Industrial Profile: The Timber Industry

Learn more about the business
Growing Stronger Trees Faster
Goods from the Woods


Lasers & Lumber
Computer technology helps the timber industry 
bolster profits and survive global competition

By Heidi Russell Rafferty

Roots grow deep for North Carolina’s timber industry, a mainstay business that has fueled the state economy for decades. And during the current weak economy, manufacturers say they are surviving by using new technology that makes production more efficient and by offering specialized products to better compete in the world market.

 “The good news is that the companies are still in business and are still running,” says Bob Slocum, executive vice president of the North Carolina Forestry Association, a private, nonprofit partnership of 2,500 forest managers, land owners, mill operators, loggers, furniture manufacturers, educators and others. “Forest product has always been a cyclical industry that has peaks and valleys. We’ve been in the valley a while. The good news is that everyone is projecting economic recovery, and things will get better.”

Timber is the second-largest manufacturing industry in the state, next to textiles, Slocum says. It employs 145,000 people and has an annual payroll of more than $3.5 billion and annual shipments valued at more than $20 billion.

Among those are large companies Weyerhaeuser and International Paper. Weyerhaeuser alone employs 3,500 in the state and has a payroll of $150 million. The company has operated continuously in North Carolina since 1957, when it bought the Plymouth Paper Mill and surrounding timberland from the Kieckhefer family. Since then, it has grown to 20 operating facilities in 15 North Carolina communities.

At International Paper, the annual payroll tops $187 million, and there are 3,114 employees. IP, which produces everything from folding cartons to music and home entertainment packaging, has 19 operating facilities in 15 North Carolina communities. Its distributor, xpedx, has six facilities in the state. IP also is the parent company of Hendersonville Shorewood of East Flat Rock, which is a packaging and graphic imaging company.

The presence of timber companies also lends to the continuing development of natural resources. Forests cover 62 percent of North Carolina, and the state ranks as the fourth most forested state in the nation. Worldwide, there are more than 20,000 different species of trees. Of those, 180 grow in North Carolina.

Few people recognize the integral role that the industry plays in their everyday lives: more than 5,000 products that we use come from trees.

“A lot of the products are made from byproducts that result from wood processing,” Slocum says. “It’s not necessarily that they’re made here (in North Carolina), but the ingredients are grown here.” For example, did you know that cellulose, which comes from wood, is found in photographic film? Some of the yeast that goes into bread is a byproduct from the pulping of paper. And almost all of the glues on the market contain lignin, the glue that holds wood fibers together in trees. Lignin is broken down during the production of paper and is recovered for making glue and other products.

“So you find things like cellulose and some of the binders in ice cream that are the result of wood products,” Slocum says.


Challenging Times

But the prices that manufacturers are getting for their products have plummeted, which is the most pressing problem facing the industry, say Slocum and business owners. The industry has been plagued with an oversupply of wood, which is coming from foreign competition that formerly didn’t exist.

“The last few years, the dollar has been so high that it’s had a significant impact on export markets for U.S. products. It’s just a reality,” Slocum says.

The Forestry Association does not track sales, but Slocum says that anecdotal evidence shows that companies are having a difficult time making a profit. “We’re not seeing mass layoffs, but we have seen sawmills that might have run five days a week with two shifts go down to three days a week and one shift. Some small mills, if they can, will shut down for a short period of time,” he says.

Bob Jordan III, CEO and president of Jordan Lumber & Supply Inc. in Mount Gilead, points out that the value of the euro has decreased. Foreign companies that were looking for markets started shipping to the United States. The port in Wilmington is filled with shipments of lumber from Finland, Sweden, Norway, Poland, Austria, Germany and a Canadian-owned mill in Lithuania. “That’s the global business we’re in,” he says.

Only the fittest companies will survive, Jordan says. “We’re not in a profit recession, but a capital recession. It’s like a game of chicken. If you have investments and debts to keep cash flow going, and you find times when you sell below what it costs you to produce, you’re in trouble.”

He adds that “everyone” wants to get into the U.S. market. “The most efficient lumber operations are in the United States, but there are also efficient operations in Canada and Europe. And since their markets are not good, their exchange rates reflect their economies. So that gives them an advantage,” Jordan says.

Other business owners and mangers agree that the past 18 months have hit the industry hard. Amyas Player, general manager of the Yard Division for Coastal Lumber in Weldon, says timber prices of cut logs have been on a steady increase, but lumber prices don’t correlate with the timber prices. “That depletes our potential margin,” Player says.

“I’m concerned about the future of the industry,” he adds. “We know what’s happened to textiles, and it seems that furniture is going in the same direction. I’m concerned about the fact that we might be losing jobs to other countries.”


