Monday, July 23 2018
By Michael D. White, author and freelance writer
No pun intended, the story of America’s timber and logging industry goes deep with roots that weave all the way back to the early 17th Century when the settlers of the early colonies in present-day New England and Virginia built their beleaguered settlements from timber harvested from the vast forest that loomed around them.
Over the past four centuries, amidst economic ups and downs, depressions and recessions, the labor-intensive work of felling trees and fashioning them into the lumber and wood products used across the nation and around the world has grown into a multi-faceted business generating billions of dollars annually from much of the country’s 751 million acres of public- and privately-owned forests.
Currently, paper and wood products exports account for about 15 percent of the industry’s annual total sales. In 2017, the industry’s global exports totaled $30.9 billion, of which $21.4 billion were exports of pulp, paper and packaging materials, while some $9.5 billion were exports of wood products.
The demand for U.S.-produced softwood lumber—a staple of the timber industry nationwide—is at an all-time high as its five end-use categories—residential housing, repair & remodeling, non-residential construction, material handling, and ‘other’—are all expected to see record growth over the next decade.
The forecasted growth surge is due, largely, to the non-residential construction sector which is expected to grow at the fastest rate and increase its share of the total softwood lumber usage at an annual rate of 2.3 percent over the next ten years with U.S. lumber consumption reaching an “all-time high” by 2030, according to ForestEdge and Wood Resources International.
Nationwide, the lumber used in the residential housing sector alone, including repair and remodeling, will continue to account for the almost 70 percent of the end-use market as the construction of new homes across the country is on the rise since the housing bubble burst in 2008, says the Washington state-based industry analyst.
The rosy forecast for the U.S. lumber industry was spurred last November when the U.S. International Trade Commission imposed average import duties of 21 percent on Canadian shipments of timber following a trade dispute that had gone on for years. Canada had, historically, been the largest softwood lumber exporter to the U.S., supplying a significant percentage of softwood lumber to the U.S. market.
While the move supports U.S. lumber producers, it’s problematic for domestic builders, who have depended on suppliers north of the border for more than a quarter of their needs.
For house construction in particular, the U.S. doesn’t have enough supply to meet demand. The National Association of Home Builders (NAHB) in Washington, D.C. estimates the tariffs will increase the price of an average single-family home built in 2018 by $1,360.
Nonetheless, “builder confidence remains strong, despite total housing starts falling 3.7 percent in April,” says NAHB Chief Economist Robert Dietz. “Though multifamily starts declined 11 percent last month, that market is up 10 percent year-to-date, outperforming our forecast. And single-family starts are 8 percent above their year-to-date totals from a year ago.”
Writing in his bi-weekly Eye on the Economy newsletter in May, Dietz stated that “The most serious headwind facing housing markets today, says Dietz, is the escalation of framing lumber prices—up 59 percent since the start of 2017,” alluding to an earlier NAHB surveys that suggested “the price for lumber had overtaken the availability of labor as the primary business challenge for home builders.”
Private ownership accounts for 56 percent of total U.S. forest land, while more than 10 million individual and family landowners own 42 percent of the country’s total. Corporations, partnerships, and Native American tribes own most of the remaining 14 percent.
The Top 5 U.S. lumber producers in 2017 were Weyerhaeuser, Georgia-Pacific, West Fraser, Sierra-Pacific, and Interfor, which, aggregated, produced 12.5 billion board feet of lumber, or almost 40 percent of all U.S. lumber shipments, up 4.9 percent from 2016. Three more U.S. companies reached the one billion board foot mark last year—Canfor, Hampton and the Idaho Forest Group.
That said, though, U.S. softwood lumber suppliers are ratcheting–up operations to meet the shortfall with producers in the U.S. Northeast, Mid-Atlantic and Upper Midwest regions are experiencing an across-the-board upturn in business.
The greatest surge in growth, though, has been in the Southern States, which have positioned themselves as the lowest regional cost supplier of softwood lumber to the U.S. lumber market. Often referred to as the ‘wood basket’ of the country because of their vast timber supply, the Southern states hold some 40 percent of the country’s 521 million acres of timber land.
