Forest Products Markets
Paper and Packaging
Overall demand for paper and paperboard is expected to rise at an annual average rate of 2.4 percent. However, demand for both newsprint and printing and writing papers are expected to decline at a rate of five and three percent per year, respectively.
To counter the effects of digital communications and popular messages that equate the use of paper with environmental recklessness, the paper and packaging industry is successfully pursuing efforts to educate the public about the positive renewable and environmental qualities of paper products. Two Sides is one such group that has successfully challenged misleading claims related to paper use.
On September 16, the USDA published the second rule for its proposed paper check-off. The USDA will now conduct a referendum from October 28 to November 8 before a final rule is published in the Federal Register. The Paper Check-off will encourage demand across four industry segments: printing and writing paper, Kraft packaging paper, containerboard and paperboard.
Hardwood and Softwood Lumber
Markets for lumber and building materials have recently begun to recover from the housing market crash and subsequent recession, and the overall outlook for both domestic and foreign markets is relatively positive. As demand ramps up, however, capacity is a significant concern.
A number of mills were forced to close as demand for wood products all but stopped after 2008. In addition, existing loggers left the industry while would-be loggers simply did not enter the market. According to the report, since 2009, rising operating expenses associated with high fuel and equipment costs and a lack of long-term contracts has reduced logging capacity by 25 percent.
A key opportunity for this industry segment is leveraging the mounting consensus that wood is a preferable building material and increasing its use in green building systems. The LEED standard presently recognizes only the Forest Stewardship Council’s certification program, effectively leaving out wood products certified by comparable programs offered by the Sustainable Forestry Initiative and American Tree Farm System. Encouraging architects and construction industry participants to learn about the importance of wood as a green building material is also an area of opportunity. (Learn more about both at Are Wood Skyscrapers the Solution to Our Climate and Housing Crises?).
To boost awareness among consumers, both industry segments have pursued check-offs. The hardwood industry segment has taken steps toward a hardwood check-off program, though it has not made recent strides forward. A softwood lumber check-off program was established in 2011, and has since funded programs such as the American Wood Council and WoodWorks.
Bioenergy and Biofuels
The report states that in 2006, worldwide wood pellet production ranged between six and seven million tons. By 2010, production had approximately doubled to 13.6 million tons. Primarily because of increased wood pellet manufacturing capacity in the U.S. South, Forest2Market expects demand for pine pulpwood to increase by 17 percent and demand for hardwood pulpwood to increase by nine percent between 2013 and 2018.
Historically, the bioenergy market has relied on raw materials that are byproducts of the paper and packaging or lumber sectors. Large-scale mills opened in response to a rapid rise in demand for industrial wood pellets have caused thinnings and small-diameter trees – a standard source of supply for pulpwood and Oriented Strand Board (OSB) markets – to go towards bioenergy needs. (Learn more about raw material supply within these industry segments at Pellet Manufacturers Face Increasing Competition from OSB Mills).
As European demand for wood pellets - driven by government subsidies - continues to rise, questions associated with market stability, the sustainability of U.S. forests and carbon accounting for wood biomass will be an ongoing part of the discussion pertaining to this emerging industry.
Supply Chain & Forest Policy Issues
A strong and reliable supply chain is critical to the success of all segments of the forest products industry. Despite forest growth rates that outnumber harvests in the United States (and across North America as a whole), changes in land ownership, coupled with workforce and infrastructure reductions, have contributed to an overall decline in the availability of wood raw materials.
One way to ensure the longevity of the supply chain is through the establishment of a consistent and streamlined regulatory environment. Today’s environment is subject to substantial design and implementation costs as well as uncertainty surrounding the inordinate length of time it takes to establish and finalize regulations.
For example, the report notes that over the past 30 years, manufacturers were subject to more than 2,000 regulations. Manufacturing output over the next decade is expected to be six percent less than expected as a result of just those regulations passed between 1993 and 2011.
Like forest products manufacturers, landowners are also subject to regulations that do not always provide benefits that outweigh the burdens of implementation. Certification programs are one such example. Taxes, lack of access to forest management options and diminished support for traditional and new forest products markets also incent forestland owners to take advantage of other financial opportunities such as selling land to developers.
In a report on the future of America’s forests, the United States Forest Service estimates over the next 50 years the lower 48 states will lose between 16-34 million acres of forestland due to population growth, urbanization and other land use changes. This loss could significantly impact water quality, wildlife habitats and other benefits large forested areas provide. Encouraging active forest management and developing forest communities are ways to engage landowners. These activities contribute to the development of an intrinsic sense of value that outweighs the strictly financial benefits of selling land for development.
Market opportunity is another way to create value for landowners. The Forest Products Fairness Act is one effort aimed to open markets for traditional wood and forest products by including them in the BioPreferred Program. A part of the 2002 Farm Bill, the BioPreferred Program recognizes products made up with as little as 25% biobased content yet ignores wood and paper products that are 100% biobased. A version of the 2013 Farm bill passed by the Senate on June 18 included provisions of the Forest Products Fairness Act. However, it is unlikely that the House and the Senate will come to terms over their differing versions before the bill expires at the end of the month.
Other threats to healthy forests – among them wildfire, invasive species and climate change – require collaboration among industry participants and the federal government to achieve scalable results. The report suggests that creating local, market-based systems for low-value wood has the greatest potential to provide sustainable and on-going solutions to these threats.
Although improved efforts to expand markets for both traditional and new forest products and an improved policy environment are a good start, ultimately, the long-term health and sustainability of forests may just rest on cooperation throughout the forest products industry.
On September 26 I sent you a comment on the newsletter published called what lies ahead for the US forest industries. I opened a couple of times to see the comments that were publicated but the place is vacant and does not have any comments. Please let me know if my comment will be published or not. If you have decided not to publish it I WOULD WELCOME THE REASON FOR THIS.
M.Sc. Chemical Engineering
We have not received the aforementioned comment. Please feel free to resubmit.
AS F2M has reported in the past, there is a looming shortage of logging capacity to meet the forecasted demand for roundwood across the US.
The latest report released by the Wood Supply Research Institute only verifies this issue. It is expected, according to the report, that capital investment in harvesting infrastructure will need to increase from 0.9 Billion per year to 1.65 Billion per year over the next 4 years.
If the industry as a whole is going to take advantage of the resurgence in the forest products markets, all sectors need to be taking steps now to ensure that there will be sufficient timber harvesting capacity to meet the projected roundwood demand so that we all do not miss out on this opportunity.
It is time for both landowners and mills alike to share some of the wealth that will come with rebounding markets with the suppliers.