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Prentiss & Carlisle
February 2, 2017 12:51 PM
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The Russian Pulp & Paper (P&P) sector is export-oriented, and Russian producers compete with other long-fiber pulp and paper product producers in global markets. Due to the recent depreciation of the local currency (ruble), Russian producers have a reprieve; among the lowest cost producers in the world, they are currently enjoying high margins. This situation is temporary, however. As the ruble strengthens, fiber prices will increase and when this happens, knowledge of real-world market wood fiber costs will be crucial for Russian P&P products to retain a competitive edge on the global market. ***
The Russian P&P sector has expanded in the last 10 years, and its importance for the Russian economy has been growing. From 2006 to 2015, the growth has been significant for production of market pulp (15 percent) and especially for packaging materials, where production volumes have more than doubled. Export sales also account for a considerable share. For instance, exports amount to 30 percent of all wood pulp sales, 70 percent of all printing & writing paper sales and 25 percent of all packaging material sales. Increasing export revenues (a result of the weak local currency) have made Russian producers the most profitable in the world during the last two years.
The pulp and paper raw material base in Russia is heavily dependent on wood, as the amount of recycled fiber is low. Traditionally, the share of virgin fiber has been very high— around 80 percent. As demonstrated in Figure 2, Russia currently enjoys the lowest pulpwood costs among the main supplier regions, which is less than $20 per cubic meter. For example, pulpwood for Russian mills currently costs one third of what competitors in Scandinavia pay. Differences from North American producers are also significant, partly due to the strong depreciation of the Ruble in 2014-2016 (Figure 3).
Between 2010 and 2015, raw material prices in Russia rose sharply in terms of local currency, but the favorable exchange rate has halted the growth of euro-based prices (Figure 4). Due to limited infrastructure and depletion of nearby resources, pulpwood is usually hauled long distances, sometimes longer than 1,000 km (more than 600 miles). Increasing oil prices and the accompanying revaluation of the ruble may be lurking around the corner. If no action is taken now to improve wood supply operations, Russian pulp and paper producers risk losing the competitive advantage they currently have.
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April 6, 2015 12:18 PM
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In the first part of this series, Wood Supply Chronicles, I highlighted three events that have changed wood supply in the US South: timberland divestment, the timing and intensity of the housing bust and inattention to—and an inability to react to—global policy changes.
In this post, I would like to focus more closely on the unintended consequences of timberland divestments from a perspective that few have considered and that might not seem apparent on the surface. It is, however, a viewpoint that is ultimately very important to maintaining the health of both individual forests and the larger forest products industry.
Demand from the forest is out of balance from an historical perspective. Why? Because demand for pine sawtimber has declined, while the demand for pine pulpwood has grown.
We all know why the demand for sawtimber has declined. What we cannot do, however, is predict its return or the scope of its growth when it does. The demand for pine pulpwood, on the other hand, increased significantly during this same time period. The result of these events is a tenuous market situation in which: - Pine pulpwood prices are high and pine sawtimber prices are low
- An excess of pine sawtimber is available now and will be for years to come
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This is where the unintended consequences of timberland divestment are most demonstrable. We are dealing with two dissimilar groups of owners with conflicting agendas: one group owns property and trees, the other owns mills. Timberland owners are trying to maximize their forest yields and profits by relying on past pricing norms and mill demands to set their harvest regimes. Not surprisingly, this data has historically been used in a very local context.
The mill owners, by contrast, are usually large multinational corporations operating numerous facilities. Not only are they maximizing profits across entire systems, but they are modifying mill outputs based on fluctuating consumer preferences. When the mills owned timberland, this data was quickly transferred back to the timberlands to close the information loop. This nimble operating structure and ability to rapidly respond to market demands has all but vanished, resulting in a gaping inefficiency in the supply chain.
Forest2Market believes that this knowledge gap will only expand as pulp mill owners continue to consolidate both nationally and internationally and as new consumers enter the market and the pace of changing consumer preferences increases. As this knowledge gap widens, supply chain inefficiencies will continue to intensify and the entire industry will suffer lower returns.
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October 15, 2014 6:47 PM
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It’s a drill Rosaire Pelletier has been through many times.
A Maine paper mill closes, and Pelletier, the governor’s senior adviser for forest products, is handed the task of trying to find a buyer. The state gets involved because, more often than not, tax breaks and other aid are needed to make a deal come together.
