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V O L . X X I N O. X X V I I N OV E M B E R 3 0 , 2 0 1 5 18 In a separate analysis published earlier this fall, Kingsley makes the point that the 2013 closure of the Great Northern Paper mill in East Millinocket and the 2014 closure of Verso's mill in Bucksport resulted in the loss of more the 1 million tons of pulpwood demand annually. But there hasn't been a corresponding drop in price, he notes, as might be expected in applying the basic economic law of supply and demand. Kingsley explains why pulpwood prices have remained strong, citing "a confl uence of events" at work in the region. ese include "market diversifi cation" giving landowners, loggers and foresters more markets for low-grade wood and "product diversifi cation." "Pulp isn't the only game in town," he writes. "During the same period that the region lost two paper mills, it gained a new biomass plant in New Hampshire with an average annual consumption of 750,000 tons of fuel. Over the last few years, wood pellet mills have been successful, and the region has even experienced a few periods of 'shortages' of wood pellets and dried fi rewood. Every ton of pellets or cord of fi rewood delivered to heat someone's home is a ton of wood that a pulp mill won't utilize." Demand isn't falling so much as it's shifting to other markets, which is helping to keep prices up. Another factor, he adds, is the loss of logging capacity, as smaller loggers "often disappear when a mill does." High entry costs also make it harder for new loggers to come into the market. "When enough of these small loggers disappear … it can be a big deal. Likewise, the trucking sector is also beginning to experience the same challenges." At the Bangor summit, Kingsley concluded, " e trends suggest it will get worse before it gets better. e bottom line: Maine's higher wood fi ber costs contribute to the state being a net importer of more than 2,500 tons of wood from New England, Maritime Canada, New York, Quebec, and even Michigan. The logger's perspective Dana Doran, executive director of the Professional Logging Contractors of Maine, confi rmed Kingsley's sense of a looming shortage of loggers. Next to paper mill workers themselves, Doran says, loggers and their families are among the hardest hit when mills shut down or downsize. "It's not a good situation out there right now," Doran says. "In the last four months I've heard from six of our members that they're going out of business. My prediction right now is that by the mud season of 2016 we're going to see a reduction probably of 10% to 15% in total logging capacity in the state of Maine. at is a tough story to tell, but it's the reality of the situation." But Doran fl atly rejects what he characterizes as a "common misconception" that the high cost of wood fi ber in Maine is due to loggers' ineffi ciency and high profi t margins. "On our costs, we have seen minimal rate increases, but we've had to invest in productivity because the mills have wanted that productivity," Doran says. "People want to stay in business — we're competitive people so we've made those investments." But there are investment costs related to that increased productivity, he says. A logging company will typically invest upwards of $550,000 in a mod- ern cable-skidder, a shredder and feller buncher, along with trained workers to operate that machin- ery. "Yes, productivity increases," he says, but the combination of higher overhead and lower demand is cutting into profi tability and is creating extremely tight margins for many Maine loggers. Sticking to the summit's theme of innovation and investment, Doran highlights initiatives Maine's log- ging industry is pursuing in response to the overarch- ing goal of improving the competitiveness of the state's wood products industry. Among them: A new mechanized logging operations training program is being developed with three Maine community colleges, with support from Milton CAT and CAT Forest Products, to meet the demand for skilled workers as mechanization increases and older workers retire. An aggressive safety training program launched to reduce risks, work injuries and thereby reduce operating costs. Working with lawmakers to pass a sales tax exemption for loggers similar to the one cur- rently available to professional fi shermen. Exploring cooperative buying opportunities to reduce overall operating costs, including the pos- sibility of creating a "fi rst-ever cooperative buy- ing program" for fuel for PLC members. Countering negative perceptions of logging and log- gers by emphasizing the high professional standards and sophisticated skills needed in today's industry. "We want to work with the mills to lower costs," Doran says, "by reducing transportation costs and » C O N T I N U E D F RO M P R E V I O U S PA G E Equal Housing Lender Member FDIC 9 locations in Southern Maine and New Hampshire 207.324.2285 | 1.888.226.5747 | banksis.com EXPERTS IN BUSINESS BANKING We have the Business Checking Account that works for you! We listened to our Business customers and created two checking products that fit the bill. 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