Logging

SIC 2411

Companies in this industry

Industry report:

This category covers establishments primarily engaged in cutting timber and in producing rough, round, hewn, or riven primary forest or wood raw materials, or in producing wood chips in the field. Independent contractors engaged in estimating or trucking lumber, but who perform no cutting operations, are classified in non-manufacturing industries. Establishments primarily engaged in the collection of bark, sap, gum, and other forest products are classified in SIC 0811: Timber Tracts; SIC 0831: Forest Nurseries and Gathering of Forest Products; and SIC 0851: Forestry Services.

Industry Snapshot

The over $5 billion logging industry, which is one of the oldest U.S. industries, had become one of the most controversial by the late 2000s. Environmentalists ruthlessly attacked harvesting practices and scored significant victories. The conflict between the industry and its opponents ignited in August 1990 when the federal government added the northern spotted owl to the endangered species list and developed rules to ensure its survival by protecting government forests in the Pacific Northwest. Severe restrictions were imposed, including the prevention of logging within a 2,000-acre radius around a known spotted owl nest, a ban on cutting the largest trees in a 500-acre area around that zone, and the prohibition of logging within a 70-acre area around a nest. Since then, the industry has been engaged in ongoing court cases, political wrangling, and regulatory proceedings to retain logging rights on government lands.

A diverse group of economic entities and individuals are involved in logging. Among the participants are the giant, integrated forest products firms like Weyerhaeuser and Plum Creek Timber that own millions of acres of private timberlands; small sawmills that harvest relatively few trees on federal lands for their own use; and independent cutters, who are compensated according to the number of trees they distribute to mills. Logging activities are distributed among different types of firms and individuals, but they can be integrated with other operations within a single, large company.

Although the size of the nation's forestlands has remained fairly constant, the growing stock of hardwood and softwood tree species increased, jumping nearly 50 percent between 1953 and 2006. The South claimed the largest share of forestland, followed by the North and the Rocky Mountain regions.

According to Dun and Bradstreet's 2009 Industry Reports, 10,363 establishments employed 55,447 workers in the logging industry in the late 2000s. Total annual sales in the industry were $5.2 billion. States employing the largest number of workers in this category were Oregon, Washington, Alabama, and Georgia. Mississippi, however, accounted for the highest percentage of total sales, with $766.2 million, followed by Oregon with $490.5 million, Washington with $416.6 million, and Georgia with $348.7 million. Other significant states in terms of revenue included North Carolina, Alabama, California, and Louisiana.

Background and Development

Logging is older than the United States itself, and wood products have played a central role in the economy's development. The clearing and revival of the U.S. forest has been extraordinary. The land area of the coterminous United States is 1.9 billion acres. Between 822 and 850 million acres, or about 45 percent of the country's land area, was originally covered by forest. By 1920, as a result of agricultural clearing, lumbering, and other activities, that figure had fallen to about 470 million acres, of which only 138 million acres were original forest. Some 250 million acres were significantly disturbed through grazing, cutting, and burning and could not sustain second growth, while 81 million acres were nonrenewable and nonrestoring. By 1977, however, better management, the suppression of fire, replanting, and other factors reversed the trend and the commercial forest had grown to 483 million acres. The U.S. Forest Service estimated that there were 490 million acres of timberland in 1992.

Logging in the great forests of the Pacific Northwest was started by the Hudson Bay Company at its Fort Vancouver trading post on the Columbia River in 1820. In 1825, the Royal Horticultural Society of London sent David Douglas, a Scottish botanist, to the area. He returned to England with a sprig of what is now the most important commercial tree of these forests, the eponymous Douglas fir. The logging industry began in the region at the time of the Gold Rush, which produced a new market for timber in California. The timber barons from the East recognized the potential of the Pacific Northwest forests. Most famous among them was George Weyerhaeuser, who incorporated his company in 1900 in Tacoma, Washington. Often a pioneer in the industry, Weyerhaeuser began the practice of hand-planting new trees on clear-cut lands in 1938.

Most of the nation's timber supply comes from softwoods, which are used predominately in housing construction. In 1987, approximately 35 percent of the nation's softwood lumber came from sales of timber on federal lands in the Pacific Northwest. By 1992, that contribution had dropped to 25 percent. Sales of timber from federal forests in the region fell from 6 billion board feet in 1987 to 1.5 billion in 1992.

