that biofuel operations could skew the harvest, leaving less wood for lumber.
“That takes round wood [logs], not just chips,” he said. “There’s less tops and less limbs.”
For those who get out of the business, there are some options.
Skills are applicable elsewhere
“The skill set that loggers have is applicable to other industries,” Dane said. “Equipment industries, mines, maintenance. Quite a few have gone to work in maintenance for municipalities. But as marketable as they are, these guys do not want to leave their woods. It’s something that’s forcing them out of the woods.”
Rutar said some of his best employees have gone to work for the taconite mines on the Iron Range, which are seeing a resurgence and are primed for explosive growth in the coming years.
“All we know is logging,” Rutar said. “My Dad’s been in it for 50-plus years; he’s 77 and still works with us. He feels so sorry for us, but there’s nothing he can do. It’s been a good life, though.”
Another side-effect of a logging slowdown is less forest management. “Forest management needs to be done,” said Dog Magee, a procurement forester for Hedstrom Lumber Co. in Two Harbors, which serves as a middleman between loggers and mills. “The most efficient way to do that is harvesting. If people are getting out of it, the cost rises astronomically.”
“The industry doesn’t exist to create jobs,” Dane said, “but to make a healthy forest. If we don’t have a healthy logging industry for the infrastructure, then we can’t manage the forest, and the health of the forest deteriorates.”
Catherine Conlan reports from Duluth; she covers rural developments and other issues in northeastern Minnesota.