Technological Advances

But the advancement of technology in the manufacturing process has helped companies become more efficient and keep production costs lower, which lends hope for future business success, says Bodie Bodenheimer Jr., chairman and CEO of Zickgraf Enterprises Inc. in Franklin. He says that the timber industry traditionally has used technology from the 1960s, but state-of-the-art lasers and automation are now enabling companies to get the most usage out of every single log.

“Technology is the great opportunity of the future, because in our industry, the waste is where the money is,” Bodenheimer says. “In our case, if we could cut waste one percent, we could save $200,000 a year. The systems being developed will reduce that waste substantially. As much as we can, all of us in the industry are in the process to modernize our plants and capitalize.”

Zickgraf is made up of four companies. Two handle the hardwood floor business: Zickgraf Hardwood Flooring Co., which manufactures the flooring, and American Floor Finishing Co., which puts a proprietary finish on it. The other two companies are a building supply house and a heavy equipment rebuilding company.

Three years ago, Bodenheimer bought a sorter and stacking system. “It’s had a great effect on the efficiency of the stacking of the wood as well as optimizing the wood,” he says. Zickgraf also spent $5 million developing a machine at its finishing plant in Bryson City that enables more precision. It is one of a few in the world, Bodenheimer says.

“We now have tremendous capacity for production,” he says. “You can run the line with only three people and can do 40,000 square feet in an eight-hour period.”

He adds that the best thing a company can do to survive bad economic times is to create efficiencies in the manufacturing process. “If you create efficiencies, then you have opportunity,” he says. “This is a penny business. It’s a volume business, and when you’re cutting up 40 million feet of anything and throwing away 40 percent of it, then if you save just that one percent, there’s a good bit of money. That’s where I think the future is.”

Jordan also has increased his production with a small mill technology that he brought over from Finland five years ago. It can saw 40 logs per minute. His other mill, which is larger and more conventional, saws eight to 10 logs per minute. Large logs can’t flow through conventional mills at a high rate of speed.

 “The little mill allowed us to take smaller and smaller logs, which means we’re able to use trees that historically could not be upgraded to lumber. They could only be used for chips. It has increased our production and enabled us to have more raw material without growing more trees,” Jordan says, adding that about 40 percent of the lumber he produces today comes from trees that were not usable five years ago.

The technology works this way: Workers scan a tree electronically five to seven times to maximize its value before it is changed into lumber. Workers take the bark off the tree and examine it with laser scanners. “We tell the computer, ‘Here’s what we can sell, and here’s the value of that.’ The computer decides what log lengths to cut it in. We scan it again and separate according to market value and the size of the log,” Jordan says.

Same-size logs are then put together to go through the small mill. This enables them to run through much faster, “like a ribbon,” Jordan says.

Jordan adds that he constantly has to keep up with the changing technology. His five-year-old mill was out of date two years after he installed it, and computers had to be updated. “In another year-and-a-half, we’ll have to do it again,” he says.

Coastal Lumber also uses laser technology to scan logs and get a three-dimensional model of them, says Steve Wagner, the Northern Division Operations Manager who is based in Hobwood, Pa. The company installed the technology about five months ago, he says. “A computer takes a picture and determines what boards are in (the log) and where to set the first cut. It increases the amount of lumber by about five percent from every log,” Wagner says, adding that one of his mills can do about 450 logs per shift.

Coastal Lumber mostly produces rough, random-width and random-length lumber that is used for furniture, flooring and cabinets. “Basically, you get different grades out of that same log,” Wagner says, adding that the company runs about 45 to 50 percent of upper grade lumber (for furniture and cabinets) from a typical log. Another 30 percent from the log goes into flooring lumber, and about 15 to 20 percent is for pallets.

Player notes that other technological advances not yet available to the manufacturing process include experimentation with X-ray scanning so that the mill can cut around interior defects. “That’s still quite a long way away from being available in terms of price and durability,” he says.


The Long Haul

Company owners and mangers say that they have survived tough times before and that they expect to pull through this latest economic downturn with an old-fashioned business philosophy: to set themselves aside from their competition.

Bodenheimer recognized the importance of crafting his own niche when he bought Zickgraf in 1991. The company, which started as a sawmill in 1933, first offered solid paneling and then grew into a hardwood flooring business. Bodenheimer decided to find a market for exotic woods. He now manufactures 100,000 square feet of product per day.

“Our products are a little different than some of our competitors. They’re in a strip flooring business and sell 2 1/4-inch-wide red oak and white oak flooring. We began to try to get out of the business several years ago and manufactured 3-4-5-6-inch-wide flooring and also began to manufacture different kinds of species,” Bodenheimer says.

Zickgraf also expanded its sales by using distributors to sell its products. The company has distributors in the United States, the United Kingdom, Europe, Japan, Korea and Iceland, and Bodenheimer is currently negotiating with one in Hong Kong. About 20 percent of his product is sold in other countries.

