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Sds Halts Lumber, Plywood Operations For Now

Until demand increases

By JESSE BURKHARDT

The Enterprise

With a severe lack of demand for lumber products due to the slumping economy, Bingen's SDS Lumber Co. has been forced to close most of its operations until sales pick up.

Last week, SDS President Jason Spadaro announced that all plywood and lumber operations would be halted through the end of March. The move, which was effective at the end of last week, leaves 150 employees out of work for now.

"This is not a permanent or total shutdown. Once we reduce inventories, we'll start back up. We're hoping that by the end of the month we'll be back up and running," Spadaro said.

Operations will continue in forestry, log chipping, shipping, and marine transportation during the mill closure. Combined, those operations employ 75.

Market conditions could change at any time, Spadaro added.

"It might not even be to the end of March. It will be the next two weeks for sure, but then we'll re-evaluate," Spadaro explained. "If prices and demand pick up, the time could be shorter. But we have to match our production to market demands. We've tried to delay any curtailment as long as we could. But if the product is not moving out the door, we can't just keep building the inventory up."

According to Spadaro, current lumber and plywood prices are "barely above chip value."

"In real dollars, it's at an all-time low," he explained.

Spadaro said there is no doubt the mill will resume operations, but when and at what level was uncertain.

"We may run a few weeks, and then take a few weeks off," Spadaro said. "It all depends. There are too many variables to predict. But we're going to try to get people back to work as soon as we can."

Timber harvesting will also see reduced operations, but will not be completely shut down.

"Normally we start our woods operations about now, but we might delay it," Spadaro said.

Spadaro pointed out that the lumber mill has already been operating at reduced hours over the past three months, with one shift rather than two -- and that shift running only 30 hours a week.

With the job cuts, the SDS complex will be down to 75 employees. During peak operations over recent years, the mill has employed as many as 330.

Bingen Mayor Brian Prigel said the impact of the layoffs would be serious for the community as a whole.

"That certainly is going to hurt the local economy. That's a lot of employees to be out," Prigel said. "Unemployment insurance compensates for a while, but it doesn't pay as much as they would be making normally, and it's certainly a temporary solution. I know employees getting unemployment are not going to be spending money unless they absolutely have to."

Prigel added that given the market conditions, SDS had no choice but to curtail production.

"I can't blame SDS -- the housing market just has no construction going on," Prigel said.

Spadaro pointed out that SDS is at the mercy of the nation's overall economic health.

"The bigger picture is, when is the U.S. economy going to recover? That's anybody's guess," Spadaro said. "We don't see bright spots for housing or for demand for lumber and plywood. Until the credit crisis is resolved and unsold inventories of homes are resolved, it could be a long time before housing rebounds. There is a housing component to the federal stimulus package, and we'll see how that affects the economy."

Spadaro said SDS will continue health benefits for laid-off workers at least through the end of March.

"Also, we've made it easier for employees to enroll for unemployment, by treating this as a standby layoff," Spadaro added.

Finding another job in the current market does not look promising. According to the Washington Employment Security Department, Klickitat County's unemployment rate in January -- the latest month for which statistics are available -- stood at 12.8 percent.

Mayor Prigel, who began serving as mayor in 1998, said the layoffs at SDS are among the worst in SDS's history.

"This is the biggest layoff since I've been mayor," said Prigel. "I hope it turns around pretty quick."

Spadaro added that the overall downturn in the industry is very troubling.

"These are unique times. That's a gentle way of saying it," Spadaro said.

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