The curtailment of harvesting on federal lands had a disparate impact on firms in the wood products industry. In general, the major forest products companies performed poorly in 1991 and reported mixed results in 1992 in reaction to the recession. In the first half of 1993, however, large firms that had extensive land holdings of their own recorded sharply higher earnings, as they benefited from the price increases that accompanied shrinking supply. However, other companies, including many small sawmills without timber assets, faced increasing margin pressure as their raw material costs rose. In 1995 and 1996, wood product companies held their own in the face of continued flat prices. In 1995, wood chip demand from the paper industry and a strong level of Canadian imports created an oversupply of lumber and held back a return to stronger conditions. However, the paper industry demand for chips dropped, and an April 1996 Canadian lumber quota reduced the lumber supply.

The national recession of the early 1990s had a strong negative effect on the wood products sector, but as the recession waned, the industry began to recover. Due largely to the strength of higher housing starts and firmer timber prices, the wood products operations of the major forest products companies did better in 1992 and 1993 than in 1991. In the first half of 1993, profits at those companies that rely most heavily on wood products were up 179 percent from the same period in 1992. Nevertheless, the prospect of sustained cutbacks in the timber supply raised significant questions about the long-term health of the industry. In 1996, merger and acquisition activity was strong, with 5 million acres of timberland changing hands. Most of the land that changed hands was in the South and West. About 7 percent of the estimated 68.6 million acres then owned by the industry were in those regions. Half the 5 million acres that changed hands was in the South, 42 percent was in the West, and 8 percent was in the Northeast and Great Lake states.

Through the mid-1990s, smaller sawmill companies in the Pacific Northwest were hurt by shrinking supply, and they continued to decline in number. Some observers blamed the companies, because beginning in the 1970s, they tended to disregard forecasts for a looming timber shortage during the 1990s. They also suggested that at the rate the loggers were cutting, the Pacific Northwest would have had severe supply problems by the year 2000, regardless of the spotted owl controversy.

Environmental constraints placed on logging in the 1990s reduced the amount of timber harvested from national forests in the United States by 75 percent. These logging restrictions did not have a major impact in most of the South, the Northeast, and North Central regions of the country. They did have a dramatic impact on the Pacific Northwest, which had supplied about half the country's timber for wood products. The restrictions resulted in reduced production, subsequent closing of some operations, and ongoing political and social problems for the industry. From their major victory in limiting logging in areas where the spotted owl was found, environmentalists went on to secure habitat protection for other animal and plant species. Also in the 1990s, the Forest Service began to shift use of national forests from logging to recreation, further limiting timber available to loggers.

Lumber markets improved in 1996 due to tightened lumber supplies and better pricing for lumber products. Housing starts increased 5 percent in 1996, aiding wood products sales. However, the industry also struggled against competing materials, especially steel, in homebuilding. An increasing number of builders used steel-frame housing, and an estimated 80,000 houses were built with the technology in 1996 compared to 800 houses in 1992. The availability of affordable wood products, however, dampened this building construction trend.

The Spotted Owl Controversy
On June 26, 1990, the U.S. government listed the northern spotted owl as a threatened species under the Endangered Species Act. Unlike most other species protected by the act, the spotted owl's habitat covers a much larger area as it ranges from southern British Columbia, Canada, to Marin County, California. Under the terms of the act, more than 5 million acres of old-growth forests that were over 200 years old were designated as conservation areas. These generally contained conifers of mixed varieties.

Technically, logging was still allowed within the conservation areas as long as it did not threaten the spotted owl, but as a practical matter, much of the owl's habitat was off-limits to loggers. The U.S. Forest Service reported it sold 4.45 billion board feet of timber in fiscal 1992, which was less than half 1990 sales. The agency managed to sell only 20 percent of the Congressionally-approved volume in the Pacific Northwest and 40 percent in California. Most, if not all, of this shortfall stemmed from measures taken to protect the spotted owl and other species. Loggers cut 61 percent more national forest timber in 1992 than was sold during the year.