There are a dozen new sawmill projects planned for the U.S. South. As a result, U.S. lumber production will be expanding and the examples are impressive.
Alabama boasts 23 million acres of timberland, accounting for 69 percent of the state’s total land area with the timber industry pumping more than $21.4 billion annually into its economy. According to industry analysts, nearly $500 million in investments and improvements to its saw mills and wood processing facilities are forecasted by 2019.
The Westervelt Co. has built a new state-of-the-art lumber mill in south Alabama. The facility employs more than 100 workers, has a capacity of producing 250 million feet of softwood lumber annually, and compliments the 130-year old company’s existing lumber facility in Moundville, currently the second-largest southern yellow pine production facility in the U.S.
In the fall of 2016, a new firm—the Two Rivers Lumber Co.—began accepting timber deliveries at its first sawmill. Located near Demopolis, the facility handles up to 150 loads of timber daily and produces about 230 million board feet of Southern Yellow Pine dimensional lumber and market it throughout the U.S.
At the same time, multinational International Paper announced a $300-million investment at its Riverdale Mill in Selma, converting its equipment there to produce high-quality linerboard and containerboard to meet increasing demand from the packaging industry. The renovation will reportedly add 450,000 tons of annual capacity and will be completed by midyear 2019.
In February of this year, the Rex Lumber Company unveiled plans to construct a state-of-the-art lumber manufacturing facility in Alabama’s Pike County, creating more than 110 jobs and providing a significant economic boost to the region’s forest products industry. The company projects the total capital cost of the new sawmill to be $110 million, including startup and working capital. Annual production at the facility, will be a minimum of 240 million board feet.
Elsewhere in the region, in February, Ruston, Louisiana-based Hunt Forest Products began construction on a $115 million lumber mill in Urania, in LaSalle Parish, in a joint venture with Canadian forestry company Tolko Industries. Operations at the new mill are expected to begin in early 2019.
The company said the Urania sawmill will use up to 850,000 tons of wood annually to produce about 200 million board feet of lumber a year. Jobs at the Urania mill will pay an average annual salary of $46,000 plus benefits. Hunt said it will employ 60 people when operations begin, eventually building up to 110 employees.
Tolko holds a 50 percent share in the mill, which will be managed and operated by Hunt. The State of Louisiana is giving the project a forgivable $1 million loan to help cover the costs of building a rail spur for the mill. The project also received workforce training assistance and other tax breaks from the state.
In Tennessee, Escue Wood Treated Products, LLC said in January that it would invest $3.3 million and create 100 new jobs at a new facility in Milan, capable of producing 60 million board feet of treated pine lumber per year for distribution in five states, while New River Hardwoods Inc. officials announced Thursday that the lumber company will invest $3.8 million in its operations in Roan Mountain.
The company, which began operations in 1991, plans to install new equipment and convert its log yard there into a lumber manufacturing facility. New River operates plants in Virginia and North Carolina, as well as Tennessee that produce more than 40 million board feet of high-quality lumber annually.
At the heart of the South’s preeminence in the forestry and timber industry, though, is Georgia with 37 million acres of land area, 24.8 million acres of which is timberland available for commercial use—more than any other state in the nation.
According to the Georgia Forestry Commission, Georgia’s forest industry is the second-largest industry in the state in terms of employment and wages and salaries with forest-related industries injecting a staggering $23.6 billion and 108,112 jobs into the state’s economy, making it Georgia’s second-largest manufacturing employer.
“What’s happened here is success largely based on the back of private investment in the industrial facilities needed to produce soft lumber, pulp and paper,” says Andres Villegas, president and CEO of the Georgia Forest Association in Forsyth, Georgia.
There are, he says, “three ingredients that have built the industry here: a respect for private property rights, expanding markets both in the U.S. and abroad, and a reasonable and sensible pro-business environment that’s allowed the industry to prosper. Those three things have combined to make the industry here a real engine of the state’s economy.”
