Mills thriving due to sky-high forest products prices

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    SEELEY LAKE, Montana (Missoulian) — A strong demand for lumber, caused by a surge in housing starts nationally and home remodel projects during the pandemic, has been welcome news for the Montana forest products industry.

“There’s high demand, higher than normal demand,” explained Todd Johnson, the plant manager at Pyramid Mountain Lumber in Seeley Lake. “People are building or buying and remodeling. We’ve enjoyed pretty good production and a very good market. Through half the third quarter last year and the fourth quarter, along the first quarter this year, we’re higher (in revenue) than normal.”

The company produces various dimensions of lumber and sells it wholesale. According to the National Association of Homebuilders, lumber prices skyrocketed 130% between April and September of 2020, which that organization said raised the cost of constructing a new single-family home by $16,000.

Those costs eventually get passed on to homebuyers, and the median home sales price in the Missoula Urban Area hit a record $350,000 last year amid a serious shortage of supply.

But high lumber prices are good news for Pyramid Mountain Lumber, which employs about 135 workers and is a crucial economic driver for the town of Seeley Lake and its population of about 1,300.

“It was a pretty normal year up until halfway through the third quarter when prices started to rise,” Johnson said. “People were home doing things, and they started to remodel. I talked to a paint salesman in town — he said he mixed more paint last year during the shutdown than he can remember. People were home doing home projects. It definitely drove the market.”

The U.S. Department of Commerce said homebuilding increased 7% from 2019 to 2020 across the country.

Todd Morgan, the director of forest industry research at the University of Montana’s Bureau of Business and Economic Research, said a variety of factors pushed prices up.

“Certainly it was a unique year,” he said. “Repair and remodel, do-it-yourself really boosted demand for wood products,” Morgan said. “We really saw it in the run-up of lumber prices. New housing slowed down in March and April but came back strong.”

There was quite a bit of post-wildfire rebuilding in California and Oregon and a fairly mild winter that supported a higher demand for wood products, he said.

“We saw reduced imports from Canada,” he said. “It was COVID-related, a disruption of the supply chain.”

In 2004, there were 10,000 people in Montana employed by lumber mills or working in forestry. That number dropped to 7,030 in 2010 but has rebounded a little bit to 7,641 in 2020.

The private forestry industry earned $508 million in 2004 and stood at $305 million in 2010, the bottom of the Great Recession. In 2020, it was up to $347 million, with all figures adjusted for inflation.

Lumber production has dropped from 985 million board feet in 2004 to 428 million board feet in 2020.

Morgan said all the gains in the forest products industry in Montana are due to the sales prices of products going up, not from an increase in the volume of products produced.

“There has been a decline in harvest over the last four decades,” he said. “Some mills closed, but the mills that are left are operating a bit closer to capacity.”

The threats to the industry include the possibility of overseas lumber imports expanding, he said.

The mountain pine beetle problem in Montana is not as severe as it was in years past, with many trees dead from infestation but fewer trees actively dying, he said.

Tom Schultz is the vice president of resources and government affairs at the Idaho Forest Group, which operates the St. Regis lumber mill. The company scaled back the mill for a while in 2020 to renovate it with new equipment. Now it’s back up and running strong.

“Home starts are on par right now for 1.7 million starts nationally,” he said. “We haven’t seen those kinds of numbers in years. There’s significant demand for wood products right now. And given low interest rates, a lot of people are looking to relocate to Idaho, Utah and Montana.”

A key issue in the industry is getting the message out that a technical education could be a good career move for young people who don’t necessarily want a four-year degree and the associated student loan debt, Schultz said.

Todd Johnson with Pyramid Mountain Lumber said the industry is very volatile, and he and his staff are always bracing for when the bubble pops.

“It can always go right back down as quick as it came up,” he said.

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