Biomass, pulpwood and sawlogs make up almost all of the wood harvested in the Northeast. Each is important to the sustainability of the region’s forest industry, but due to the current state of the economy are facing a handful of economic challenges as well as a few opportunities.
Timber and Lumber
Housing starts, a reliable indicator of market health, enjoyed a sustainable climb after the housing-led recession. The US housing starts surge of the last five years was met with a dramatic collapse when the COVID-19 pandemic hit.
With that said, lumber prices have held reasonably steady. This is due to mills in the southeast, pacific northwest and Canada electing to reduce capacity and therefore limit supply to reflect the decrease in demand. In addition, the forest industry was largely deemed essential across the US throughout the pandemic, and in many places building has continued. Even with the drop in housing starts and home sales slowing nationally, home repair and remodeling has increased significantly. Home centers like Lowe’s and Home Depot have reported record demand. Most of that demand is from small quantity purchases, but these “little sales” add up.
Operation of Sawmills
Most Northeast mills – although not all – have been operating close to a “normal capacity” for the spring and mud season. Inventory of logs and sawn lumber has grown to record levels, which could be a sign of tough times ahead. Adding to this surplus may be the stall in building permits across the Northeast, as towns and cities have been operating at reduced capacity due to COVID-19. A bright spot for hardwood mills is that export markets have recovered somewhat as workers return to manufacturing businesses in places like Asia.
Through the spring and to the present, log prices have softened partly from normal spring and mud season conditions and partly from pandemic effects. Overall, the summer will tell us more about the solid wood market.
Anyone that purchases a cylinder (log) and sells a rectangle (board) needs a market for everything that’s not in that rectangle. The softwood sawmills’ markets for this residue have shrunk, and this is a dangerous sign for a healthy industry.
The restart of Old Town, Maine’s mill has been some welcome news, but has been offset by the Jay, Maine explosion that decimated the Androscoggin Mill’s pulp processing capacity.
Cross-laminated timber (CLT) is a market that has lots of unrealized potential in the Northeast. These large-scale, prefabricated panels can be used for construction and are favorable due to their solid engineering and strong design while also being light weight.
While there is promise for this resource and market, ground has not yet been broken on a CLT manufacturing facility in the region. Given its high potential, future plants – if built in the region – are likely to use spruce/fir lumber. Long term, this could also provide a market for hemlock and potentially white pine, as promising research out of UMass-Amherst suggests.
Energy from Biomass
In short, for the foreseeable future, it appears that biomass electricity will not be viable without public support. This conclusion comes from a combination of the cost to pay staff and facility operations, the fuel per megawatt-hour to run these facilities, and more. Renewable Energy Certificates are available for some facilities and, for those that qualify, may be a key piece of their operations. However, once offshore wind and other lower-cost renewables establish a foothold in the region, the biomass electricity industry will largely be uneconomical.
In addition to wood being used for electricity, it’s energy can also be used for heat. There are a number of biomass heating projects, which have traditionally competed very well in the Northeast and rural areas that rely on oil for heating. However, the return of low oil prices may spell limited near-term growth for wood heat. These facilities have been bolstered by the existence of Thermal Renewable Energy Certificates (T-RECs) in New Hampshire, Massachusetts and soon Maine for wood heating which can provide significant money to support these operations.
Pulp and Paper
The health of pulp and paper is very mill-specific. The product mix of these mills has shown to be critical during COVID-19 due to:
- Tissue, paper towels and wipes in very high demand
- Some specialties (personal protective equipment, medical uses, etc.) are very strong
- Increased packaging demand as large distribution companies like Amazon, UPS and FedEx report increased use of their delivery services
- A drop in demand for printing and writing paper due to closure of schools and offices and halted brochure use from lack of traveling consumers
Reentry brings uncertainty for the use of paper
- How will companies integrate work-from-home be integrated into companies and what does that mean for paper demand?
- Will reliance on online shopping and grocery delivery become the norm?
- What market shifts will be temporary, and which ones structural?
What we do know is the current recession is bigger than anyone expected, and the economic reopening has many unanswered questions. Ultimately, the solution relies on millions of individual decisions to lead what the “new normal” looks like. The actions of the Northeast’s high-density populations in cities and suburbs will be the key to getting the economy back on its feet.
An emerging industry is a new wood-based insulation facility under construction in Madison, Maine. This plant expects to begin commercial production in 2021 and will use softwood chips to create home wood fiber insulation for the residential and light commercial construction market.
Companies have been looking to across the Northeast for new opportunities in biofuels, biochemicals, cross-laminated timber, Nano-cellulose and more. Furthermore, an effort in Maine and similar cooperative project New Hampshire, Vermont and New York are looking to recruit new wood-use facilities.
Final thoughts on the Northeast Forest Industry
For better or worse, the forest industry is accustomed to boom-and-bust cycles and is experienced in handling them. Northeast markets are incredibly well-positioned compared to other parts of the country and the forest resources and supply infrastructure is incomparable to other regions. In addition, the region’s consumers live in close proximity to Northeast timber markets.
This time presents an opportunity for the forest industry to develop new technology and test product innovation that can attract new markets while maintaining traditional markets.