Pulp And Paper Caps Another Strong Year; Looks To 2013 For A Repeat Performance

The U.S. pulp and paper industry, a mainstay market for timber growers, turned in another strong year in 2012 with prospects good for a repeat performance in 2013.

A survey by F&W Forestry Services of financial reports of eight major publicly-owed pulp and paper corporations showed sales of a wide variety of pulpwood-based products at home and abroad remained strong in 2012 but with a few signs of slowing toward year end.

The mood expressed by company CEOs in reports to shareholders and the financial community was generally upbeat with a bit more caution than in recent years because of economic unease in the U.S. and uncertainties in Europe and China.  The U.S. and Canada are big exporters of wood pulp and paper products.

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Strong Rebound In New Home Construction Cause For Excitement By Sawtimber Growers

The impressive increase in new home construction that began in the latter part of 2012 may bring stronger demand and higher prices for growers of large, high-quality trees sought by sawmills for production of lumber.

Marshall Thomas, president of F&W Forestry Services, a leading U.S. forestry management and consulting firm, reports in his company’s newsletter — the F&W Forestry Report — that new housing starts in December were up 32 percent from last January 2012 and a “whopping” 77 percent above December 2010.  “Those are the kind of numbers that should get a tree grower excited,” Thomas wrote.

“It’s not unreasonable to believe that we are at least at the bottom of the latest housing cycle and things are about to get better for sawtimber growers,” Thomas said.

Thomas also reports on timber prices and markets across F&W’s service areas encompassing much of the forested areas in the U.S.  F&W also operates in South America.

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Southern Pine Belt Timber Prices and Markets Could See Winter Boom If Wet Conditions Prevail

Following one of the wettest summers on record, timber markets across the southern pine belt appear headed into a promising winter season with prospects of rising demand and prices for tree growers.  That’s the outlook seen by Marshall Thomas, president of one of the nation’s largest forestry consulting and marketing firms, F&W Forestry Services, Inc., based in Albany, Ga.

Writing in his firm’s fall newsletter, F&W Forestry Report, Thomas said some timber products—notably pine pulpwood and hardwood sawtimber and pulpwood—are already reflecting generally higher wet weather price and demand patterns.  He thinks this is likely to extend to larger, lumber-sized pine timber if even normal wet rainfall patterns prevail in he coming winter.

“All in all, timber markets look positive as we move into the typical fall dry season with more ground water than we’ve had in years. The creeks and associated wetlands held water during the summer. While they are drying out some now, most foresters believe that even normal rainfall this winter will create some real issues with logging and make all-weather logging sites very valuable—something we have already seen in the rain-soaked eastern U.S. this summer.”

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Alabama Looses Big Paper Mill, But Lumber Mill to Reopen

The state of Alabama is seeing both sides of how changes in the U.S. economy are affecting the forest products industry in the U.S.

In near back-to-back announcements, International Paper Co. said it is closing a big pulp and paper mill in north Alabama due to declining demand for certain types of paper products while Weyerhaeuser Company said it would reopen a shuttered lumber mill in the southern part of the state because of reviving home construction.

IP’s paper mill in Courtland will be shut-down in stages to be completed by next March, resulting in the loss of 1,100 jobs and a market for timber for landowners and loggers in northern Alabama and adjoining areas of Tennessee. Weyerhaeuser’s lumber mill to be reopened is in Evergreen in the southern part of Alabama, which has been closed for four years due to the decline in demand for engineered wood products during the prolonged housing slump.

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U.S. Environmental Groups Form Coalition to Oppose U.S. Wood Pellet Exports to Europe

Some 75 U.S. environmental groups led by the Natural Resources Defense Council (NRDC) and the more militant Dogwood Alliance have mounted an all-out campaign against exports of U.S. wood pellets to Europe to reduce air pollution from coal-fired electricity generation plants.

The environmental battle cry, as voiced by the Dogwood Alliance, is that “European utility companies are driving the destruction of Southern forests in the name of ‘renewable energy’.”

The environmental groups have been fired up by the dramatic growth over the past five years of wood pellet production primarily in the U.S. South largely for shipment to the European Union countries that are under mandate to cut carbon emissions by 20 percent by 2020 by reducing coal consumption.  The pellet boom has resulted in the establishment of 68 plants, in operation or planned, from Virginia to Texas, according to a forestry research source.

