Still Rolling : Cut Off in U.S., Lumbermen Seek Greener Hillsides South of Border

Nat Stock’s family milled lumber in Oregon’s Willamette Valley for three generations until the company went broke in 1992, a victim of the federal government’s shutdown of logging in a surrounding national forest to protect the endangered spotted owl.

Stock was one of 250 lumber mill owners in the Northwest who went belly-up, left with no logs to cut. But he is trying to come back--by accommodating a new economic order that has prompted U.S. lumber companies to seek logs in every corner of the globe.

Stock and three Oregon partners have set up a lumber mill near Hermosillo, Mexico, that this month will begin exporting Mexican lumber to the United States.

They are among a growing number of U.S. companies--from giant Louisiana Pacific to Stock’s tiny Natco-Mex--that are setting up lumber manufacturing and marketing ventures in Latin America. About 15 U.S. lumber companies are thought to have moved to Mexico in the last five years, with at least as many in Chile and Brazil.

Lumber imports to the United States from Mexico, Brazil, Chile and other non-Canadian sources have increased fourfold since 1990, zooming to 405 million board feet in 1995, according to the Western Wood Products Assn. With import momentum building, non-Canadian imports--most from Latin America--could reach 600 million board feet in 1996, the association says.

That’s still a tiny percentage--a bit more than 1%--of total domestic lumber consumption. Canada provides about a third. But Latin American imports represent the fastest growing import source for the U.S. market and present big opportunities for lumbermen such as Stock who are looking to regroup.

“The preacher was right, there is life after death,” said Stock of his new business, which this week begins drying and planing rough-sawn Ponderosa pine lumber for shipment to an Oregon finishing plant owned by his partners. The end uses for Stock’s lumber are non-structural: windows, door jams, interior molding and the like.

There is no guarantee his Mexican venture will succeed. Some large U.S. concerns, including Georgia Pacific, have given up on Mexican operations, victims of culture shock and fast-changing lumber economics. But others have enjoyed considerable success.

Even the failures are the predictable byproducts of the accelerating globalization of the lumber industry. And they reflect the lumber industry’s efforts to stay alive and busy by seeking out new sources of raw timber outside the United States.

In setting up in Mexico, Stock is trying to take advantage of free trade. The North American Free Trade Agreement eliminated a 10% tax that the Mexican government once put on exports of natural resources such as lumber. Americans are now permitted to set up wholly owned ventures. Like other Latin American countries, Mexico is allowing foreigners greater access to natural resources.

“Many of the Southern Hemisphere countries will be playing an increasing role in serving North American lumber markets, and South American countries are some of the key ones,” said Brian Greber, a staff economist at Weyerhaeuser Co. in Federal Way, Wash., and a former professor at Oregon State University’s forestry school.

If Stock succeeds, he will have regained some self respect--if not the millions of dollars that he and his family lost when their Clear Lumber Manufacturing Co. of Sweet Home, Ore., went broke in 1992. Three years prior, the plant employed 75 workers and manufactured an average of 3 million board feed of lumber per month.

But tighter environmental policies, culminating with the Endangered Species Act of 1992, changed all that by “locking up” federally owned timber land in Oregon and Washington in a bid to save the endangered spotted owl. That deprived Stock and other mill owners of the raw material they need to keep sawing and planing.

Especially hard hit were mills such as Stock’s that specialized in manufactured wood products like moldings, doors and windows because they relied on Ponderosa pine that grew almost exclusively on federal lands, said Sam Sherrill, executive editor of Portland-based Crow Publications, which publishes a newsletter tracking North American lumber trends.

In the 1980s, Stock’s company borrowed $7.5 million to modernize its plant in expectation that the supply of federally owned timber in the nearby Fremont National Forest would last 50 years. Stock’s lender, the Bank of California, took back the keys to his $7.5-million sawmill and sold it at auction earlier this year for $300,000.

“Federal timber is what built those towns in the Northwest. The government changed the policies and wiped these people out,” said Paul Ehinger, a Eugene, Ore.-based timber consultant.

Encouraged by NAFTA, Stock and his partners opted to build a small mill on their own. They decided to locate in Hermosillo--a four-hour truck ride from Tucson--on the western side of the Sierra Madre range. Other U.S. companies had already set up mills in Chihuahua and Durango, east of the range, to produce timber for markets in Texas and the Eastern states.

“I know there are downsides” to doing business in another country, “that there is a learning curve. But deep down in my heart I know that I know lumber,” Stock said. “We’re just taking it one step at a time.”

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Timber!

Lumber imports from Brazil, Chile and Mexico have tripled since 1990, facilitated by lower trade barriers and attracted by high U.S. timber prices caused by a restricted U.S. harvest. Although they represent a small part of total U.S. lumber consumption, Latin American imports are the fastest-growing import sector. Imports in millions of board feet:

Source: Western Wood Products Assn .