As many of you undoubtedly know, a devastating blow was struck to pulpwood markets in southeast Louisiana in January. Georgia-Pacific’s (GP) Port Hudson mill announced it will eliminate 630,000 tons of uncoated freesheet (UFS) paper capacity and completely exit that market.
Although 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 to be found 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 IP in Vicksburg (138 miles away). In short, there is no answer for hardwood pulpwood markets for those in the area. Even if Drax in Gloster switched over completely to hardwoods it would only account for about half of the consumption the Port Hudson mill was consuming.
Likewise, economic modeling indicates a potential gross loss of the 650-700 jobs, including an additional 100-plus logger jobs. At the least, they would have to operate over longer distances, and with the logging rate presently comprising two-thirds of the delivered price of hardwood pulpwood in South Louisiana (per Timber Mart South price report series), operating competitively and profitably in other parishes or counties already over-supplied with logging operators becomes even less feasible. What’s more, the model doesn’t capture the remaining towel and tissue lines that will be required to source wood supply from imports.
So from both the landowners’ and loggers’ perspectives, the mill has disappeared completely. Further, the model doesn’t 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’s 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 doesn’t 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, so unless there is a hardwood mill 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 production process. Hardwood lumber 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 how the former paper mill did. Currently, there are around 25 OSB mills in the South and Southwest and they take around 15 percent 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’s unclear whether the Baton Rouge and New Orleans markets can sustain both the current Martco Oakdale facility and a new player that could locate in the Florida parishes.
However, looking at the population centers in Mississippi and Louisiana, something along the Interstate 55/Interstate 12 intersection would have the best luck. It would likely need to be a smaller mill, though, 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 offer lower prices for sawtimber and chip-n-saw.
This could be alleviated by one or a combination of particleboard and containerboard or cartonboard/boxboard plants. 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 provide some measure of stability in that region.
(Dr. Shaun Tanger is a forest economist with the LSU AgCenter Extension; Dr. Eric McConnell is an assistant professor of Forest Products at Louisiana Tech University.)