“It’s not an easy job,” concedes Pelletier, a 40-year veteran of the paper industry who uses an impressive list of contacts to market Maine’s shuttered mills. But declining demand for the type of paper Maine specializes in, coupled with increasing competition, does not create an ideal seller’s market, especially when the most recent mill owners couldn’t make a go of it.
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September 10, 2014 6:21 PM
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At quick glance, the aerial view of Maine’s forest products industry looks pretty much the same now as it did 20 years ago.
First and foremost are the 17.6 million acres of forest that comprise 89% of the state’s total acreage, making Maine the most heavily forested state in the country. The U.S. Forest Service’s 2012 tree census reported 24 billion trees of at least an inch diameter growing on all those acres — an increase of 6.3% since 2007 and the equivalent of 18,688 trees for each of the state’s 1.3 million residents. For the past 22 years, Maine has harvested an average of 6.7 million cords each year.
Then and now, no question about it, Maine’s forest products industry is a major sector in the state’s economy, with its current economic impact pegged at $8 billion. Although no one questions that Maine’s forest products industry is a major business sector, it would be a mistake to conclude from a quick aerial view that not much has changed over the past 20 years. “This is not your grandfather’s forest products industry anymore, or even your father’s,” says Patrick Strauch, executive director of the Maine Forest Products Council since 2004.
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July 2, 2014 12:30 PM
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While pulpwood prices across North America are driven by competition for fiber, we tend to see higher price volatility in pulpwood prices in the Northeast and Lake States due to availability factors that are unique to these markets. These factors include:
Seasonality – Wood production tends to be volatile in these regions from one quarter to the next. This is especially true when comparing a high production first quarter to a low production second quarter...Higher delivered prices are fairly common in April and/or May as wood production is limited by weather. This 2014 winter harvest season was also longer than average with March hardwood pulpwood deliveries remaining extremely strong.
Distance Hauled – As the overall supply of hardwood increases during these months, mills are able to purchase wood originating in forests closer to the mill...Lower haul distances coincide with lower delivered prices, such as those observed over the first quarter of this year despite the competitive fiber markets over the course of the winter.
Competition for Other Species and Other Types of Fiber – Logging capacity, particularly as it relates to the “surge capacity” needed to fill inventories during the winter or when unexpected events drive inventory shortfalls, has been a pervasive topic of conversation in the Northeast and Lake States. Capacity issues such as these often affect hardwood production. The overall supply of hardwood pulpwood, for instance, is affected by aspen and softwood demand and the availability of pulp quality chips. If softwood sawmills are running more hours, this will increase the supply of softwood chips, thereby freeing up constrained logging capacity for hardwood production. This interaction affected hardwood production this winter, and the additional supply lowered prices.
Supply Agreements – Supply agreements are frequently used in the pulp and paper industry with strict requirements for deliveries that affect the price of fiber on the open market...Depending on the calculation mechanism, this can create a delayed effect on market pricing.
While these factors come into play in all regions in the North American timber industry, they are typically more pronounced in the Northeast and Lake States regions. Price volatility is therefore higher in these regions as seasonality, haul distances, competition for other species and types of fiber and supply agreements put pressure on prices from opposite directions.
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May 16, 2014 12:18 PM
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Forestry groups are worried about a looming shortage of loggers. So much so that Tennessee’s forestry association and other groups have signed a letter of support for a federal bill allowing teenagers to start logging at 16.
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Ed Moore, a logger on the Tennessee-Alabama border, says not enough is being done to promote the trade.“I couldn’t tell you how many different loggers are in the state. And I could count on one hand the number that are under the age of 50. And their kids don’t want to take over. It’s hard work.”
The Tennessee Forestry Association and several other groups around the country have endorsed a bill introduced by U.S. Rep. Raul Labrador of Idaho.
Labrador is proposing to deregulate the Fair Labor Standards Act of 1938, which bars anyone under 18 from working with logging equipment. An unintended consequence of that law, Labrador says, denies children of loggers “the opportunity to work and learn the family trade until they reach adulthood.”
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Although data from the Tennessee Department of Labor indicates that logging employment has remained relatively stable since the recession, Adam Taylor, who studies the wood products industry at the University of Tennessee in Knoxville, said many loggers work part-time, or are in and out of work, thus making it difficult to track their employment status.
Though logging may be stable now, Taylor says the aging population of the industry could have grave consequences in the coming years.
