The South is Growing Again
All (Timber) Roads Lead to the Southeast
By Patty Deutsche
Winter 2022
When it comes to timber, demand far outweighs supply. It’s a classic example of economic theory. Economist Adam Smith referred to it as the “invisible hand” that naturally guides the economy. But in the world in which we operate, global trends are impacting the fact that all the timber roads are now leading to the Southeast. And that’s good news for us in Georgia as constraints are limiting British Columbia’s lumber output. We have the timber resources to expand. Our lumber producers are competitive. Investments are being made here and we have solid management practices. All of which leads to a shift: from timber supplies on the West Coast and in British Columbia to the rising South. The Southeast is positioned well to take advantage of the increased demand.
GFC Bleckley/Pulaski Chief Ranger David Brown discusses outdoor burn notification changes with landowner George Grimsley in Hawkinsville, GA.
British Columbia (BC), long a primary supplier of softwood lumber, experienced a beetle infestation in the late 1990s. Though supply increased in the 2000s as they tried to use downed trees, the result is an inability to produce lumber at the same level as in the past.
In fact, the Canadian province has gone from supplying 30% of North America’s lumber to just 16%. And there is an additional threat as the U.S. prepares to double a tariff on Canadian softwood.
The chart at left shows not only how the lumber capacity has declined in BC, but also how the annual allowable cut is lower than in years past. Production is expected to rise slightly, but is still much lower than previous production years.
Not only is production significantly lower, but Canada’s ability to increase harvest and production is limited, as illustrated in the chart above. Alberta is already harvesting near their limit. The other provinces have room to expand harvests but will not be able to make up for the declines in British Columbia. According to Wood Resources International, a reduction in the annual allowable cut in British Columbia has reduced production volumes in that region by over a third in just five years.
The result is that Western Canadian companies are making massive investments in the South now. Reports show 25-30% of the mills are owned by these Western Canadian companies. Companies like Canfor Corp., Interfor Corp and West Fraser Timber Company are taking advantage of the South’s lumber capacity, competitive pricing and better margins.
“We have already seen remarkable growth in the South’s forest product sector, and given the region’s supply of well-managed softwood timber, it remains well-positioned to take advantage of increasing demand in both domestic and international markets.”
– Rocky Goodnow, VP, Timber, Forest Economic Advisors
Photo Credit: Stephen B. Morton
What trends are impacting the shift to the South?
In addition to the difficulties being faced by BC production, the West Coast (California, Oregon, Washington as well as BC) has troubles of a completely different nature. From drought conditions to environmental regulations that result in poor forest management practices to the seemingly annual wildfire season, lumber supply is diminishing.
Wildfires
CalFire reports that in 2021 (as of Nov. 8), 8,367 fires have burned 3,083,507 acres of land. That is on top of the 8,258 fires in 2020 that burned 4,332,960 acres. (This is combined CalFire and U.S. Forest Service data. www.fire.ca.gov/stats-events) The fires not only diminished supply, they impacted the ability to move lumber as widespread fires caused transportation backlogs.
Housing
Fueling the current high demand for lumber, of course, is the shortage of housing across the U.S. Home sales may have dipped slightly this fall, but new home construction continues to be strong. People want new houses, which requires lumber. And for those who can’t afford to build, there is an unprecedented number of remodeling projects taking place, which also requires lumber. There is such a shortage of housing across the country that the supply of lumber is unlikely to catch up to the demand.
Global Markets
Historically, the West Coast exported logs to Japan and China. But with the diminishing supplies from the West Coast, there has been an increase of logs, specifically Southern Yellow Pine (SYP) being exported from the South. A short dip in 2020 was the result of trade tariffs, but those numbers are once again increasing.
The South is primed for growth for several reasons. It has the resources across the board:
● Inventory – the South has the capacity for demand
● Investment – there is global interest in building mills here due to prices
● Policies – forest management policies are better than in the West thanks to private land ownership rather than public lands
● Weather – steady rainfall, for example, helps boost yields and produces healthier seedlings
● Efficient mills – lumber prices are low, making for higher margins
In addition to the difficulties being faced by BC production, the West Coast (California, Oregon, Washington as well as BC) has troubles of a completely different nature. From drought conditions to environmental regulations that result in poor forest management practices to the seemingly annual wildfire season, lumber supply is diminishing.
