Originally created 03/25/01

Loggers face pact's end



As the lumber mills scale back production, the work week is getting shorter for Bob Leynes.

Mr. Leynes, operations manager for Canal Wood Corp. in Augusta, is working in a depressed saw timber market. Softwood prices are dropping, domestic saw timber landowners aren't selling and loggers are scratching for work as mills fight to stay open.

The cause: anticipation of cheap, government-subsidized Canadian lumber flooding the marketplace next month.

The 5-year-old Softwood Lumber Agreement between the United States and Canada expires Saturday, ending federal restrictions on the amount of tariff-free lumber imported from British Colombia, Alberta, Ontario and Quebec.

"It's not as bleak as it might seem, but it's going to hurt - there's no way it's not," Mr. Leynes said. "We're finishing the work week on Tuesday and Wednesday when we'd usually finish Thursday or Friday. So you tighten your belt and do what you can."

About 95 percent of all forest land in Canada is owned by the government, which subsidizes the timber industry to attract foreign buyers and keep its people employed. The average softwood price in Ontario and Quebec is about $50 per 1,000 board-feet. The same amount of lumber costs more than $300 in America.

"They saw lumber up there and ship it to Atlanta cheaper than we can cut it and ship it to Atlanta from down here," said Marshal Thomas, president of F&W Forestry Services Inc., a forest management and appraisal company based in Albany, Ga. "We're all for free trade, but not at the expense of fair trade."

The International Paper Co. lumber mill in Wilkes County shut down in January, forcing IP mills in Newberry, S.C., and Augusta, and the Georgia-Pacific Corp. mill in Warrenton, Ga., to accommodate the excess.

But the mills are already making more lumber than they can sell, causing them to ration out truck loads to competing timber companies.

The Augusta area is home to about 1,200 timber industry workers, many of whom are involved in family-owned operations that won't survive if mills continue to close.

Rusty Wood, president of Tolleson Lumber Co. in Peary, Ga., said the United States needs to put a tariff on Canadian lumber immediately, or the American timber industry will buckle.

"Basically, that last agreement doesn't work," Mr. Wood said. "Canada has cheated on the agreement for years, drilling pin holes in 2-by-4s and calling it manufactured lumber and shipping lumber through provinces without quotas. Our government doesn't have the capability to cover all the games Canada plays, so we need a tariff. Period."

Chain reaction

The monthly rate of new home starts - the indicator most closely linked to lumber demand - slowed in 2000 but was still good by recent housing standards. Total for all of 2000 was 1.59 million housing units, down 5 percent from 1999 but up from 1.48 million units in each of 1998 and 1997.

The mortgage picture looks promising for the housing business in 2001. Thirty-year, fixed-rate mortgages have dropped below 7 percent for the first time since 1999.

On Tuesday, U.S. Federal Reserve Chairman Alan Greenspan cut interest rates by half a point for the third time this year, putting rates at 5 percent for the first time since June 1999. With the softening economy, the Fed is expected to lower interest rates more in the coming year.

Mr. Thomas said despite the sunny forecast, timberland owners' assets have decreased 25 percent in the past year.

"The mills get hit first, then the loggers get hit - and there are quite a few around Augusta," Mr. Thomas said. "Then after the loggers, the small nonindustrial landowners get hit because their property value plummets."

In many cases, timber companies and landowners agree on contract prices six months before the timber is harvested. If market prices drop in the meantime, the timber company comes out on the losing end.

"International Paper still gets the wood, (the landowner) still gets the price I promised him six months ago and I get nothing," said Rhonda Brown of Brown Timber, a family-owned timber company in Augusta. "We did three tracts last week and two this week that we lost money on."

Mills began closing down six to eight months ago, creating a logjam of timber companies at existing mills. The reduced mill activity has forced timber companies to curtail production, causing their revenues to plummet.

"We're down to five loads a week because the mills won't let anyone bring in any more than that," Mrs. Brown said. "We had two drivers doing 20 loads apiece - now we're down to one driver with 5 loads."

Many private landowners, after feeling the effects of weak demand and low price, are waiting for the market to pick up before selling more timber.

"Certain people will sell timber no matter what the market is," said Alex Nixon, a partner with Nixon and Harris Forestry Consultant Inc. in Martinez. "We manage about 40,000 acres of land with several landowners, and we play the markets. Unless we're specifically told by landowners to sell pine right now, we won't do it. We'll wait for the prices to get up."

Taking action

The chances of a deal being struck before the Saturday deadline are slim. So the U.S. Coalition for Fair Lumber Imports, of which Mr. Wood is chairman, says it will file a countervailing duty and anti-dumping lawsuit against Canada on April 2.

The anti-dumping lawsuit accuses Canada of shipping lumber into the United States below cost.

"If you ship lumber below cost into another country, you are dumping," Mr. Wood said. "We have been documenting this for five years - they are subsidizing and they are dumping."

The countervailing duty will go before the International Trade Commission and the U.S. Department of Commerce, which will determine whether Canada's lumber subsidies have injured the domestic industry, and to what extent.

Even if the lawsuits prevail, it could be months before any duty tax is applied to Canadian lumber.

"In that time we fear just a wall of wood coming down from Canada," said Chris Barneycastle, executive director of the Georgia Forestry Association. "We could be flooded with Canadian lumber and have a real problem."

The association has hired lobbyists with the national Forest Landowners Association to represent small property owners in Washington.

Mr. Barneycastle said he has retained the lobbying group Barbour, Griffith & Rogers Inc., whose lead lobbyist is Haley Barbour, former chairman of the Republican Party.

A rally of forest landowners is scheduled for 1 p.m. Saturday at the Centreplex in Macon, Ga., sponsored by the Forest Landowners Association, Georgia Forestry Association, Georgia Farm Bureau and the Association for Consulting Foresters. Mr. Wood said he expects a crowd of about 5,000 people.

Two U.S. congressmen from Georgia, Saxby Chambliss and Mac Collins, have agreed to show. Gov. Roy Barnes won't make it, but pledged his support.

Sharon Beningfield, the association's communications director, said invitations have been extended to all Georgia's elected officials. She also said there's an outside chance ex-president and former Georgia governor Jimmy Carter might attend.

The Bush administration has yet to take any definitive action on the issue, but has shown more interest than the previous administration.

"Clinton and Gore didn't want to touch it in an election year, so now it's up to Bush," Mr. Thomas said. "It's tough to say where he'll come down on the issue. Obviously, he's for free trade, but I think he's for fair trade as well. It's not fair when the Canadian government almost gives this wood away."

Mr. Barneycastle said considering the significant number of mills that have closed in the United States in the past few years because of foreign lumber imports, he's confident the Bush administration will support his cause.

"Canada is exporting lumber and exporting joblessness to the U.S.," Mr. Barneycastle said. "They have a right as a sovereign country to do what they want, but when their choices affect our jobs and our lives we have a right to go ahead and react."

Reach John Bankston at (706) 823-3352 or jbanks15@hotmail.com.