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“It’s a big concern, and a growing concern,” Taylor said. “Logging is becoming increasingly expensive to get involved with. Fuel costs are high. In addition, the cost of equipment is going up. And the old days when you could get by with a small skitter and a couple chainsaws, that isn’t the business model any more. It tends to be bigger, more expensive equipment — and insurance goes up.”
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February 27, 2014 4:12 PM
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The forest-based economy of the states of Maine, New Hampshire, New York and Vermont is an important component of the region’s economic health, according to new research by the North East State Foresters Association and the Northern Forest Center. Forest-based economic activity annually contributes more than $33 billion and provides 178,000 jobs to the four-state region.
“These reports show how integral the forests of the region are to the economic health of the Northeast,” said Steve Sinclair, chair of the North East State Foresters Association and state forester of Vermont. “We hope that this new information can help people in the region gain a greater appreciation that, in addition to scenic beauty, a place to recreate, clean air, clean water and many other environmental benefits, our forests provide tens of thousands of jobs and are an important part of our economy.”
The four reports and a regional summary are available online at http://www.nefainfo.org/publications.htmland update data last compiled in 2011 for New Hampshire and 2007 for Vermont, New York and Maine. According to the reports, the annual value of sales from the region’s forest products industry totals more than $18.8 billion, while the forest-based recreation economy is worth $14.3 billion.
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February 14, 2014 11:48 AM
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Much has been written about the challenges facing the paper industry in Maine. In most cases, however, all paper manufacturers are lumped together without regard for the specific types of paper they produce. The majority of the paper produced in Maine is what’s known as coated paper, which is used to make magazines, catalogs and newspaper inserts. The market for coated paper has been in decline as digital media eats into demand for the printed page. However, there is a type of paper not under siege by digital technology: tissue.
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Demand for tissue — which includes toilet paper, paper towels, paper napkins and specialty tissue paper — has been increasing, albeit slowly, according to Gregory Rudder, editor of the trade publication PPI Pulp & Paper Week. In the past 19 years, total U.S. tissue capacity — meaning the amount of tissue that would be produced if all tissue machines operated at 100 percent all year — has grown on average 1.8 percent per year, from 6.55 million short tons to an estimated 8.92 million short tons in 2015, according to Rudder, who noted most U.S. mills operate on average at 95 percent to 97 percent capacity.
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While Maine may have a history of tissue production, only one mill currently produces the product. That mill, Lincoln Paper and Tissue, faces heightened competition from an aggressive build-up of Asian production — and from U.S. firms looking to tap the tissue market.
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In late 2012, Jakarta, Indonesia-based Asia Pulp and Paper made an announcement that rattled the global market for tissue. It announced plans to over the next few years build 42 new tissue machines at its paper mills in China and another 15 new tissue machines at its mills in Indonesia. Such an expansion, if successful, would add 2.9 million metric tons of capacity to the global market and vault the company past major tissue producers such as Kimberly-Clark and Georgia-Pacific to become the largest tissue manufacturer in the world.
While much of that new capacity would meet the growing demand for tissue in the Asian market, where more people are rising into the middle class, Van Scotter expects the company to ship a good portion of that new tissue across the Pacific Ocean to the United States, which is the largest market for tissue products in world.
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As the rest of the paper industry struggles with falling demand, the growing demand for tissue makes it an attractive market for U.S. paper manufacturers that are considering converting other types of paper machines to produce tissue. Just last year a paper mill in Virginia converted an uncoated freesheet machine to produce tissue, and another paper company is working to convert another uncoated freesheet machine to tissue production at a mill in Oregon, according to Rudder.
In Maine, John Williams at the Maine Pulp and Paper Association has heard that the Woodland mill in Baileyville may install a tissue machine at some point in the future. And just across the border in New Hampshire, Patriarch Partners invested $35 million to install a new tissue machine at its mill in Gorham, N.H. Patriarch also owns Old Town Fuel and Fiber, which supplies pulp to Gorham Paper and Tissue.
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February 3, 2014 10:50 AM
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The wood costs for the global pulp industry have trended downward in amajority of the pulp-producing regions of the world the past two years, according to the Wood Resource Quarterly (WRQ).This has mainly been the result of lower prices for market pulp but also because of reduced pulp production and increased supply of wood fiber in some regional markets.
As the costs of energy, labor and chemicals have changed relatively less than those of wood fiber the past year, the wood cost as a percentage of the production costs when manufacturing pulp have fallen. In the 2Q/13, wood fiber costs accounted for just over 59% of the production costs on a worldwide basis, down from approximately 63% in the 2Q/12 but up from 51% in 2006, according to Fisher International.
