Wood knows no boundaries. Not just wood as forest, which straddles arbitrary political boundaries throughout the globe, but wood as logs and lumber.
Since humans first learned to turn trees into useful products, there’s been a brisk trade in wood between tribes, empires, and civilizations. The massive cedars that once grew on the mountains of the Middle East disappeared more than two millennia ago, incorporated into Phoenician ships and temples and palaces all around the Mediterranean.
Not long after that, Egyptians imported huge quantities of wood for buildings and furniture. The ancient Romans imported exotic woods from Africa. The Dutch loaded ships with teak from Indonesia. The British imported huge pines for masts from the North American colonies. Central American mahogany became the wood of choice for high-end colonial American furniture. Whether by pack mule or ship, railroad car or tractor trailer rig, wood has been flowing across the landscape for millennia.
Today, wood continues to flow around the world, most notably toward China, where the products made from it continue on their globe-trotting way. Wood flow: that’s what utilization foresters, biometricians, and forest economists call it. But “flow” is a little misleading, implying a riverine unidirectionality. A better word might be “churn.” Like all things capitalistic, the flow of wood is chaotic, self-organizing, and constantly changing. Following a truck loaded with logs down a highway in rural New Hampshire only to have another truck loaded with seemingly identical logs pass you going in the opposite direction can leave you shaking your head.
“There are all these little stories about why wood flows the way it flows. There is a lot of common sense to it if you can drill down enough to take a look at it. It’s economics. To a large degree it’s market driven,” said Maine Forest Service biometrician Kenneth M. Laustsen.
Some key determinants in the wood flow equation include: what’s in demand, where it’s cut, and what local prices are compared to those elsewhere. But the path wood takes also hinges on where the roads and railroads go, and where the ports are. Not to mention the price of diesel fuel, the cost of insurance and labor, weather, and geography. And don’t forget currency exchange rates or the health of regional, domestic, and global economies. Even relationships factor in. People don’t necessarily see the doctor closest to them; they’re just as likely to drive farther to see a doctor they feel comfortable with. It’s the same way with wood sellers and buyers.
How Far is Too Far?
When looking at how wood flows in the Northeast, you can’t restrict your vision to New York, Vermont, New Hampshire, and Maine. You have to broaden your perspective, because wood flows into and out of each of those states, as well as Pennsylvania, southern New England, Quebec, and New Brunswick on a daily basis. Some even goes into containers headed for Asia or Europe. There are no firm boundaries.
Maine, the most forested state in the country, is, interestingly enough, a net importer of wood. But most of Maine’s hardwood sawlogs are sold out of state. Some go to Europe, where top quality logs are turned into veneer sheets as thin as a paper clip. New Hampshire, which has no pulp mill, finds markets for its pulpwood in Maine and New York. Vermont imports around 324,000 cords of wood and exports around 379,000.
All of the northeastern states are shipping logs to Quebec, where a string of sawmills and paper and pulp mills are draped like Christmas lights along the province’s southern border.
“Between 20 and 25 percent of New York’s logs go to Canada,” said Sloane N. Crawford, who oversees the forest stewardship and use programs for New York’s Department of Environmental Conservation. While that rate has dropped because of the global recession, Canada still has a high demand for certain woods, like white pine and spruce. “Canada gets nearly all the spruce from plantations on state lands,” Crawford said.
Sometimes, when you’re trying to wrap your head around the concept of wood flow, it helps to boil it down. Consider a theoretical woodlot in northern New Hampshire with 200 acres of mixed woods. Where would that wood flow to?
Sarah Smith, a forest industry specialist with New Hampshire Cooperative Extension, said the white pine would likely stay in the state, white pine mills being fairly numerous. “You would have to have a real beef with a lot of white pine mill owners to want to truck it out of state,” she quipped. The pulpwood – both hardwood and softwood – would likely go to Maine, since New Hampshire no longer has a pulp mill, she said. Spruce and fir logs would go to mills in New Hampshire, Maine, or Quebec. Hardwood logs would probably go to Quebec. (Hardwood harvested south of the White Mountains would probably stay in the Granite State.) Whole tree chips would be used in-state.
“The markets are fierce and competitive,” Smith said.
Despite high diesel prices, today wood from the Northeast tends to travel farther from stump to mill than it has in the recent past.