The environmental groups are particularly agitated that most of the wood being converted into pellets is coming from whole trees rather than from woody biomass such as timber harvest residues, including tops and branches.

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Southern Pulp Mills Increase Use of Whole Trees as Opposed to Wood Residues in Pulping Process

Southern pulp mills are using more logs and less wood residues to make paper and packaging products—and it’s not entirely due to the slump in home construction.

According to a report by the U.S. Forest Service, the industry’s 81 mills in the Southern region consumed almost 170 million tons of fiber from whole trees and residues mostly from sawmills in 2011, the latest data available.  Of that total, 82 percent was from “roundwood,” or whole trees, and 18 percent was from wood residues.

By comparison, the industry in 2002 used a total of 167.7 million tons of wood fiber from both sources, of which 68.6 percent was in the form of whole trees and 31.4 percent was from wood residues.  However, in subsequent years before the housing bust in 2006, the proportion of trees used by the industry showed an increased relative to residues.

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U.S. Supreme Court Reverses Oregon Decision That Could Have Required Logging Road Permits

In a seven-to-one decision, the U.S. Supreme Court has overturned an Oregon federal appellate court ruling that could have required EPA permits for forest logging roads on grounds they are connected to industrial stream pollution.

The landmark decision by the nation’s highest court gave high marks to state-administered Best Management Practices (BMP) as an effective means of protecting the nation’s water and forest resources, citing Oregon as an example.

“The EPA’s decision (that forest logging roads don’t require permits) exists against a background of state regulation with respect to storm water runoff,” the Supreme Court decision said.  “The State of Oregon has made an extensive effort to develop a comprehensive set of best practices to manage storm water runoff from logging roads…Indeed, Congress has given express instructions to the EPA to work ‘in consultation with state and local officials’ to alleviate storm water pollution by developing the precise best management practices Oregon has established here.”

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U.S. Paper Industry Hits Mid-Year Stride After Beginning 2013 On Sluggish Note

The U.S. pulp, paper, and packaging industry—a mainstay market for tree growers—was running at a vigorous clip at mid-2013 after getting off to a somewhat shaky start at the beginning of 2013. This is good news for tree growers who have experienced relatively good markets and strong demand for pulpwood during a prolonged period of depressed markets and prices for larger, lumber-sized trees during the long slump in new home construction.

According to the Institute of Supply Management’s highly regarded survey of U.S. manufacturing activity, the paper industry was in neutral in January—showing neither growth nor contraction. But by February, it had snapped back into a growth mode where it has since remained, at least through June. In the ISM’s June industrial ranking, paper manufacturing was third among all U.S. industries in growth, with new orders up, customer inventories low, production expanding, and new export orders rising.

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Bi-Partisan Legislation Introduced In Congress Seeks End To Litigation Over Forest Road Permits

A large bi-partisan group of U.S. senators and representatives has introduced legislation in both houses of Congress seeking to block further court efforts by environmental groups to get around a U.S. Supreme Court decision holding that forest logging roads do not require EPA permits. The roads legislation was included in a new version of the Farm Bill without food stamps that passed the House on July 11th with all Republican votes. The forest roads legislation would write into law rules the Environmental Protection Agency has followed for 37 years that storm water run-off from forest roads is not considered a potential source of stream pollution and thereby does not require permits under the Clean Water Act. That position was essentially upheld by the Supreme Court in a seven-to-one decision in March, but the environmental group that brought the original lawsuit is attempting to get around the high court ruling through further litigation. Sponsors hope to pass the measure on its own merits or as an amendment to other legislation, such as the Farm Bill. However, the Farm Bill as passed by the House has a highly uncertain future. (This article includes developments that occurred after the print edition of the F&W Forestry Report went to press.)

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Southern Pine Timber Prices Eased In Second Quarter But Outlook Appears Encouraging For Tree Growers

Southern pine prices received by tree growers eased modestly in the second quarter of 2013 but continued to show strength over the same period a year ago as home construction continued a slow recovery, the head of one of the nation’s largest forestry management firms reports. Marshall Thomas, president of F&W Forestry Services that operates across the southern pine belt as well as the central and northeast forested regions of the U.S., said the decline in prices for pine timber on the stump would likely be short-lived as extremely wet weather spread over the region in early summer, dampening supply. “All in all it is a good time to be a timber owner in the South—housing is picking up and we seem to be back in a rainy cycle,” Thomas writes in the summer edition of his firm’s newsletter, The F&W Forestry Report.

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