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January 29, 2014 10:59 AM
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In tough times companies and governments look to cut costs. Unfortunately, those cuts may come at the expense of future opportunities, such as new product development. A new report released today finds that the forest products manufacturing industry invests less than one-seventh as much as the average U.S. manufacturing sector, seriously undermining the industry’s capacity to remain viable in the face of intense, global competition. The report, A New Model for Forest Sector Research and Development in the United States, was released by the U.S. Endowment for Forestry and Communities (the Endowment).
“In an age when more and more consumers are looking to use green, sustainable products, the forest products industry has the potential to be among the nation’s biggest growth sectors,” said Endowment President Carlton Owen. “But, this isn’t likely to happen without a more strategic and collaborative investment in research and development for state-of-the-art science such as green-building and wood-based nanotechnology.”
“America has for decades been the world’s leader in innovation in the forest products sector,” Owen continued. “That leadership is rooted in on-going research and development. Without a new commitment to research and development, and a new model for harnessing the power of public-private partnerships, the outlook for the forest products sector is uncertain at best.”
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January 1, 2014 12:23 PM
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Wood bioenergy markets interest forestland owners and timberland investors for a simple reason: potential returns on capital. Higher demand for pulpwood and other lower-valued forest residues can strengthen prices and increase returns to landowners for any investments made in their forests. However, the reality is that new wood bioenergy markets are small relative to traditional forest industry demand, and they are incredibly localized based on specific and primarily pellet-producing facilities. *** Pellet plants in the U.S. today have two primary markets: domestic U.S. home heating and European industrial markets for electricity and cogeneration. While a surge of proposed domestic projects occurred in 2009 and 2010 to take advantage of pellet use from increased petroleum prices, most recent investments have supported pellet plants intent on exporting to the EU, especially the U.K. These projects are larger than their domestic counterparts, consuming hundreds of thousands to over one million tons of wood per year, versus the typical fifty to two hundred thousand tons per year for domestic plants. *** Wood pellet projects represent one sub-sector within the overall wood bioenergy market. There are 122 pellet plants operating in the United States, 10 plants under construction, and 47 in the planning stages. Regionally, the North leads the U.S. with the most pellet plants operating, while the South leads in growth with 11.6 million tons of pellet production capacity in development. While more than 800,000 U.S. homes use wood pellets for heat, global wood pellet markets are growing largely in response to EU renewable energy mandates. Pellet production globally increased from 8 million metric tons per year in 2007 to more than 15 million metric tons in 2010. Currently, Europe consumes most of this production. In 2012, European consumption of wood pellets was 14 million metric tons alone. The European Union estimates that the EU will consume 17 million metric tons in 2014 (EU Biofuels Annual 2013). *** The data specific to pellet plant announcements and development in the U.S. tell a story of two market strategies. The U.S. domestic market for pellets relies primarily on smaller producers who rely on low cost manufacturing residuals.This strategy complements the U.S. forest products sector, and has an immaterial influence on timberland investments. The pellet export market from the U.S. has encouraged investment in larger scale facilities that, by necessity, focus on procuring traditional pulpwood roundwood. This strategy competes with traditional pulpwood users while providing a growth market in key local markets in the U.S. Southeast for timberland owners. Overall, however, large-scale pellet sector success remains hinged to EU policies and, in the near term, realized demand from U.K. power plants. Within the overall forest products industry, wood pellets represent a niche opportunity reliant on specific, critical factors associated with logistics and the economics of pulpwood and residuals.
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November 19, 2013 9:18 AM
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The largest paper mill in Minnesota is now churning out a type of pulp used to make textiles.
In a hopeful sign for the state’s forest industries, Sappi Fine Paper in Cloquet announced this week that its $170 million conversion to making pulp for clothing has been successful. The mill in September reached its daily goal of producing 1,050 tons of what’s known as chemical cellulose.
The pulp, which is the hottest forest industry product on the market, is generally sold to textile mills in Asia, blended with other materials and made into thread. Fast-growing demand for the product has outlined one possible future for a forestry industry struggling with the terminal decline of the paper market.
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October 21, 2013 12:21 PM
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Eva logger Bobby Collins spoke with uncertainty as he described the options he will be forced to pursue when the Courtland mill closes.
In addition to the 1,096 International Paper employees who will be displaced when the mill closes by late March, the closure will also affect an estimated 5,404 loggers and foresters in Alabama, Mississippi and Tennessee, according to the Alabama Forestry Commission.
