Idaho's Evergreen Forest Products exemplifies return of sawmill industry

Idaho’s recession-battered timber mills are rebounding. Just ask Rodney Krogh, who almost closed his.

broberts@idahostatesman.comNovember 7, 2012 

Nine-foot steel band saws whir and screech as they slice through 3-foot-wide logs at Evergreen Forest Products’ sawmill in Tamarack, a few miles south of New Meadows.

Electronic scanners read the logs and instruct the saws on the best way to slice them for maximum production of rough-cut lumber.

By the time a log makes its way through the mill, it will have been turned into lumber for construction. Its sawdust will be sold to paper mills. Its bark will feed an on-site cogeneration plant that produces steam for kilns to dry the wood and electricity to run the plant. Excess electricity will be sold to Idaho Power Co.

For Rodney Krogh, Evergreen’s 42-year-old president, the production is a welcome sight as he strides through the small mill on a hillside next to U.S. 95. In 2009, an imploding housing market nearly silenced the mill.

“We had long, hard discussions about mothballing or shutting down completely and getting out of the industry,” says Krogh, whose grandfather bought the mill in the 1960s, one of several he owned in Oregon and Washington.

Housing starts, a major market for Idaho lumber, tumbled from 2 million a year in prerecession days to 480,000 at the low point. Average Idaho sawmill employment fell 37 percent between 2006 and 2010, according to the Idaho Department of Labor. Wages paid plummeted 31 percent to $71 million. Sales sank 45 percent to $419 million, based on 2009 dollars.

Between 2007 and 2011, lumber production fell 23 percent to 1.4 billion board feet.

Sawmills are the heart of the state’s forest-products sector, which employed 10,300 people in 2010 with an average wage of $41,150. Idaho is the eighth-highest timber-producing state, according to the Idaho Forest Products Commission.

“Those sawmills really responded to that homebuilding collapse,” said Todd Morgan, who monitors Idaho’s timber business as director of forest-industry research at the University of Montana.

Idaho Forest Group, formed in 2008 in a merger between the North Idaho mills owned by Bennett Forest Industries and Riley Creek Lumber, hunkered down for 18 months. “We curtailed shifts” and shut down parts of the operation, Chairman Marc Brinkmeyer says.

The company employs 750 people at its five mills and headquarters in Coeur d’Alene. Some workers were laid off, though Brinkmeyer declines to say how many. “We’re talking about people’s lives,” he says.

Evergreen —a family business whose owners include his two brothers, Jeff and Mark, and his father Robert — let 70 workers go.

Rodney grew up in Kamiah (pronounced KAM-ee-eye), a Clearwater River town not far from Evergreen’s planing plant near Kooskia (KOOS-kee), where the lumber is finished off before going to market.

He remembers spending six to eight weeks every summer as a kid working in the mill, doing mostly cleanup.

“We were sweeping sawdust and chips off the ground and throwing them in conveyers,” he says.

He always knew he would be in the family’s mill business, and he began there after graduating from college in the 1990s.

Evergreen is a mom-and-pop operation compared with Idaho Forest Group, which has the five largest sawmills in Idaho. Evergreen looks for niches to sell its products, while larger mills turn out the same products, like 2-by-4s or 2-by-6s, day after day.

Evergreen mills white fir, Douglas fir and ponderosa pine. Some goes into door and window frames, some on walls, and some for beams and framing. Evergreen’s customers include Boise Cascade and Franklin Building Supply in Boise. Some Evergreen lumber is sold through middlemen to big-box stores like Home Depot and Lowe’s.

Sawmills are a cyclical business. Small recessions pop up every three to four years. But beginning in 2000, Evergreen saw a nonstop runup in the prices of logs the company bought and the lumber it sold. “Lumber prices in 2006 were about $425 to $450 per 1,000 board feet, which is a great market,” Krogh says.

But by 2008, prices fell to $250. “You couldn’t sell lumber,” he says. “If you thought you could sell a car load of lumber at $270, there was somebody selling it for $250. Selling it right out from under you.”

Evergreen lost millions. The company cut shifts and trimmed its staff from 120 at its two plants to 50, mostly at the Tamarack plant. The plant is in Adams County, where the unemployment rate hit over 16 percent. Evergreen quit buying logs and concentrated on working through a contract it had with the state to harvest 20 million board feet of lumber from Idaho lands.

Then the federal stimulus came along.

Krogh was looking for way to cut costs and didn’t have the money to undertake large-scale capital improvements. In early 2009, the company’s kilns were two hours from the sawmill at the Kooskia plant. Hauling moisture-laden rough-cut lumber there cost about $30 per 1,000 board feet.

Krogh learned of a stimulus program offering grants for ready-to-build projects. He had only a rough idea of what he wanted: kilns at Tamarack. He wrote a proposal the same day and submitted it the next morning. In a couple of months, he received a $2.5 million grant. The grant saved 60 jobs at the mill and put 100 people to work building the kilns over seven months ending in early 2010.

By 2010, the kilns were operating. Hauling dry wood to Kamiah for planing cost $8 per 1,000 board feet — 73 percent less than wet wood. “That was the turning point for us,” Krogh says.

In the past two years, Evergreen has broken even, Krogh says. He hopes to be in the black when the books close in 2012. Revenues in 2011 were $30 million.

It’s been a bumpy ride. Sometimes the housing market looked like it was going to pick up, Krogh says. Evergreen would restore part of a shift. Then the market would slip back, and the company would cut back again.

But by fall 2012, the national home construction market was showing a modest comeback.

Housing starts grew 15 percent between August and September to a seasonally adjusted annualized rate of 872,000, which is the highest since July 2008. Building permits also rose 12 percent, a sign that builders are planning to keep up the speed of construction.

Krogh has kicked up production from a low of 30 million board feet to 55 million per year. Before the downturn, Evergreen produced 75 million. He worries that there is still a shadow inventory of distressed homes — people behind on their mortgages or in foreclosure.

Brinkmeyer, the Idaho Forest Group chairman, says his company is now at about 80 percent capacity, and the housing market is stable, with little downside. But expanding that market is a challenge.

“The government drives 95 percent of the mortgage market,” he says. “The mortgage situation has not been fixed.” Freddie Mac and Fannie Mae are bankrupt, he says. “So the whole government issue will be the factor that determines what housing markets will be in the United States.”

On top of that, the country still faces high unemployment, which impedes qualifying for home loans. “All that stuff affects housing,” he says.

In 2011, average employment and total wages in mills each rose about 7 percent. Morgan, who studies Idaho’s timber business at the University of Montana, says the sector’s employment growth was muted by increasing mechanization in sawmills and the restoration of some workers’ shifts to full time before companies moved to hire more people.

At Evergreen, Krogh handed out 50-cent-an hour raises and restored a full second shift, bringing the total number of employees at the two plants to 100.

“We really feel good about going back to two shifts,” Krogh says.

Bill Roberts: 377-6408, Twitter: @IDS_BillRoberts

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