Underscoring Villegas’ assessment, over the past year, several new projects have been unveiled that are serving to fuel the growth of the state’s burgeoning timber industry.
Last February, industry giant Georgia-Pacific announced it will build a 340,000-square-foot softwood lumber mill in Warrenton, Georgia. Construction of the $135 million technologically-advanced facility is scheduled to begin this summer, with an anticipated startup in spring 2019.The new lumber production facility will replace an older plant and create 30 to 40 additional jobs when operational, bringing the company's workforce in Warren County to approximately 150 people. It will be built on land adjacent to the existing mill, which has been in operation since the early 1970s.
"We have enough property next to our existing mill in Warren County to build a larger facility equipped with the latest in lumber manufacturing technology," said Fritz Mason, vice president and general manager, Georgia-Pacific Lumber.
The new facility will be capable of over three times the output of the current facility, which will remain operational until the new plant is built. Once in production, the new facility will receive approximately 185 truckloads of pine logs a day and produce approximately 350 million board-feet of lumber per year, according to Georgia-Pacific in a February 20 statement.
Georgia-Pacific employs more than 7,200 people at 18 locations in Georgia. Those jobs create an additional 21,440 indirect jobs. Since 2006, the company said it has invested approximately $1.9 billion in additional capital and acquisitions in Georgia.
Villegas credited the economic development efforts of the state government in promoting the state’s burgeoning timber industry, alluding to a key piece of timberland tax reform legislation being touted by Governor Nathan Deal. Considered “a big step” in providing tax equity for the 450,000 private forest landowners across the state. The new law is aimed at creating a more uniform, fair market valuation of timberland for ad valorem taxation purposes. And will be included as a referendum on the ballot in the upcoming November election.
"For more than 100 years, the Georgia Forestry Association has been instrumental in timber tax legislation, which has positioned the state as a global leader in forestry," said Villegas, commenting on the legislation. “Thanks to the leadership of our elected officials and Governor Deal, we can, once again, ensure that our tax policy supports the growth and vitality of our working forests and the communities that depend on them."
According to a report by Georgia Tech’s Enterprise Innovation Institute, Georgia’s forestry industry’s total revenue generated $35 billion and employed nearly 52,000 Georgians in 2016.
“Another way to examine forestry in Georgia is to compare it with the state’s other manufacturing sectors,” the Institute said. “Forestry ranked second in total employment and first in terms of wages and salaries. “Compared to 2015, the industry’s 2016 output grew by eight percent, employment grew by three percent, and wages and salaries increased by five percent. The industry’s increased activity resulted in high net revenues for the state government.”
The Western Perennials—Oregon and Washington
In contrast to the South, the Western states constitutes only 28 percent of the country’s timberland, most of which is controlled by federal and state governments in protected reserves and national parks.
The Oregon timber industry is continuing to see an increase in demand for their products, and experts say that the steady increase is thanks to construction for new homes across the country.
“The state of the industry in Oregon is generally positive,” says Timm Locke, director of forestry products at the Oregon Forestry resources Institute in Portland, Oregon. “It’s not at its peak, but it’s still very strong though the industry has shrunk a bit over time because of consolidation more than anything else.”
Another factor, he says, is the limited supply of timber available from public lands. Unlike its competition on the other side of the country, a majority of the timber in Oregon, and other Western States, grows on public, rather than privately-owned, lands—that is, land owned largely by the federal government. Despite that, the industry directly and indirectly employs more than 61,000 workers statewide from log truck drivers to sawmill equipment operators.
The strength of the industry, says Locke, “is directly related to the strength of the markets, the housing market, which is seeing tremendous growth right now, being the most important one. Other markets, for example, are currently being opened up that have previously been untapped, in commercial construction.”
One such market is the growing demand for cross-laminated timber (CLT), a component of the so-called mass timber industry. Massive cross-laminated timbers, first pioneered in Austria and Germany in the 1990s, are giant beams, panels and walls comprised of multiple layers of cross-laminated timber sheets produced at the same site where the trees were felled.
