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----------------------------------------------------------{ June 25, 2008 }Raw Material Availability and Industry Trends by Region
By Tim Sydor, Ph.D. (tsydor@forisk.com) and Brooks Mendell, Ph.D. (bmendell@forisk.com)
Forisk Consulting LLC (www.forisk.com)
Timberlands in the United States can be grouped into four distinct regions: Pacific Northwest (Oregon and Washington); Midwest, or Lake States (Minnesota, Wisconsin and Michigan); Northeast (mostly Maine, Vermont and New York); and South (Virginia to East Texas) (Figure 1).
Figure 1. US Timberland Regions
![USmapForestlandsmall[1].JPG](http://www.amerimulch.com/resources/art/USmapForestlandsmall%5B1%5D.JPG)
The wood chips-mulch-waste products are primarily a by-product of one industry: forest products manufacturing. The viability of the industry depends on the availability of forest resources and mills.
Pacific Northwest Region
The Pacific Northwest region is characterized by a large proportion of public (mostly federal) timberlands. During the late 1990s, harvests on public timberlands declined due to federal policy changes. In the early 2000s, harvests increased slightly, mainly on private timberlands, to satisfy local demand. Between 2000 and 2005 softwood lumber capacity increased 25% in Washington and 17% in Oregon, by closing old mills and realizing economies of scale. In addition, new mills and biomass energy generating facilities (e.g. Lyons, OR) continue to expand, aiming to eliminate biomass fuel in the forests and protect against forest fires.
Lumber imports from Canada declined 10% since 2005. With respect to exports, primary markets are Japan and Korea. Chip exports to Japan are down by 84% and lumber 90% since 1997. Recently, chips and soft lumber exports increased to Korea, but the scale does not compare to that of Japan.
Midwest – Lake States Region
The region is a smaller industrial market. Typical lumber mills consume about one-quarter the wood raw material relative to mills in the South (70,000 tons/year versus ~300,000 tons/year). The region has a large proportion of public (mostly state) owned timberlands. Potlatch is the largest industrial lumber producer.
Softwood lumber capacity in the region has increased overall. Logging residues were flat over the past 10 years and mill residues have increased in 2007 since declining slightly in 2002.
Northeast Region
The Northeast is the only region with declining softwood mill capacities. Leading the Northeast region in timber production, Maine had strong, growing demand for sawlogs between 2001and 2004. The demand for pulpwood, both hardwood and softwood, in the state was declining, despite a temporary increase in demand for hardwoods in 2004. Demand for hardwood, both pulpwood and softwood, declined in 2005.
Renewable power generators represent a growing market for forest biomass in the Northeast. A key driver of this market is legislation passed at the state level in Connecticut, Maine, Massachusetts and Rhode Island. It requires electricity providers to include renewable energy as part of their total energy supplies. This legislation has encouraged investments in additional biomass-fired power generation. For example, operations belonging to Boralex in the Northeast now use 1.6 million tons of wood residues per year.
US South Region – South Atlantic and South Central markets
The US South is the primary wood growing, lumber and wood products producing region in the country. It features one of the highest concentrations of manufacturing facilities and pine plantations in the world. The most active harvesting markets are concentrated in the tri-state area of North Louisiana-East Texas-South Arkansas, West Alabama -East Mississippi and Coastal Plains of Georgia, South and North Carolinas. These active markets correspond well to areas with high concentrations of softwood lumber facilities (Figure 2).
Figure 2. Frequency of Sawtimber Consumers – US South
South Atlantic Market
South-Atlantic market features increasing capacity of softwood lumber mills, accompanied by a decline in the number of mills. Logging residues declined slightly, but milling residues showed significant recovery since the lows of 2002.
South Atlantic has strong hardwood (West NC and SC) and softwood (GA, Coastal NC, SC) local markets. The market also boasts a strong export market to Europe and numerous development opportunities along the I-85 and I-95 corridors in Northern Georgia and along the Florida Coast. In addition, due to well-established pine plantation management, the market attracts attention from investors in renewable energy generating facilities.
South-Central Market
Softwood lumber capacity in the South-Central market declined in 2002, but quickly recovered by 2005. The number of softwood lumber mills declined significantly between 2000 and 2005. Mill residues in the market increased over the past 10 years, while logging residue declined since 2002.
South-Central area features a strong and diversified timber market. South Alabama is historically the strongest pine grade and pulpwood market in the South. The market also has many export and import facilities to Europe and from South America.
Unlike the South-Atlantic market, the market has lower potential for development, but still has a strong resource base for renewable energy generation. Five wood-pellet producing facilities have been announced in Arkansas and one in Alabama over the past 12 month. In addition, two cellulosic ethanol facilities have been announced in the area, one in Alabama and another in Mississippi.
Conclusions
The forest industry in the US is robust. Increasing lumber capacities and TIMO timberland management indicate an abundance of timber resources for other timber-dependent industries. However, developments within the forest products industry matter to those dependent on its by-products. For example, OSB took market share from plywood in 2006 in the South, currently holding ~ 55% of total panel production. OSB facilities use chips and pulpwood and thus compete with chip mills, pulpmills and other users. OSB facilities also produce less residue than plywood mills, thus significantly changing the timber by-product dynamics.
Numerous wood pellet mills and cellulosic ethanol facilities pose a direct thread to other users of wood by-products. These facilities are often armed with federal and/or state grants and thus can compete favorably for raw materials.
Bottom line: wood resources are abundant in the US, but demand for wood by-products is growing from within the forest products industry and from other sources. This will likely result in increased competition and higher prices for wood residues.
Data Sources
• International Wood Fiber Report, RISI
• Forest Inventory and Analysis, USDA Forest Service, http://www.fia.fs.fed.us/
• Spelter, H., Alderman, M. 2005. Profile 2005: Softwood sawmills in the United States and Canada, USDA
• Timber Mart-South Quarterly Journal, Norris Foundation, http://www.tmart-south.com/tmart/
• Timber Product Output, USDA Forest Service, http://ncrs2.fs.fed.us/4801/fiadb/rpa_tpo/wc_rpa_tpo.ASP
• Wood Demand Report, Forisk Consulting LLC, http://www.forisk.com
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