“It’s a bad situation,” said Collins, who has contracted with IP for 18 years. “We’re going to have to make cuts. The next thing we’ll do is look for other markets.”
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November 7, 2016 10:09 AM
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What is a tree worth? For timberland investors, the value of a tree is determined by the returns on the capital committed to owning, growing and marketing the tree. For manufacturing firms that rely on wood as a raw material, value depends on the profitability of selling the finished products they produce. Forisk’s research into the forest product industry’s “ability-to-pay” for wood raw materials speaks to this value, and the profitability of markets that use the timber products sold by timberland investors.
The economics of the forest products industry remind us that timber raw materials go into products with widely varying margins. Higher recent price levels for lumber and structural panels have increased operating margins for OSB (24%) and plywood (26%), while fluff pulp and linerboard facilities, based on current end product prices, generate margins closer to 60% to 44%, respectively. Wood pellets and SYP lumber hover below 10%. [Note: this snapshot does not show how margins cycle over time, between manufacturers, and across local wood baskets. In addition, it does not account for common “discounting” by sales teams, especially in the pulp and paperboard sectors.]
In addition, wood varies widely as a percent of total manufacturing cost across products. Given manufacturing and wood costs as of mid-2016, sawmills and plywood plants have a higher percentage of costs associated with wood raw materials, followed by wood pellet plants and fluff pulp facilities (see figure). Changes in relative pine grade-to-pulpwood prices and yield assumptions – the tons of wood required per unit of finished product – are critical to this analysis across mill types. While sawmills usually have higher percentages of costs associated with wood raw materials, improving yields, greater market shares held by lower cost producers, and relatively low pine sawtimber prices regionally reduced this percent for now.
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October 20, 2014 5:40 PM
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The U.S. housing market is facing a new headwind — a jump in the cost of hardwood prices. The hike also is escalating the price of wood pallets.
Against the backdrop of rising raw materials prices, most of the American hardwood flooring manufacturers have been forced to raise prices on finished goods. Some announced hikes at the beginning of the summer, while others increased prices in September.
Hardwood prices actually began their long climb in early 2013. Since then, they have reached record highs. According to the Bureau of Labor Statistics, hardwood prices are now over 40 percent higher than they were in 2009. Several factors have fueled this dramatic surge in prices.
First, overseas demand, particularly from China, has swelled over the past few years. Second, the U.S. housing recovery has helped boost domestic hardwood demand. Although annual housing starts are well below their demographically driven normal level of 1.5 million units, they’re still twice as high now compared to 2009.
Finally, on the supply side, the Great Recession upended the lumber industry. Mills closed and workers struggled to find employment in other professions. Although demand is returning, it takes time to reopen mills and attract workers back to the industry.
At the same time, adverse weather conditions have taken a bite out of supply. Also, there was a wetter-than-normal spring this year, and lastly, access to timberland has been limited. As a result, hardwood availability is struggling to match the swelling tide of demand, said Charlie McCarren, economist with the Pricing & Purchasing Service at IHS, in an interview with My Purchasing Center.
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October 6, 2014 11:54 AM
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Hundreds of mill workers from across the state will find themselves without jobs at the beginning of the holiday season after Verso Paper Corp.’s sudden announcement Wednesday that it will close its paper mill in Bucksport effective Dec. 1. More than 500 employees will be out of work in the third mill closure in Maine this year, dealing a severe blow to the town of 5,000 people, which derives 47 percent of its tax revenues from the Verso mill.
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“The Bucksport mill unfortunately has not been profitable for a number of years, in spite of our employees’ dedicated efforts to make it so. Our assessment indicates that it is impossible for the mill to achieve profitability in today’s marketplace,” Dave Paterson, Verso’s president and CEO, said in a statement posted on the company’s website.
The Maine paper industry, which has been reeling from weak demand, high energy costs and foreign competition, has seen its workforce cut by half since 2000. Paper manufacturing employed 12,847 people in Maine in 2000, but it had dwindled to 6,913 by 2012, according to data provided by the state Department of Labor.
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Verso Paper is headquartered in Memphis, Tennessee, and owns three paper mills, including two in Maine and one in Michigan. Its paper products are used in media and marketing applications, including magazines, catalogs and commercial printing.
The closure will reduce Verso’s annual coated groundwood paper production capacity by about 350,000 tons and its specialty paper production capacity by about 55,000 tons, or about 39 percent of Verso’s output in Maine. Its Androscoggin Mill in Jay produces more than twice the amount of pulp as the mill in Bucksport, and about one-third more paper.
