74th Oregon Logging Conference: Optimism and Innovation

Article by Mike Crouse

The 74th Oregon Logging Conference (OLC) greeted visitors with sunny skies, moderate temperatures, and a prevailing mood of cautious optimism apparent amongst vendors, programs, and participants. While the relative size of the conference was similar to the past few years, the prevailing attitude was upbeat, with some innovative products being presented for the first time, recognizing again the OLC’s position as the premier logging conference and equipment display in the western United States.

The opening session was packed (conference fees cover the morning breakfasts), and after the preliminaries, this year’s president, Ken Wienke, introduced the key note speaker William (Bill) Springer, Vice President, Diversified Products Division of Caterpillar, Inc.

Springer’s speech reflected the theme of this year’s conference, “The World Needs Our Wood,” but strongly reflected the positive tone seen throughout the conference: the positive signs of an economic resurgence. (This view mirrors much of what we’ve heard from three other economists we’ve heard this past year.) Following specifics towards  Cat’s corporate position overall, Springer noted addressed the economic outlook saying,  “...we think the stars are aligning, which bodes well for the future for years to come.”

“First, there is a huge influx of new money coming into the world’s economy.  In fact, the flow of new money coming into the world from central banks, and in turn lending institutions, is the highest it has ever been since WWII.  Of the 12 countries we track closely, nine have real growth in money supply, with the US leading the charge with real money growth in the last year of over 16%.  In fact in the last six months, US money supply has increased at a rate of 20%; in the Euro zone, bank liquidity in Europe grew at a whopping 40%; and even in China, where they slowed their economy down by restricting the money supply, they saw some quantitative easing in the last quarter 2012, indicating they will likely move back into a growth mode soon.  For the first time in a long time, all of the major central banks in the world seem to be on the same page relative to this issue.  That is why we think the global economy is getting a “second” wind.

“Second, companies are beginning to invest in capital equipment again.  One example is what we are seeing with equipment fleets around the world... And, what we are now seeing is a small increase in industrial and consumer confidence to start to replace these aging assets.  This emerging replacement cycle is driving more orders on plants, especially in developed countries like the US, Germany, and France.  This is beginning to impact employment numbers and even though it is slow, higher employment levels will put people back into the housing market, and that is critical in the US.  I will get more into that later.

“Third, interest rates and inflation remain low, and we think that will continue well into the future.  In fact, in North America short term interest rates are below 1960 levels.  And, from interest rate highs in 2007/8, interest rates in the developing markets have been declining, and the major countries that can impact this are also managing their inflation at very manageable levels.  As long as this kind fiscal policy is maintained, we are confident interest rates will remain low, and this will eventually have a big impact on US housing as more people return to work and consumer confidence grows.

“Fourth, we feel the world economies are growing at rates even higher than we felt six months ago.  In 2012, the world’s GDP will grow from 2.8% in 2011 to 3.3% this year, and we believe there might be an upside to that, mainly on the back of stronger growth in the US, and possibly a stronger recovery in Europe the last half 2012.”

Springer voiced the same optimism the U.S. economy and markets saying, “All good news. We had growth of 1.8% in 2011, and we see 3.1% in 2012.  We see US construction beginning to come to life again, and we even see turnaround starting with housing.  Commercial properties are already growing and you can see that in rental properties and new apartment buildings.  And we see new housing starts growing to 700,000 in 2012, up from 650,000 a year ago.  Even in the last quarter of 2011, we saw the run rate for housing that would put starts at 680,000 in 2012.” He added, “Another reason we see housing beginning to take off is that employment levels are recovering.  And while they are still high, it is our expectation that more and more people will be getting back to work, and as people get more confidence in a more stable economy, they will begin to want to invest in housing again, and that will further drive employment.  If this projection comes to fruition, there will no doubt be a positive impact on the logging industry.”

There are potential clouds with the greatest uncertainty at the hands of government, hinted Springer saying “...there are global uncertainties and potentially stupid policy makers, that could derail what we believe is a realistic outlook.  These are just a few of our concerns, with probably the one that concerns us the most being trade policy protectionism.”

“But China will still be the big gorilla in this part of the world for the foreseeable future,” Springer said.  “With GDP for 2012 forecast to be near 8%, it is hardly evidence of a major slowdown.  This will continue to drive the need for lumber, as well as softwood fiber since they have limited domestic demand.  The thing we have to watch for closely in China is housing, since it represents 25% of their GDP.  Any disruption is that could be a problem, but right now we don’t see that being the case, especially with inflation expected to fall from 5.5% to three (3%) percent.

“And, looking long term at China, this is what is on the horizon.  Specifically, you can see what they are doing:  Lots of roads, lots of airports, lots of growth.  But, with plans to build 35M homes in the next five years, if those homes move to more lumber structures, the demand for lumber could be huge.”

New technology

The always-popular “What’s new in logging” panel led off with Michelin field engineer, Bob Kimble, outlining six factors that can make a considerable difference in operation costs to trucking fleets: low air pressure, high air pressure, missing valve caps, dual (tire) mismatch, dual mismatched heights, and irregular wear.

Shawn Hagen, with Pierce Pacific Mfg. introduced their new Grapple Processor (GP), which he explained is, “...designed to gain utility and productivity from a single machine: It loads, shovels like a grapple, delimbs and measures like a processor.” It received a lot of attention at the show.

Husqvarna’s Cary Sheperd presented “Chain saw technology applied to logging,” on some innovations on this generation of Husqvarna chain saws, particularly in their emissions technology X-Torq(r) engine, their auto-tune feature, and the Rev-Boost that’s part of that feature. 
Keith Hicks, from Caterpillar, outlined the emerging technologies from Cat, touting their “...purpose built products for this industry,” and their ACERT engine technology, integrated with other innovations, and particularly in their Cat 568 shovel logger. “WE increased the horse power on the 568,” Hicks said. “More horse power (12%) using less fuel (5%).”

Another product receiving lots of comment was Tigercat’s 880 shovel logger, being sold locally through Triad Equipment, both for it’s strengths in engineering, performance, and a very frugal use of fuel. 

There was a new, and very innovative tower displayed at this year’s show: Koller 721 remote control tower. We’ve heard of remote control towers for over a decade, but this is the first we’ve actually seen, designed to be operated with a two-man crew. It’s a build strong, comes with a slew of options, including a Koller designed remote control control motorized carriage (though most carriages can be modified to work with this technology, . We look forward to seeing it operating in the real world environment of the Pacific Northwest in the next few months.

The conference also provided several class room and “hands on” seminars as has been the practice the past decade, enhancing professional skills, and bringing some of the industries most capable hands to the conference to share their expertise. 

In all the 74th edition of the Oregon Logging Conference was very upbeat in approaching the coming few years, and cautiously optimistic in preparing for the next upbeat cycle in our business.

Kudos on another great job by the conference manager and the board of directors.