Market glut doomed Spanaway lumber mill

SPANAWAY, Pierce County — Workers at the Spanaway mill gathered Friday for a final time. There were no speeches, toasts or testimonials to mark the mill's closure — just a farewell buffet of ribs, chicken and baked beans served to more than 120 people in a sort yard filled with green lumber awaiting shipment.

The Pierce County mill was doomed by glutted wood markets that sapped the profits of sending fir trees through the saw lines. Even with logging at a near standstill in the spotted-owl forests of the Pacific Northwest and record U.S. housing starts, there's plenty of lumber to sate demand. Much of the wood is coming from Canadian producers that have ramped up production and now claim about a third of the U.S. market.

Three months ago, the U.S. Commerce Department concluded that U.S. producers were the victims of unfair Canadian competition, and imposed what some expected to be a crippling mix of duties and tariffs on lumber imports.

"I really thought the tariff might help keep us open, and give us a chance," said Darrell Young a sort-yard worker who made a 120-mile round-trip commute from Morton to the mill.

But rather than prop up softwood prices — and save mills such as Spanaway's — the duties have spurred Canadian producers to shut down older mills and increase production in their most efficient ones. The failure of the tariffs to protect U.S. mills has spurred new interest in a negotiated settlement, with U.S. trade officials visiting British Columbia last week for talks.

"Most of our mills are producing flat out," said John Allan, president of the B.C. Lumber Trade Council. "There's a certain amount of psychological warfare. Canadian companies are very angry about the whole situation, and there's a bit of the last-man-standing mentality out there. Survival of the fittest."

Canadian softwood has been a mainstay of the construction industry and retailers such as Home Depot. As it crosses the border, most is now hit with import duties that average 27 percent of the product's value.

Since the tariffs took effect, wholesale prices for cedar — a scarce, valuable resource cut from Canadian forests — have climbed. But prices for most pine, fir and other softwood lumber have slid. Random Lengths, an industry trade publication, reports a composite lumber price of $292 per-thousand-board-feet in August. That's down 7 percent from May, and more than 40 percent from the record August peak in 1996.

Some of the price savings have trickled down to consumers. At one Seattle-area Home Depot, the price of a 2 x 4 stud has ranged from $1.99 to $2.32, compared with more than $2.45 in the spring, according to a sales clerk at the store.

The sagging prices reflect the strong lumber imports from Canada as well as from Europe and South America. "There's just too much finished lumber around," said Burrle Elmore, a Random Lengths editor.

Many of the big U.S. producers are able to weather the market downturn, falling back on cash reserves and trees supplied from their own private-land timber holdings. Some, such as Federal Way-based Weyerhaeuser, have major investments in Canada and have spoken out against the tariff. A Weyerhaeuser fact sheet calls the tariffs the result of "deeply flawed trade law," and the company is eager to see the tariffs lifted.

"We're trying to work on both sides of the border. In Washington, D.C., and in Ottawa," said Frank Mendizabal, a Weyerhaeuser spokesman. "But this is a tough one."

At the heart of the trade dispute is a Canadian system of publicly owned forests that supplies about 90 percent of the timber to provincial mills at what U.S. critics say are bargain-basement prices. The Canadian supply system contrasts with the U.S., where private lands now supply the bulk of the timber.

Earlier this year, the U.S. Commerce Department concluded that the Canadian public-timber sales allowed some Canadian producers to sell their softwood lumber at below fair-market values.

The competition hits hardest at smaller, independent U.S. producers. Many lack their own timber base and must bid for private-land timber. That's the plight of the Spanaway mill owner: Portland-based TreeSource Industries. Over the past four years, it has closed nine of 12 mills and earlier this year emerged from a U.S. bankruptcy-court financial reorganization.

When the tariffs were first put in place in May, Bob Lockwood, company president, hoped the Spanaway mill could keep operating, or at least attract a buyer. The mill had a saw that could readily handle small logs that — since the demise of most old-growth logging in the early '90s — have become the industry staple. But by late July, with the market still soft, Lockwood said he had yet to get a serious offer to buy the mill. So he decided to shut it down. "It's our only choice — given what Canada is doing."

Canadian industry and government officials deny that the timber sales from public lands amount to an unfair subsidy and have appealed the U.S. sanctions to the World Trade Organization. But they say they are willing to consider changes in the supply system.

The provincial government allocates timber to different operators, and then requires that certain amounts be cut within a five-year period regardless of market conditions. Reform proposals under consideration could allow Canadian companies to bid competitively on at least a portion of the timber — and then give more flexibility on the timing of when the trees are cut.

"We haven't been at all coy or cryptic about our desire to make changes that would move our industry more directly towards a market system" said British Columbia Forests Minister Michael de Jong.

But any resolution still appears to be months away, too late for the workers at the Spanaway mill.

They're getting dumped into a tough job market in a state with the nation's second-highest unemployment. Many are considering taking advantage of federal aid to go through retraining programs to try to launch new careers.

Others are going to try to hang on in the timber industry.

Young, the sort-yard worker, is 53 and a veteran of some 20 jobs in the woods and mills. "I'm going to try to find something else in the industry — at my age, what else are you going to do?"

Brian Sidebottom, the mill's sawyer, followed his father and grandfather into the industry. At Spanaway, he put in 14 years, working his way up to a top job that paid $12 an hour plus bonuses. He said at his next mill job, he fears he will start at a bottom-rung job and have to work his way up. Friday, Sidebottom wore a black T-shirt emblazoned with a slogan to guide him through the weeks ahead. "Stay focused," it said.

Hal Bernton: 206-464-2581 or hbernton@seattletimes.com.