In February, Great Northern Paper furloughed 216 workers at its East Millinocket mill and has since filed for bankruptcy. In August, Old Town Fuel and Fiber announced it was closing its pulp operation and laying off 180 people. That facility is now for sale.
Verso is trying to merge with NewPage Holdings, but it has turned into a protracted negotiation that has gone on since January. Verso Paper is on track to complete the merger by the end of the year, according to its most recent Securities and Exchange Commission filing.
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August 21, 2014 1:16 PM
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Wednesday’s closure of the Old Town Fuel and Fiber mill is a setback for the Maine pulp and paper industry’s efforts to break into biofuels production, industry representatives said.
The mill, owned by New York-based private equity firm Patriarch Partners, has ceased operations indefinitely and furloughed about 180 employees. While pulp remained the mill’s core business, it was the only facility in Maine experimenting with the production of biofuel on a commercial scale.
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The Old Town mill had initiated a pilot program in 2008 to produce “biobutanol,” supported by a $30 million grant from the U.S. Department of Energy. The project was a collaboration with the University of Maine, which has done extensive research on how to distill fuels from wood. Butanol is a motor fuel that can be used in place of gasoline without any engine modifications.
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May 21, 2014 6:37 PM
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The end of more than a century of paper manufacturing in this town looks to be at hand with the auction of the No. 11 paper machine and other equipment from the shuttered mill site.
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Cate Street spokeswoman Alexandra Ritchie said the sale of the No. 11 comes after more than two years of searching, with state officials and other stakeholders, for a strategic partner to operate the Millinocket mill. The company determined that it could not restart the mill and be profitable without one, she said.
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The No. 11 is the last papermaking machine on the Katahdin Avenue site, which in its heyday employed more than 4,000 workers as part of a company formed in 1897 that opened in 1900 under the direction of Garrett Schenck. The mill’s industrial might peaked after World War II, when it owned more than 2 million acres of timberland. It began producing specialty papers for magazines, newspaper supplements, paperbacks and catalogs in the 1950s, according to a history compiled by the University of Maine.
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Cate Street Capital is a New Hampshire-based investor that bought the two paper mills in Millinocket and East Millinocket for $1 in October 2011.
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Many residents and millworkers believed that the mill’s closure in September 2008 was premature. They claimed that the mill, which produced catalog, magazine and retail industry fliers, was making about $2 million per month in sales when it closed.
Representatives of then-mill owner Brookfield Asset Management admitted that they had booked the No. 11 machine with orders through 2008 and were running the machine 24 hours per day, seven days per week. The machine’s most productive year, they said, was 2006.
Brookfield officials said the booming cost of No. 2 heating oil, upon which the mill relied to produce steam critical to papermaking, made profitability impossible.
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The East Millinocket paper mill maintained operations until it shut down in April 2011. About 450 workers were laid off. It reopened in September 2011 with about 220 workers. Then it closed again in late January 2014. Cate Street representatives said they hoped to restart the mill in 16 weeks with the completion of an energy and management makeover.
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The building that houses the No. 11 will be the home of the $140 million pellet mill that Thermogen Industries LLC, which Cate Street manages, hopes to build later this year or early next, Ritchie said.
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March 24, 2014 3:15 PM
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Trees have grown in what is Mississippi for countless eons, but changes in how they’re grown, how they’re processed and what they’re used for have changed the landscape in the state over the past half-century or so. In 2006, just before timber prices dropped with the decline in housing starts, forest products had reached a high point, contributing $17.4 billion and 123,659 direct and indirect jobs to the state’s economy, according to Mississippi State University research.
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One of the first big advances was the advent of the Counce, Tenn., paper mill, followed by another massive mill in Courtland, Ala. Pulpwood to supply the paper mills gave growers a new market for small trees, especially pines.
Landowners benefited doubly from cash payments for the pulpwood harvest itself and from the faster growth from trees that remained after thinning harvests, eventually boosting yields of trees for higher-priced products such as lumber, plywood or poles.
The pulp market, however, is a big question mark in today’s wood products industry.
“In the U.S., we have a declining pulp/paper sector partly because of cost of labor and also because of regulatory compliance,” Henderson said. “That’s a substantial cost. A lot of major paper companies U.S.-based companies close mills in the U.S. and open them in Asia, where they don’t have those compliance costs.”
