Bioeconomy, Build It With Wood, Climate-Smart Commodities

Shifting Markets: Challenge or Opportunity?

Nov. 30, 2016
New England Forestry Foundation

New England’s low-grade wood markets are rapidly declining (see articles from the Kennebec JournalVermont Digger) and mill closures are making headlines. NEFF asked Eric Kingsley of Innovative Natural Resource Solutions LLC to report on this issue to find out what shifting markets could mean for landowners and forest management. In the following article, Kingsley sheds light on the opportunities and challenges that face landowners and the forest products industry throughout New England.

Kari Post Photography

In a region with an abundance of low-grade wood in the forest, wood typically used for pulpwood or biomass energy, we are quickly losing markets. In the last two-and-a-half years, New England has lost markets for almost four million tons of wood. Put into visual terms, this represents markets for over 350 truckloads of wood every day, all year.

Almost all of the lost markets have been in Maine, and pulp mills represent the lion’s share of the loss. Pulp mills in East Millinocket and Bucksport have been closed and dismantled. In Lincoln, Old Town, and soon to be Madison, mills sit idle, with little expectation that they will ever operate again. Biomass electric plants in West Enfield and Jonesboro closed after losing access to valuable operating incentives provided through the Massachusetts Renewable Energy Portfolio Standard.

Of course, it’s not all bad news. While the industry is going through some structural changes, new investments and business strategies are allowing remaining mills to position themselves for the future. In Woodland, an investment of $150 million is bringing tissue manufacturing to that location, transitioning the mill away from its historic “pulp only” status. The mill in Rumford, now owned by Catalyst, has turned the flexibility of its paper machines into an asset, and is looking to produce paper that best fits its customers’ needs. Down the river in Jay, Verso has cut some production and is moving through bankruptcy, but it appears that those changes will position their Androscoggin mill for a brighter future. At SAPPI’s mill in Skowhegan, New England’s largest wood user continues to produce quality product and is continually investing in improved efficiency.

While mill closures and new investments grab the headlines, the critical question of “What does this mean for the forests and forestry in the region?” often doesn’t get enough attention.

Markets for low-grade wood are important for a number of reasons, and the loss of so many markets –so quickly – will impact landowners, loggers, and forest management options throughout New England.

First, it’s a hit to the wallet. For many landowners, this isn’t brutal – most family forest owners make their money selling sawlogs for lumber, not pulpwood and biomass. For example, recently in New Hampshire, low-grade wood represented 74% of the volume harvested statewide, but only 8% of the timber price was paid to landowners. Of course, for loggers and truckers further down the supply chain, this loss of volume means loss of revenue and opportunity.

More importantly to the landowner, the loss of markets is a loss of options. Foresters often tell me that markets represent “tools in a toolbox.” Having a toolbox with fewer tools means fewer forest management opportunities. Markets for low-grade wood provide opportunities for the harvest of lesser-quality trees, allowing the remaining higher quality trees to grow more rapidly and achieve a higher value as sawlogs.

Of course, it is easy and natural to focus on what has been lost, forgetting that a large number of markets remain. Paper mills in Maine and New York buy wood from across New England. The region has a number of wood pellet producers, and though they have been challenged by a warm winter and low oil prices, they remain a long-term option to heat our homes and businesses with locally grown, locally produced fuel. Biomass electric plants, as well as biomass use at some forest industries, provide markets for landowners in nearly every New England state.

While changing and shrinking markets will impact all of New England, the greatest impact will be to specific, local areas. While a mill may be located in Maine, pulpwood comes from every New England state and from nearby Canadian provinces. With some mills now gone, the remaining mills are able to get more of their wood closer to their operation. This is good for a number of reasons, but a challenge for those on the economic edge of supply to a facility. Distant wood is expensive wood, and gets cut off from supply chains first. Landowners in southern New England, parts of Vermont and New Hampshire, and Maine’s Penobscot River valley may find themselves scrambling to access markets that were reliable just a year ago.

Mills also use specific species, and the recent round of mill closures and reductions has hit softwoods particularly hard. Landowners with an abundance of pine, hemlock, spruce, and fir pulpwood may find themselves with limited markets. When markets for softwood pulpwood are available, landowners should recognize that they won’t be getting paid what they would have a few short years ago.

Dramatic market changes can be disconcerting, but they aren’t the end of the world. In many parts of New England, a range of markets–sawmills, pulp and paper mills, energy facilities, and more–are available to landowners. They have changed, and will continue to shift over time. What is important is landowners, foresters, and loggers utilize those markets that are accessible to continue practicing forestry, and the forests continue to grow a range of species and products. The forest industry and the region are full of entrepreneurs, and the loss of markets should provide opportunities for new ventures to be pursued, and new products developed that fit the resource and the market.