“A lot of people are hauling wood 100, 120 miles and hardly batting an eyelash anymore. And hauling it right past the wood yards of other people who are buying the identical product. And this is true of the lowest-value product – topwood that’s been chipped for biomass. We used to say it was the high-value stuff that was hauled long distances. Today, even the lowest-value stuff is going long distances,” said Lloyd Irland, a forest economist and president of the Maine-based consulting firm The Irland Group.
Paul Frederick, a wood use specialist with the Vermont Department of Forests and Parks, said, “It’s actually more pronounced when you get into the lower-grade markets. In pulp, particularly, we’re seeing wood moving farther than we did in the past.” Pulpwood is moving from Vermont to pulp mills in Ticonderoga and Glens Falls, New York, for instance.
One big influence on how far a load of logs or chips will travel is whether there’s a haul-back opportunity. “You have to look at the distance and ask, ‘Is there an opportunity to bring something back?’” said Smith.
Three Recent Trends
The movement of wood, like that of other products, is affected by events large and small; some near, some far away. But three recent trends have had profound effects on the northeastern U.S. wood markets and will likely continue to play out for years to come.
One is globalization. In the recent past, lower manufacturing costs in China essentially gutted the U.S. furniture industry, with jobs and hardwood logs flowing across the Pacific in increasing numbers. While rising wages and higher shipping costs have allowed the U.S. to regain some of this market share, other countries, like Vietnam, have become major players in the log buying and wood manufacturing arenas.
The second is the recent recession. In a 2012 article in The Forestry Source, W. Brad Smith and Richard W. Guldin crunched numbers from a variety of sources and found that, since 2005, the U.S. has lost 1,008 sawmills, 15 pulp mills, and 148 other mills. The shutdowns were accompanied by “slowdowns or closures in hundreds more secondary manufacturing facilities,” and the loss of 294,000 jobs. That number has since been updated to 322,805. Of the mill closures, more than 500 were in the north, along with 100,000 lost jobs. That is a lot of mills, a lot of destinations, a lot of flow points for wood that are no longer there.
In Vermont, harvest and wood production peaked in the late 1990s, said Frederick. “Since then, we’ve lost a fair amount of production capacity. In some cases, that’s from having mills go out of business, and in others the lack of demand for lumber caused people to cut back. That’s particularly true in the economic crisis of the last few years.”
The recession seemed to be particularly hard on mid-size sawmills.
“The last five to seven years it has plain been the economy,” said Smith, the New Hampshire wood use specialist. “It has, on so many levels, just hammered the forest industry. Everything from fuel costs to lumber demand. One of the reasons that the larger mills survived is that they had invested, before the drop in the economy, in efficient and high-tech equipment.”
Crawford said that the number of New York sawmills with a production capacity of at least one million board feet dropped from a couple of hundred to less than one hundred over the past 15 years. Most of the loss was in those sawing between one and three million board feet a year. Much of that lost production, however, drifted to a handful of really big operations. And New York still has roughly 1,800 very small portable and fixed-location sawmills that together saw some 60 million board feet a year, almost all of it in-state timber production, he said.
The third trend affecting the movement of wood in the Northeast has been the rise of biomass energy, seen as a competitive green alternative to oil and coal for generating electricity. Ironically, this often means trucking low-grade material long distances in order to supply biomass plants.
While New York’s log harvest has been trending down since the late 1990s, the state’s pulpwood and chip harvest has been trending up, to 2.5 million green tons in 2011, according to the New York State Industrial Timber Harvest Production and Consumption Report.
“We always seem to be able to find someone to backfill,” said Crawford. “Harvest and consumption of logs in New York has been going down. Starting in 2008, it took a dive. But even during the recession, pulpwood and biomass harvest went up a little.”
In Maine in 2011, wood harvests for biomass amounted to 2.4 million green tons, with 86 percent of it produced in state and the rest imported, according to the 2013 report titled Maine’s Forest Economy, by the Maine Forest Products Council. Much of the imported material came from southern New England states, which don’t have as many biomass plants.
While grateful for the market, most in the forest products industry note that biomass is no panacea. Consultant Lloyd Irland said he was stunned when, paging through a wood flow report for 2009 or 2010, he saw that biomass production had eclipsed sawlog production.
“We’re going downmarket fast. That’s scary,” he said. “And it’s extraordinary how far biomass travels. It would knock your socks off to see the distance that stuff is traveling now. And that seems blooming crazy.”