The International Paper plant in Courtland, Ala., is a casualty of that pressure. Formerly a major market for the region’s pulpwood, it began cutting production last year and is now closed.
The U.S. housing market over several decades drove domestic demand for lumber and other tree products, making timber a more attractive crop for marginal farmland and justified more intensive management.
“Our forest products industry in the South is tied to the U.S. residential construction market,” Henderson said.
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New products and technologies have provided new markets for timber products, too, in the past 50 years. Oriented strand board, a cheaper plywood substitute often used in subfloors, roof sheathing and even furniture, uses trees that are too crooked and knotty for traditional plywood or lumber.
“Chip-and-saw” technology allows harvesters to extract more valuable two-by-fours from the hearts of small trees while utilizing the rest for OSB. The rayon favored by many Asian garment manufacturers is made with dissolved pulp, another recent advance in wood-products exporting.
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February 25, 2014 6:40 PM
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China’s importation of softwood lumber was 19 percent higher in 2013 than in 2012, reaching a new record high. The unprecedented increase in lumber shipments to the Chinese market that began in 2008 is continuing.
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Canada and Russia are the two major suppliers of lumber to China, with Canada having overtaken Russia as the largest supplier in 2010. Together, these two countries supplied almost 80 percent of all imports. However, this year Europe, Russia, Chile and New Zealand have all increased their shipments to China at a higher pace than has Canada.
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This trend, where countries that just a few years ago were virtually non-existent in the Chinese market are now expanding is likely to continue in the coming years both because China’s continued hunger for more wood and because Canada is not likely to increase exports much more than the levels seen over the past few years.
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With record shipments of logs and lumber from North America to China during 2013, it will be very interesting to see if Chinese wood buyers can continue to increase their imports from the US and Canada in 2014 and 2015 when demand for lumber is likely to go up in the US market.
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February 12, 2014 10:28 AM
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New Zealand forest growers, long overshadowed by booming returns from the dairy industry, look set to cash in on record prices for logs as they prepare to harvest trees planted in a flurry of activity two decades ago.
Forestry plantation activity in New Zealand jumped between 1992 and 1998, as a surge in Asian log prices lured investment syndicates to the sector. Radiata pine, which makes up about 90 percent of the nation's plantations, are typically felled between 26 and 32 years, meaning the "wall of wood" will start being harvested from about 2018, according to government figures.
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China is underpinning New Zealand commodity price strength as Asia's largest economy undergoes urbanisation, growing incomes and demand for better housing, says ASB rural economist Nathan Penny.
Forestry exports to China rose more than 50 percent in 2013, putting New Zealand ahead of Russia as the biggest seller of logs into that market. Russia's log exports have dipped as a result of an export tax aimed at stimulating its domestic timber processing industry. At the same time, shipments from the US and Canada have dwindled as demand picked up in their home markets.
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While an increase in supply in coming years may put some pressure on prices, foresters have the ability to stagger harvests and continued Chinese demand is likely to underpin the sector, Penny said.
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Increased demand in New Zealand from the rebuilding of earthquake damaged Christchurch and a surging Auckland housing market are also adding to wood demand and supporting prices, Penny said. New Zealand exports of logs and wood surged 22 percent last year to $3.86 billion. In comparison, meat exports rose just 2.2 percent to $5.28 billion and dairy exports increased 17 percent to $13.4 billion. The Wood Council of New Zealand, which represents forestry and wood processors, aims to triple export earnings to $12 billion by 2022.
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The New Zealand Superannuation Fund partnered with Harvard Management Company, the endowment fund of Harvard University, and the Public Sector Pension Investment Board, Canada's largest pension investment managers, for the harvesting rights to the 178,000 hectare Kaingaroa Forest, New Zealand's largest plantation forest and one of the largest contiguous plantation forests in the Southern Hemisphere. The NZ Super Fund valued its 41.25 percent stake in Kaingaroa at $1 billion as at June 30, saying it has delivered an 18.05 percent return since it was purchased in 2006.
Other large plantations are owned by US-based Hancock Natural Resource Group, the world's largest timberland investment manager which bought 260,000 hectares of forests from Carter Holt Harvey, and Matariki Forests, a consortium managed by US-based Rayonier which owns 130,000 hectares of forests, according to Forest Owners Association records.
Demand for logs from China is hurting the local sawmilling industry as forest owners send their logs overseas rather than sell them to local processors, according to the New Zealand Timber Industry Federation.
