Timber Taxes

Michigan timber industry hit by pandemic

There are some bright spots, but mill closures expected to have major impact

Forestry scene near Grand Rapids, Mich.

MIDDLETON, Wis. -- Like other states in the region, Michigan’s forest products industry has suffered during the COVID-19 pandemic.

And while there are some bright spots, outright closures and slowdowns at mills caused by the coronavirus will have a lingering negative effect on loggers, truckers, foresters, mill workers and others, said Henry Scheinebeck, executive director of the Great Lakes Timber Professionals Association (GLTPA).

“Some of our members are barely hanging on,” he said. “The shutdown of the Verso mills in Duluth and Wisconsin Rapids, which make specialty paper products, is hitting hard. Not only are 1,000 mill workers being laid off, but at least 3,000 loggers and truckers are affected, too. That's just the start because there is a multiplier effect that will hurt a lot more people.”

According to the Michigan Department of Natural Resources, the state’s forest products industry has more than 800 logging and trucking firms, around 300 primary manufacturers – sawmills, veneer mills, pulp and paper mills, and engineered board manufacturers - and another 1,000 secondary manufacturers - companies that use lumber or products made by a primary manufacturer to make finished goods.

The Duluth Verso plant closed July 3, while the Wisconsin Rapids mill will shut down July 30, Scheinebeck said. Many loggers in the Upper Peninsula provided wood for both plants.

“Verso made the announcement in a press release at 8:21 a.m. on June 9 and by 10 a.m. any logger who was cutting wood for them was told 'don’t cut another tree because we aren’t going to buy the wood.'”

He said other loggers in the UP and elsewhere in Michigan were already dealing with lower quotas - some reduced by 50 percent compared to this time last year - for their quarterly deliveries at mills.

He said a slowdown at the $450 million Arauco facility in Grayling, MI, which is a major producer of medium density fiberboard (MDF) also hurt his members.

“The Arauco mill had only been open a little more than a year and one of their larger customers is IKEA,” he said. “When IKEA closed a lot of its stores because of the pandemic, they didn’t need all that particleboard. And that has a rolling impact all down the line.”

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On the positive side, he said mills that are producing corrugated cardboard - used by shipping giants like Amazon - are going “24/7” and keeping loggers who supply them busy.

“So I’d have to say the pandemic has had an uneven effect, but overall it’s negative,” he added. “Some guys are going to go out of business. And that will hurt our association because we run on dues.

“We need to create some new markets for our industry and that will take at least a year or two. Maybe they can convert some mills into products that are selling. There has to be a demand in this region for cross-laminated timber products used for making wood panels for high rises. We’ve been slow in moving that forward. Maybe this will speed that up because the need is great.”

David Price, a forest products manager with the Michigan Department of Natural Resources, said there continues to be a great deal of uncertainty in his state’s timber industry.

“The economy was picking up, but everything is fluid with the economy now," he said. "Things have been very dynamic up and down the supply chain from the loggers to the mills to the secondary manufacturers because of the pandemic. We just don't know what the future will hold."

“Anything to do with packaging is doing very well, but when it comes to other sectors like paper, they are more challenged."

To help out, he said his agency has reduced minimum bids for stumpage prices. In addition, the DNR also offered free extensions of any contracts that were going to expire by June 30 to give loggers more time to complete cutting.

Jim Carey, a member of the GLTPA who runs a logging operation near Iron Mountain in the UP, said times were tough for the Michigan timber industry even before the pandemic.

“It’s more of the same now,” he said pessimistically. “Markets are terrible, prices are dropping, mills aren’t paying on time.”

He said he got out of biomass and sold his chipping equipment last year because of the sea-sawing market.

“We were a major producer for several mills and we made 100,000 tons a year of fuel chips,” he explained. “But we got rid of all our chipping equipment because the market would skyrocket and you’d get a big crew going.

“Then you’d get an email in the middle of March from a mill saying ‘we’ve decided not to burn chips this summer so we will call you back when it gets cold in the fall.’ What do you do with 15 to 20 people and $5 million in equipment? You go through that cycle a couple of times and when you get the opportunity to sell the equipment, you take it.”

Now 65, Carey is ready to cut back his work and explore North America in a motorhome with his spouse.

He said his 35-year-old son has expanded the company’s excavation and septic tank-pumping business. They employ 28 and have not had to lay any off in recent months, he said.

“My son - who is great at marketing and finding new business - reduced the timber work to a fraction of what it was years ago because of the poor stability and uncertain future.

“He’s worked with me since he was a boy. He could see that paper mills aren’t great to deal with like they were. People have changed and with investment groups owning a lot of the mills, there is no loyalty. Now, it’s what can you do for us and how cheap can you sell us wood.

“So I’m glad he’s diversified us,” Carrey said. “You need to do that to survive and do well these days.”

Brian E. Clark is a contributor to Forest Business Network. He formerly was a business writer for the San Diego Union-Tribune and also wrote for newspapers in Washington State. He's also a regular contributor to the Milwaukee Journal-Sentinel and the Los Angeles Times.

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