Opinion:

By Dr. Shaun Tanger and Dr. T. Eric McConnell

As many of you undoubtedly know, a devastating blow was struck to pulpwood markets in southeast Louisiana in January. The Georgia-Pacific (GP) Port Hudson mill announced it would eliminate 630,000 tons of uncoated freesheet (UFS) paper capacity and completely exit that market. While this has ramifications for global markets, the old adage is that stumpage markets are local, and the impact will harm landowners, loggers and even other mills in the area for years to come.

More specifically, this crushes the hardwood pulpwood market in the area as the only other hardwood roundwood consumers we can find are Gloster (very small demand), Arcadia-Simsboro (very little demand and too far away), Mansfield (too far away), Oakdale (same), Campti (chips only) and then International Paper in Vicksburg (138 miles away). In short, we have no answer for hardwood pulpwood markets for those in the area. Even if Drax Biomass in Gloster switched over completely to hardwoods, it would only account for about half of the consumption that the Port Hudson mill was consuming.

Likewise, economic modeling indicates a potential gross loss of 650 to 700 jobs, including an additional 100-plus loggers. At the very least, they would have to operate over longer distances, and with the logging rate presently composing two-thirds of the delivered price of hardwood pulpwood in south Louisiana, according to Timber Mart South price report series, operating competitively — and profitably — in other parishes or counties that are already oversupplied with logging operators becomes even less feasible. What’s more, the model does not capture the remaining towel and tissue lines that will be required to source wood supply from imports. Therefore, from both the landowner’s and logger’s perspectives, the mill has disappeared completely. Further, the model does not capture the effect on sawmills in the region that were selling residuals from their operations to GP in the form of wood chips, both hardwood and softwood.

Landowners in the area have to understand that prices for hardwood are going to drop significantly. While the mill also took large amounts of pine, other locations will absorb some of the pine resource. Unfortunately, those prices are going to drop as well — not as much, but it will be noticeable. In terms of hardwood pulpwood, for the time being, landowners will have to look at thinning as a cost or take whatever prices they can get. It is also worth discussing that if you have mixed stands or hardwood stands and have income generation high on your list of objectives, you may consider leasing your property for hunting, fishing and recreation or even selling to someone who has recreation higher on their list and does not mind the lower prices as much.

The simple fact is that as a global economy we continue to move toward softwood products for end use, with a small side of hardwoods. Unless there is a hardwood mill very close by that does not make printing paper, growing hardwood pulpwood for purely financial reasons in the southeast is going to remain a challenge due to the diversity of the timber stands. Most mills like uniform inputs for their production process. Hardwood sawtimber still fetches superior prices to pine, but if you are going to grow it, getting the stand thinned (with any revenue generated) will be a challenge.

There is, however, some hope in Louisiana and other states. Oriented strand board (OSB) mills in many cases use both hardwood and softwood in their production process. These mills use pulpwood similar to what the former paper mill used. Currently, there are around 25 OSB mills in the south and southwest, and they take around 15% of their wood input in hardwood pulp.

However, OSB mills like to be close to end-use markets with large populations that have strong rental housing markets. It is unclear to us if the Baton Rouge and New Orleans markets can sustain both the current Martco Oakdale facility and a new player that might locate in the Florida Parishes. However, looking at the population centers in Mississippi and Louisiana, something along the Interstate 55 and Interstate 12 intersection would have the best luck. It would likely need to be a smaller mill to be feasible because Oakdale is one of the larger OSB facilities in the southeast. Nonetheless, this will not help lumber mills in the region that source wood chips to paper mills and wood pellet facilities. This will likely have indirect effects on landowners as the lumber mills will have to either lower their expectations on profit margins or lower prices for sawtimber and chip-n-saw. One — or a combination — of particleboard and containerboard or cartonboard/boxboard plants could alleviate this. Many of these mills take both hardwood and softwood chips and, in some cases, sawdust residuals.

A second option may be pellet mills. When the paper mills in the mid-Atlantic region switched to pine exclusively for fluff pulp production, pellet mills in the Carolinas and Virginia began using low-valued hardwood stems, which helped support the pulpwood markets and provided some measure of stability in that region.

— Shaun Tanger is a timber and sawmill economics expert and an assistant professor in the AgCenter Department of Agricultural Economics and Agribusiness. T. Eric McConnell is an assistant professor in the Louisiana Tech University Department of Agricultural Sciences and Forestry.