Some 40 sawmills have closed since 2003, according to the New Zealand Forest Owners Association. In October, the Tachikawa Forest Products sawmill in Rotorua was put in receivership with the loss of 120 jobs.
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Scooped by
Prentiss & Carlisle
February 3, 2014 10:47 AM
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The paper industry has a long and storied history in the Northeastern United States but is being challenged by two of the largest paper making costs, fiber and energy. According to Forest2Market’s Delivered Price Benchmark, the Northeast average hardwood total fiber cost was over $10.00 higher than the average hardwood total fiber cost in the Lake States and over $14.00 higher than the average in the South.
Softwood total fiber costs are also higher in the Northeast than in other areas of the United States. Fourth quarter averages were over $4.00 higher than the Lake States, over $16.00 higher than the South, and over $8.00 higher than the West. The chart below shows how wood costs in the Northeast stack up compared to those in other regions.
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Scooped by
Prentiss & Carlisle
January 1, 2014 12:34 PM
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Memphis-based International Paper Co.’s plan to shut its Courtland, Ala., paper mill next year may impact landowners and businesses across Northeast Mississippi.
Logging jobs may be lost or moved, and timber owners in some counties may find it difficult to market pulpwood at all. Plans for the closure were announced on Sept. 11, and the process was expected to be completed sometime in the first three months of 2014. Two of the mill’s four processors were shut down in November.
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The Courtland plant produces mostly uncoated papers used in business forms, envelopes, labels, copiers, printers along with coated magazine papers.
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That segment of the paper market began declining in 1999 as online publications and electronic billing and filing replace many paper purposes.
James Henderson, associate extension professor at Mississippi State University specializing in forestry management, said the impact on pulpwood markets in this area will be substantial. “I’ve heard that pulpwood prices are already down because of it,” he said.
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Registered Forester Jaysen Hogue is owner of New Albany-based MercyTree Forestry Services, which recently added small-scale logging to its offering of consulting services.
Hogue said the loss of a pulpwood market would be a financial setback for timber owners but that an even bigger financial risk is neglecting to thin trees in a timely manner.
“That hurts your production of sawtimber in the future,” he said. “If you can’t sell the thinnings, about all you can do is to cut them and let them rot away so your remaining trees can grow on up to sawtimber-quality and size.”
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Prentiss & Carlisle
December 31, 2013 8:35 AM
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The new owners of timber plantations established by failed managed investment scheme Great Southern say there's a resurgence in the market for Australian hardwood timber.
Investment group New Forests bought land, formerly owned by Great Southern, in six Australian states back in 20-11 and this week completed the purchase of trees growing on the land.
The group, which manages forestry plantations for investors, including superannuation funds and insurance companies, says they're exploring opportunities in new markets including India, and in new product lines, of timber veneers and bio-fuels.
Managing Director David Brand says the biggest market for Australian hardwood, exports of woodchips to Japan and China, is also picking up thanks to a lower Australian dollar.
"The woodchip market is traded in $US terms, so when we go from $US1.05, down to 89 cents US, that goes right to the bottom line, so it's really led to a resurgence in demand in the whole export market."
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Prentiss & Carlisle
November 8, 2013 9:33 AM
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Sawmills in all producing regions reported rising timber and log prices. “There is no economic sense to timber prices,” said one mill owner in the Upper Midwest. Another in the Carolinas said log prices have increased 30% in the past year, and contacts elsewhere painted similar pictures.
Landowners sitting atop the large Marcellus Shale formation in NY, PA, WV and OH are deriving more income from oil and gas leasing, and have less incentive to sell timber. Some mills have plenty of standing timber purchased, but are struggling to find loggers and trucks to get it to the mill. Moreover, in several areas, poor logging conditions remain a limiting factor. For example, in Tennessee—where the weather has been particularly wet this year—some sawmills are still operating less than 50% of normal hours.
Concentration yards were generally aggressive with lumber purchases, which one sales manager attributed more so to expectations of shortages in December and January than to current demand. That said, most concentration yards did report increasing demand, particularly from export markets. Business for distribution yards—while inconsistent from region to region and week to week—has been trending up.
One distribution yard in the Great Lakes region is having its best year ever, with sales up almost 30% from last year. Residential flooring factories were busy and optimistic about future business notwithstanding seasonal slowdowns in some regions in the months ahead.
About as many flooring plants reported adequate lumber inventories and replacement-only purchasing as reported inadequate supplies. Notably, a large moulding manufacturer indicated business has been “very strong” for the last 60-90 days.
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