Some observers blamed the timber industry for its problems with the owl. They argued that the industry ignored the bird and tried to discredit research that showed the owl was truly endangered. They also said that the timber on the federal lands, which the spotted owls inhabit, represent public assets that, in their view, have often been sold at below cost by the Forest Service and the Bureau of Land Management for the industry's benefit.

Many industry supporters, however, said there is much evidence that spotted owls of one subspecies or another are thriving on millions of acres of privately and publicly managed second-growth forests. They also noted that counts of the northern spotted owl have risen substantially over the past several years. They also argued that even if the spotted owl was indeed endangered, it did not provide sufficient reason to cost thousands of workers their jobs and destroy dozens of timber communities.

Some observers within the industry and the environmental movement believe that efforts to save individual species are merely tactical devices in the battle to curtail logging. They say that the environmental movement needed a weapon to shut down logging on federal lands and the Endangered Species Act happened to be convenient.

Environmentalists recognize that the total amount of woodland in the United States is not contracting and new plantings more than offset cuttings. Still, many are concerned that the way the nation's forests have been managed reduces biodiversity. When loggers cut down mixed forests with trees of different ages, they often replant with a single species (such as the Douglas fir, which reaches maturity in a relatively fast 50 years) of the same age. Some environmentalists argue that in a naturally regenerating forest, there are dead trees, clearings, old trees, and young trees, and each attracts its own group of plant and animal species. However, when a forest consists solely of one type of tree of the same age, only one set of species is attracted. Ecologists believe this hurts the forest's ecosystem and leaves it prone to pest infestations.

In rebuttal, the industry's supporters pointed to the expansion in total timberland over the past 50 years and the millions of acres, including much old-growth (trees over 200 years old), in national and state forests that are protected from logging. They also called attention to significant advances in forestry management over several decades. For example, after the volcanic eruption of Mount St. Helens on May 18, 1980, Congress established a 110,000-acre National Volcanic Monument in 1982. In this area, nature is allowed to take its course and the land is left undisturbed. On the acreage adjacent to it, Weyerhaeuser and other companies salvaged the downed trees and planted new seedlings. According to some observers, the result of this effort is a forest not significantly different from the original (pre-1980) cover below the slopes of the volcano. By 1992, many of the trees Weyerhaeuser had planted were already 25 or 30 feet high. The neighboring National Volcanic Monument was recovering much more slowly, but, as some would argue, more completely.

In February 1993, news reports said that the Clinton administration was trying to modify the policies of the Department of Interior (DOI) so "national train wrecks" (in the words of DOI Secretary Bruce Babbitt) like the one over the spotted owl in the Pacific Northwest could be averted in the future. Instead of protecting single species, the DOI would seek preventive measures to insure long-term protection of whole ecosystems and all their species. The theory behind such an approach is that conservation and business interests are better served by pre-planning the fate of entire ecosystems before any single species is threatened.

Winners and Losers
Cutbacks of harvesting on federal lands had a diverse impact on industry participants. Some believe the largest companies, or at least those with substantial timber holdings of their own, were less than forceful in fighting curtailments of logging on federal land. These firms have huge plantations of genetically improved trees, so reliance on federal sales of old-growth trees is relatively small, and the spotted owl does not appear to thrive on their own second- and third-growth forests. It has been argued, therefore, that these companies have been willing, and even happy, to accept restrictions on logging of federal lands.

Conversely, small independent sawmill owners have relied since World War II on public lands to supply the old-growth logs that can be turned into specialty products. The trees they used were often as much as five centuries old, so they were often inhabited by the spotted owl. The trees that were engineered by big corporations are only a tenth that age and only half the height of the old-growth trees. Often they are too small for the saws and conveyor belts of the old-time sawmills.

The South
Level terrain, frost-free winters, and numerous highways made logging much easier in the South than in the Northwest. This region has the largest share of U.S. forestlands, accounting for some 214 million acres in 2006. Trees in the region grow faster because of relatively warm winters. Because most of the South's acreage was logged years ago, there is little of the old-growth forest that aroused the strong environmental opposition as in the Northwest. Notably, some 90 percent of Southern timberland is privately owned.