According to Locke, Oregon is the focal point of the nation’s expanding mass timber industry with more than two dozen structures across the state being built or in the planning stages, using mass timber.
With building codes racing to keep up, CLT has been used to build a five story, 156,000-square-foot credit union headquarters in Hillsboro, the a multi-story Albina Yard office complex in North Portland, and the tallest (to-date) CLT building in the country, the eight-story mixed-use Carbon 12 building in downtown Portland.
The Carbon12 building won’t hold the record for long as the 148-foot tall, 12-story Framework building, also located in Portland, is scheduled for completion sometime this coming winter.
A 110-page study published last year by OregonBEST, a non-profit economic development NGO based in Portland, found Oregon has the potential to create 2,000 to 6,100 direct jobs producing CLT and related mass timber products.
Buildings constructed with CLT, the report found, “provide a dramatically lower carbon footprint than buildings using concrete and steel and cuts cost, mostly because construction takes less time. That cost advantage is projected to grow. The cost of wood as a building material and as the raw material for CLT is expected to stay stable in the near future, while concrete and steel prices are forecast to raise with their relative energy prices and carbon costs."
To the north, the Washington State timber industry brings in over $28 billion in annual sales to both domestic and international buyers and employs over 105,000 workers garnering over $5 billion in wages,
According to the Washington State Department of Commerce, about half of Washington is forested. In the state’s Western half, some three-quarters of the trees are less than a century old and about half are less than 40 years old, the optimal harvest age.
In 2014 (the latest year for which figures are available), more than 3.2 billion board feet of trees were harvested from private, federal and state lands, mostly Douglas-fir and western hemlock, accounting for 13 percent of total U.S. softwood lumber production and seven percent of all plywood production in the country.
In 1971, state law excluded timber from property taxation. In place of a property tax on trees, timber owners pay a five percent excise tax on the stumpage value of their timber when it is harvested.
Ten years later, the Forest Tax was extended to timber harvested from state and federal land, in addition to private land, with the revenue from the timber that’s harvested taxed at five percent—four percent to the county where the harvest occurred and one percent to the state general fund.
The move to relieve the tax burden on one of the state’s primary revenue generators is a natural one for Washington, which has some catching up to do in terms of mass timber adoption when compared to neighboring Oregon. The law, if passed, would make Washington the first state in the country mandating mass timber construction.
In another positive move to close the gap with its southern neighbor, the Washington State Senate recently drafted a bill mandating that all public buildings in the state rising 12 stories or less be built with cross-laminated timber, while Washington Governor Jay Inslee recently signed a new law directing the state’s building code council to “adopt rules for the use of mass timber products for residential and commercial building construction.”
The law allows state and local jurisdictions to begin to ease the use of mass timber into local building and zoning codes, and includes the requirement that any and all rules regulating the use of mass timber products such as CLT by the Washington State Building Code Council “must consider applicable national and international standards” when drafted.
One wonders what Paul Bunyan would have to say.
Bio: Michael D. White is a published author with four non-fiction books and well more than 1,700 by-lined articles on international transportation and trade to his credit.
During his 35 year career as a journalist, White has served in positions from contributor and reporter to managing editor for a number of publications including Global Trade Magazine, the Los Angeles Daily Commercial News, Pacific Shipper, the Los Angeles Business Journal, International Business Magazine, the Long Beach Press-Telegram, Los Angeles Daily News, Pacific Traffic Magazine, and World Trade Magazine.
He has also served as editor of the CalTrade Report and Pacific Coast Trade websites, North America Public and Media Relations Manager for Mitsui O.S.K. Lines, and as a consultant to Pace University’s World Trade Institute and the Austrian Trade Commission.
A veteran of the United States Coast Guard, White has traveled in both Japan and China, and earned a degree in journalism from California State University and a Certificate in International Business from the Japanese Ministry of Trade & Industry’s International Institute for Studies & Training in Tokyo.