 He made some friends in the architectural business in Europe who helped him land major projects: the French embassy in Berlin, the Austrian embassy in Paris, high-quality apartments and condominiums in Berlin, theaters, the British Airways building at London’s Heathrow International Airport, a 1,000-year-old palace in Holland and even an area in Buckingham Palace.

Bodenheimer says that he was able to get out in front of his competitors by changing the scope of his business early on. In the early years of his ownership, he made more money and reinvested it back into the company. He says that has helped him survive the latest downturn. “I’ve never taken a dime out of the company since I’ve owned it,” he says. “I reinvest our earnings into the company.”

Jordan says he has continued to increase the value of his byproducts, and that has helped his company stay the course. For example, he recently helped a German company, Homanit, start up in North Carolina. That company spent $115 million to build a plant next door to his property and now uses his byproducts for its raw material. “They’ve helped us by providing an even-better market for our chips,” Jordan says.

Player at Coastal Lumber says the timber industry always has held strong because of the nature of the product. As long as North Carolina continues to nurture its natural resource, there will always be a future for the industry, he says. “It’s a sustainable industry. It’s a renewable resource over the longer term. You have to have more patience and a longer term vision, but it is a sustainable resource.”


Growing Stronger Trees Faster
The forests of the South are predominantly privately owned and depend on the collective decisions of more than five million private landowners. Bob Slocum, vice president of the North Carolina Forestry Association, says it’s important for the timber industry to stay strong so that the 500,000 landowners in the state will continue to invest in forest management and preserve the natural resource.

“One reason we have a lot of forest land is because it has created economic value. Trees are valuable and bring a healthy return to the people who grow them,” Slocum says. “Without a good return, forests have no economic value, and landowners have to look at different land use. If the industry declines … not-so-good things will happen to the forest.”

The Southern Forest Resource Assessment was commissioned in 1999 to document and analyze factors impacting the forests of the South. The assessment projects that the South will continue to lose about 12 million acres of forest land to urban and industrial development by 2020. “There’s no question that we have less than we did 10 years ago,” Slocum says.

Lumber manufacturers say they are working with N.C. State University to grow the fiber for raw materials on less land.

Bob Jordan III, CEO and president of Jordan Lumber & Supply Inc. in Mount Gilead, has about 70,000 acres and manages another 20,000 for private landowners. He says a consortium of businesses is working with N.C. State on research so that disease will be eliminated and trees will grow straighter and higher. Researchers are currently mapping the Southern Pine gene structure, he says. “It means a lot to us, because we can maximize the amount we can grow on an acre of land,” Jordan says.

When Jordan started in the business in 1957, a crop of trees grew in 40 to 45 years. Today, trees grow in 30-year cycles. “We take 30 and divide it by the number of acres we need to plant, thin and harvest each year. We hope to bring it down to 27-year cycles.”

Jordan says logging methods have also changed. Crews plant trees closer together. As they grow, their limbs drop off. “We go in when they’re about age 15 and thin them out, too,” Jordan says.

Amyas Player, general manager of the Yard Division for Coastal Lumber in Weldon, says the industry also has made advancements during the past 15 years in mechanizing the logging process with an emphasis on safety.

“In the past, you had a man on the ground with a chain saw cutting down trees. . . .  There has been a lot of emphasis on getting people off the ground into a protective cab,” he says, adding that most of the cross cutting of the logs is done at a landing with a hydraulic saw.

Logging crews, which are subcontractors for companies, also go through certification programs in which they learn how to better protect the surrounding wildlife, such as how to cut trees around streams. “They operate under Best Management Practices, which governs how they leave the land, cut the trees, leave the roads,” Jordan says. “They’re conservationists while they are loggers.”  -- Heidi Russell Rafferty


Goods from the Woods
In addition to the fruits and nuts, trees produce a number of things that might surprise you. A sampling:

Foliage: Leaves of the carnauba tree are used to produce furniture polish, car wax, crayons, lipstick and the coating on medicine tablets. Another product from foliage is garden mulch.

Branches: These make thousands of paper products, of course, but did you know that chemical byproducts of paper-making processes are used in producing cleaning compounds, skin lotion, artificial vanilla flavoring, photographic film and molded plastic products such as eyeglasses?

Bark: Gilligan and his fellow castaways used to munch on it for nutrition; today, it’s used for a variety of purposes, from medicine to garden mulch to food seasoning.

Trunk: Primarily used for solid wood products such as furniture, musical instruments, lumber and handles for tools and sporting equipment.

Gums: Found in tree sap, gums are used for food, adhesives, paints and medicines.

Stump: Pine stumps provide wood rosin and liquid terpenes used in making such products as orange soft drinks, pine cleaners and laundry detergents.

Roots: These help provide two drinks and yep, one of them is root beer. The other, you wonder? Sassafras tea.

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