Forest industry analysts caution that loggers cannot build successful businesses solely around wood chips. Without higher-value products like sawlogs and pulpwood, the logging and trucking sectors won’t survive.
In his more than three decades in the wood trade, Earle D. “Chip” Bessey, the president of E.D. Bessey & Son, a Mainebased buyer and seller of logs, has pretty much seen it all.
“There are fewer sawmills and fewer paper mills. The ones remaining are quite strong. They’re the survivors. Nonetheless, whenever you lose a mill you are losing some demand, which in the long run could adversely impact landowners who would like to have people competing for wood and keeping the prices at a good level,” Bessey said.
“The new markets are biomass, fuel chips, pellets. All these things are low-value items. It’s nice to have a market for lowvalue material, but we always thought pulpwood was a lowgrade material. This is several steps below pulpwood in value to the landowner. As a landowner, I’m concerned as we lose the opportunity for adding value on the high end because it means the overall value of the timber we produce is lower.”
Bessey said the lesson for timberland owners is simple: never assume that the value of your trees will go up. “If you own enough woodland to worry about, I’d just keep up with it,” he said. “If there is something that is mature or dying or decaying, I’d keep it moved. It’s like housing. People thought the value of houses would never go down. The value of wood may remain steady. It may not.”
Reply Hazy, Try Again
There are many who lament the fact that wood flows out of their states or countries at all. Why, they ask, can’t we build the sawmills, paper mills, and factories to process it at home and export the finished products?
This approach seems to make sense, but the issue is complicated by consumer demand for a seemingly endless variety of wood products, from laminated flooring to two-by-fours, from butcher block tables to plywood, from wood pellets to wooden spoons. Each of these products is made of different woods and each requires different (and expensive) equipment. So to be profitable, a mill has to specialize.
“There are folks who want to see local use of wood. They talk about the little guy down the street. But that guy doesn’t necessarily have a full range of products and species. He may not have, for example, kiln-dried flooring,” said Sarah Smith.
These days, setting up an I-joist plant or a robotic truss plant requires an investment of millions of dollars. Once that investment is made, Smith said, you still have to break into the market. Competing against even a handful of entrenched competitors can be an uphill battle.
Irland agrees that the investment in machinery and technology – the optimizers, the scanners, the sorters – imposes its own kind of tyranny: you can’t compete unless you invest in the technology, but once you make the investment higher and higher volumes are required to pay for that technology.
But Irland believes that there is a place for the small mill operator in the Northeast, and that the high cost of hauling logs works in favor of the local guy, particularly if the product doesn’t require a tremendous investment in expensive machinery. “I talked to a guy who was telling me he imported a hundred loads of landscape ties a year from Ontario or Quebec or somewhere. Why couldn’t somebody local make landscape ties and sell them locally?” Irland asked.
“We just have to go back to being more market-oriented and more innovative. We should recognize that there are some products, like two-by-fours and kiln-dried, appearance-grade hardwood lumber that you aren’t going to compete on unless you’re big. But that doesn’t mean you can’t do anything,” Irland said.
Two trends that could have a profound effect on how wood flows in the coming 20 years, he said, are the current U.S. natural gas boom and the rise of China’s middle class.
If natural gas remains absurdly cheap, it could mean “all these biomass electrical plants will be gone. It will change a lot of things. It will be impossible for them to sell their power. From society’s point of view, cheap energy is good, but it will mean a lot of ripple effects in the wood market,” Irland said.
As far as China goes, that country already uses about twothirds of the furniture it produces, he said. Further growth in China’s middle class could dictate more demand for logs, but also could reduce competition in the U.S. from Chinese imports, he said.
Predicting future wood flows is problematic because of the many variables involved. Long-term wood timber outlook studies are sprinkled with caveats, what-ifs, and alternative scenarios. Changes in geopolitics and the world economy will undoubtedly alter supply and demand, as will yet unforeseen uses for wood and replacements for wood.
How will the plantation forestry trend in places like Brazil affect pulpwood prices in Maine, where natural regeneration is the norm? What about pests like the mountain pine beetle, emerald ash borer, spruce budworm, or gypsy moth? Will biomass energy remain competitive? Will its use grow? What will climate change mean for timber production, not just in the northeastern U.S., but elsewhere in the country and around the globe?
If you feel like you can’t get a clear picture in your crystal ball, join the club. If there’s one thing that history has taught us, it’s that the forest products industry is resilient and the wood will continue flowing, but where and how are impossible to predict.