Weak Lumber Markets Contribute to Higher Pulpwood Prices

Pulpwood prices in Arkansas, Louisiana and Eastern Texas are rising as the national housing slump drags lumber prices to the basement, an expert in the forest products industry said Tuesday.

Demand for pulp and paper products remains strong, but the supply of wood chips – one of the raw materials used by pulp mills – is dwindling, said Scott Twillmann, senior analyst for industry market information provider Forest2Market. Wood chips are a byproduct of making lumber, and lumber mills have significantly reduced production in the wake of the housing crisis.

Pulp mills typically use a combination of wood chips and pine pulpwood. Recently, pulp mills have been using more and more treelength pulpwood to maintain their levels of production.

“Pulp mills are replacing one source of furnish with another raw material,” Twillmann said. “The lack of chips is putting more pressure on pulpwood resources, causing prices to rise.”

Some mills have resorted to purchasing wood chips from hundreds of miles away. Others have used more expensive pine logs that would otherwise have been used for lumber.

“Pulp mills are spending a lot of money to get the raw materials they need to keep running. Shutting a pulp mill down for any length of time is not an option.” Twillmann said.

Portions of Arkansas, Louisiana and Texas have also experienced higher than normal rainfall amounts over the past 12 months. Wet weather makes logging conditions difficult and further increases prices by restricting supply.

Lumber markets are expected to remain weak for at least another year until the housing market begins to recover. This will cause pulpwood prices in the region to remain higher than usual on average.

The forest products industry employs more than 110,000 people in Arkansas, Louisiana and Texas with a combined payroll of more than $5.8 billion.