The conflicts between the environmentalists and timber interests that halted logging in much of the Northwest have been comparatively rare in the South. The two sides worked together to balance environmental and economic concerns. Georgia-Pacific, which moved its headquarters from Portland, Oregon, to Atlanta, Georgia, in 1982 and became an important presence in the region, believed in the mid-1990s that it was successfully dealing with the red-cockaded woodpecker, which some saw as the potential "spotted owl" of the South. However, others believed it was only a matter of time before the environmental movement began to be more aggressive as it opposed logging in the South.

The Global Picture
The Asian economic crisis hindered industry growth during the late 1990s. Reductions in Japanese demand for wood products, especially for housing applications, meant a reduction in exports to that country and contributed to oversupply in the United States. Imports and the growth in forest product capacity in emerging countries, which protected themselves with high tariffs, also contributed to oversupply. Imports of forest products, which topped exports by $2.9 billion in 1994, jumped to $9.4 billion in 1998. The top five export countries in 1997 were Canada, Japan, Germany, the United Kingdom, and Mexico. The top import country was Canada, with more than 83 percent, followed by Indonesia, Brazil, Mexico, and Chile. The U.S. forest products industry saw the easing of trade barriers as critical. Government negotiators worked to equalize international trade, but they took no action on a tariff agreement presented at the World Trade Organization meeting in December 1999. The agreement would have eliminated tariffs on paper products between 2000 and 2002 and on wood products between 2002 and 2004.

In the mid-2000s, the United States held approximately 8 percent of the world's primary forestlands, ranking it fourth behind the Russian Federation, Brazil, and Canada. According to the Society of American Foresters, the nation's forestland area covered 750 million acres in 2006, a figure largely unchanged from the 769 million acres in 1900. Furthermore, the standing inventory of hardwood and softwood tree species nearly doubled between 1953 and 2006.

Despite these optimistic figures, controversy remained rampant in the logging industry. Environmental conservationists and loggers performed a dance of checks and balances, each side vigilantly protecting its interests from undue intrusion by the other. These battles frequently involved individuals from the nation's highest public offices. In 2001 the U.S. government enacted the Roadless Area Conservation Rule, which protected 58.5 million acres of roadless areas in national forests from road-building, logging, mining, and other developments. Four years later, a change in presidential administration brought about a change in environmental philosophy, and the Roadless Rule was repealed. When Barack Obama was elected in 2008, ,he reinstated the rule for one year.

Current Conditions

Protests against logging operations continued unabated into the late 2000s. For example, in late 2007, a group of students sat in the president's office at the University of Kentucky to protest a logging plan the University had approved for nearby Robinson Forest. In July 2009, environmental activists in Oregon blockaded roads to the Elliott State Forest for three days, claiming that logging in the area damaged the forest and endangered the habitat of spotted owls and other species. According to the Society of American Foresters, by 2009, 20 percent of the United States' forests were protected by conservation initiatives.

Legal and political issues aside, the logging industry faced other challenges in the late 2000s. For example, forests and timberlands continued to be subject to destruction from natural forces. The western United States was prey to increased fire activity, which affected 5.8 million acres each year between 1999 and 2006. According to the National Oceanic and Atmospheric Administratio's National Climatic Data Center, 2007 saw a very destructive fire season, with 9.3 million acres burned. In 2008, the nation lost 5.2 million acres of land to fires. The threat of fire is caused not only from unusually dry climate conditions but also from insect damage. In Colorado, for example, the bark beetle is systematically killing large portions of the state's forests, turning once living trees into wildfire-ripe tinder. This insect killed 4.8 million lodgepole pines in 2006, four times the number affected the previous year, in spite of the U.S. Forest Service's efforts to curtail the epidemic by thinning dense areas, removing dead trees, and performing controlled burns.

The slow economy of the late 2000s also affected the logging industry. Lumber production in the United States dropped 28 percent in the first quarter of 2009, according to the Western Wood Products Association. Similar statistics from Fitch Ratings showed that softwood lumber production decreased more than 30 percent in January and February 2009 as compared to the previous year, after declining 17 percent in all of 2008.