Wildfires
CalFire reports that in 2021 (as of Nov. 8), 8,367 fires have burned 3,083,507 acres of land. That is on top of the 8,258 fires in 2020 that burned 4,332,960 acres. (This is combined CalFire and U.S. Forest Service data. www.fire.ca.gov/stats-events) The fires not only diminished supply, they impacted the ability to move lumber as widespread fires caused transportation backlogs.
Housing
Fueling the current high demand for lumber, of course, is the shortage of housing across the U.S. Home sales may have dipped slightly this fall, but new home construction continues to be strong. People want new houses, which requires lumber. And for those who can’t afford to build, there is an unprecedented number of remodeling projects taking place, which also requires lumber. There is such a shortage of housing across the country that the supply of lumber is unlikely to catch up to the demand.
Global Markets
Historically, the West Coast exported logs to Japan and China. But with the diminishing supplies from the West Coast, there has been an increase of logs, specifically Southern Yellow Pine (SYP) being exported from the South. A short dip in 2020 was the result of trade tariffs, but those numbers are once again increasing.
The South is primed for growth for several reasons. It has the resources across the board:
● Inventory – the South has the capacity for demand
● Investment – there is global interest in building mills here due to prices
● Policies – forest management policies are better than in the West thanks to private land ownership rather than public lands
● Weather – steady rainfall, for example, helps boost yields and produces healthier seedlings
● Efficient mills – lumber prices are low, making for higher margins
As the South rises to meet the increasing demand for softwood lumber, we expect to see continuing investment in sawmills and plantations. We expect to see increased growth and inventory in the South for softwood sawtimber (see chart above). And we expect to see innovation in the industry escalate.
There is a trend away from steel and concrete for buildings with fewer than 18 stories. From the pandemic to the conversation on climate change, from working remotely to working smartly, from trying to meet a demand for multi-family housing to the desire to be a good global neighbor, there is a nearly deafening call for “natural” and “sustainable” products.
As referenced in the article “Is Mass Timber Finally Heading Toward Critical Mass?” on page 16, alternative wood products are adding to the popularity of Southeast supply. Cross-laminated timber (CLT) is being utilized in projects across Georgia, leading the way for builders to address the growing need for wood-based building.
As CLT and other alternative products pick up in popularity, the South is poised to take it on. With capacity for new timber plants, bringing the manufacturing onto American soil will make the price more competitive and the technology more ubiquitous. The growing demand for carbon sequestration and even carbon credits will add to this popularity.
No matter which road you are on, softwood lumber or CLT, the roads are leading South. ■
Patty Deutsche is a writer and public speaker who has, for the past 30 years, worked in industries from health care to telecommunications, chemicals, oil & gas, government and non-profits. Though she is a native Californian, she will soon be a resident of the southeast.
There is a trend away from steel and concrete for buildings with fewer than 18 stories. From the pandemic to the conversation on climate change, from working remotely to working smartly, from trying to meet a demand for multi-family housing to the desire to be a good global neighbor, there is a nearly deafening call for “natural” and “sustainable” products.
As referenced in the article “Is Mass Timber Finally Heading Toward Critical Mass?” on page 16, alternative wood products are adding to the popularity of Southeast supply. Cross-laminated timber (CLT) is being utilized in projects across Georgia, leading the way for builders to address the growing need for wood-based building.
As CLT and other alternative products pick up in popularity, the South is poised to take it on. With capacity for new timber plants, bringing the manufacturing onto American soil will make the price more competitive and the technology more ubiquitous. The growing demand for carbon sequestration and even carbon credits will add to this popularity.
No matter which road you are on, softwood lumber or CLT, the roads are leading South. ■
Patty Deutsche is a writer and public speaker who has, for the past 30 years, worked in industries from health care to telecommunications, chemicals, oil & gas, government and non-profits. Though she is a native Californian, she will soon be a resident of the southeast.
|
Georgia Forestry Magazine is published by HL Strategy, an integrated marketing and communications firm focused on our nation's biggest challenges and opportunities. Learn more at hlstrategy.com
|
|
|