Industry Leaders

One of the leading companies in the logging industry in the late 2000s was Plum Creek Timber Co. of Seattle, Washington, which acquired the timber operations of Georgia-Pacific in 2001. Plum Creek owned about 7 million acres of timberland in 19 states and also operated a number of wood-products conversion plants that produced lumber, plywood, and fiberboard. Sales totaled $1.6 billion in 2008. That year, Plum Creek announced plans to sell 310,000 acres to environmental groups.

Weyerhaeuser Company of Federal Way, Washington, was one of the world's largest private owners of softwood timber. The company owned 6 million acres of timberland in the South and the Pacific Northwest and leased 30 million acres in Canada. Weyerhaeuser posted sales of $8.0 billion in 2008, which also included revenue from its four other business segments.

In the mid-2000s, Pacific Lumber Company (PALCO), a subsidiary of MAXXAM Inc., recorded annual revenues of around $122 million. However, the firm filed for bankruptcy protection in 2007, and in 2008, all its assets were transferred to the Mendocino Redwood Co. After 145 years as PALCO, the company's name was changed to the Humboldt Redwood Company. In 2009, Humboldt Redwood owned more than 200,000 acres of timberland in Humboldt County, California, but was allowed to harvest on only about half of it.

Other industry leaders included Potlatch Corp. in Spokane, Washington, which harvested 1.6 million acres of timber in Arkansas, Idaho, Minnesota, and Wisconsin and had 2008 sales of $440 million, and Rayonier Inc. of Jacksonsville, Florida, which produced logs and other wood products for sale in 60 countries and managed some 2.5 million acres of timberland in the United States and New Zealand. Sales for Rayonier in 2008 were $1.2 billion.

Workforce

About 88,000 workers were employed in the forest, conservation, and logging category in the mid-2000s, according to the Bureau of Labor Statistics. Of this total, 40,000 were logging equipment operators; 20,000 were forest and conservation workers; 13,000 were fallers; 7,100 were log graders and scalers; and 8,000 were other logging workers. Logging equipment operators, which made up the majority of employees, earned an average of $14.28 an hour. Employment was concentrated in the West and Southeast.

Logging occupations are physically demanding, and the work can be very dangerous. Many workers within the industry have suffered serious injuries and have had friends and relatives killed on the job. Hazardous conditions include falling trees and branches, strong winds, slippery or muddy ground, foul weather, poisonous plants, and snakes.

Employment for logging and forestry workers was expected to experience little or no change through 2016, and a steady demand for lumber and other wood products was predicted. Mechanization of logging operations, improvements in logging equipment, and restrictions on the volume of public timber available for harvesting were expected to continue to limit employment opportunities.

Research and Technology

As a result of mechanization and automation, timber companies can log more efficiently and do less harm to the environment. Huge "feller-bunches" often replace individual loggers in second-growth forests. These vehicles are built like tanks and have enormous "scissors" mounted on the front. They are able to snip mature trees and lay them down carefully to avoid smashing small, still-growing ones. In addition, mechanized skidders that are used to haul logs out of the forest are being fitted with extra-wide tracks or oversized tires to spread their weight and reduce damage to the forest floor.

Timber companies are also experimenting with different forestry techniques. After harvesting, some loggers leave behind the odd mature tree, dead-sun-silvered trunks, and the usual litter of the woods. The hope is that as new trees grow, their surroundings will mimic what would follow a natural fire or windstorm, which a forest can survive.

Timber shortages and the possibility of higher lumber prices over the long-term encouraged the creation of new offerings and the promotion of relatively inexpensive existing products. To fend off challenges, the industry is focusing on promoting such engineered wood products as oriented strand board and particleboard.

Another new idea that focused on helping to reduce the number of hardwoods that had to be harvested to meet demand was reported in The Economist in September 2009. Kebony, a Norwegian company, opened its first factory for making softwoods harder and more durable in January 2009. The process entails placing the wood in a vat containing furfuryl alcohol, which is comprised of sugarcane waste. When the vat is pressurized, the liquid is forced into the wood. The wood is then dried and heated, and the liquid becomes a resin, which makes the cell walls of the wood stronger and thicker. Treated softwoods can thus be used outdoors and for applications normally reserved for hardwoods. According to the article, softwoods account for 80 percent of the world's timber.

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