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NE Landscape Committee February 15, 2012
Tim J. O’Hara Steve Betzler Dave Chura
Forest Products Industry of MN
The Past
The Next 10 years
Logging Infrastructure
Cost Pressures
NE Landscape Timberlands and Outputs
NE Landscape Committee, Feb 15, 2012
Minnesota Forest Industries
NE Landscape Committee, Feb 15, 2012
Specialty papers
Label release papers
Imaging Papers
Splox Delivery system
Boise – International Falls
NE Landscape Committee, Feb 15, 2012
•
Verso – (Sartell) –– UPM-Blandin (Grand Rapids)
Coated and uncoated publication papers • Financial printing• Commercial printing• Catalogs/Magazines• Book publishing• Inserts• Educational materials• Manuals• Direct mail
NE Landscape Committee, Feb 15, 2012
Cloquet Mill At-a-Glance
Annual Production Capacity: 330,000 metric tons of paper and 455,000 metric tons of pulp
Products: McCoy, Opus, Flo sheets
End Uses: annual reports, advertising brochures, fine art books
Sappi – Cloquet
NE Landscape Committee, Feb 15, 2012
NorBord – Solway
NE Landscape Committee, Feb 15, 2012
2 x 4’s
Finger-Joint Studs
Potlatch – Bemidji
NE Landscape Committee, Feb 15, 2012
Hedstrom Lumber – Grand Marais
Paneling—Siding—Dimension Lumber—Chips/Bark
NE Landscape Committee, Feb 15, 2012
Spruce8%
Balsam Fir6%
Jack Pine5%
R/W Pine6%
Oak5%
N.Hwds9%
Ash3% Paper Birch
6%
Other SW3%
Aspen49%
Primary Wood Using Facilities and Utilization (2010)
Aspen 49%Softwoods 27%Other Hardwoods 24%
Source: MN DNR, MFI
NE Landscape Committee, Feb 15, 2012Source: PPRC
US Mill Closures and Curtailments
NE Landscape Committee, Feb 15, 2012
Huber
Norbord
Ainsworth
Weyerhaeuser
Louisiana-Pacific
Georgia-Pacific
Other Owners
Temporary CurtailmentsPermanent/Indefinite Closures
March 11, 2008
WeyerhaeuserSutton
WeyerhaeuserDrayton Valley
WeyerhaeuserWawa
WeyerhaeuserChatham
WeyerhaeuserHudson Bay
NorbordJefferson
NorbordVal-d'Or
NorbordLa Sarre
NorbordJoanna
Louisiana-PacificCarthage
Louisiana-PacificSilsbee
Louisiana-PacificSaint-Michel-des-Saints
Louisiana-PacificHoulton
Louisiana-PacificHayward
Roy O'MartinLe Moyen
AinsworthGrand Rapids
Ainsworth Line 1Bemidji
Ainsworth Line 2Bemidji
AinsworthCook
Ainsworth / Line 2Grande Prairie
CanforFort Nelson
TolkoMeadow Lake
TolkoSlave Lake
Grant ForestEnglehart
Grant ForestTimmins Arbec Forest Products
Saint-Georges
Longlac(Krueger)Longlac
TolkoHigh Prairie
Footner Forest Products LtdHigh Level
Georgia-PacificMount Hope
Georgia-PacificDudley
HuberBroken Bow
HuberCommerce
Panel Board Mill Closures and Curtailments
NE Landscape Committee, Feb 15, 2012
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2002 2007 2011 (1Q)
Year
Dire
ct E
mpl
oyee
sPaper and Wood Product Manufacturing Jobs (NAICS 321, 322)
Source: US Census of Manufacturers
NE Landscape Committee, Feb 15, 2012
Forest Service5%
State22%
Private56%
Counties17%
Who Supplies the Timber—2005 and 2010
Source: MFI, MN-DNR
Forest Service
6%
State28%
Private39%
BIA1%
Counties26%
2005 2010
NE Landscape Committee, Feb 15, 2012
Lumber16%
Paper/Pulp47%
Engineered wood37%
Wood Utilization by Sector 2006 and 2011
Source: MFI, MN-DNR
Lumber17%
Paper/Pulp69%
Engineered wood14%
2006 2011
NE Landscape Committee, Feb 15, 2012
Cost Pressures—Timber Supply / Forest Management
$0
$10
$20
$30
$40
$50
$60
$70
NE Landscape Committee, Feb 15, 2012
• Lumber Mills– Structural timber (SFP)
• Engineered Wood Products– Siding– Fiber board
• Paper Mills – Publication and writing papers
NE Landscape Wood Product Facilities
NE Landscape Committee, Feb 15, 2012
Housing Starts
NE Landscape Committee, Feb 15, 2012
Wood Products Production Index (2007=100)
NE Landscape Committee, Feb 15, 2012
OSB Production Index (2007=100)
NE Landscape Committee, Feb 15, 2012
195
473
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
Jan,
200
3
May
, 200
3
Sep
, 200
3
Jan,
200
4
May
, 200
4
Sep
, 200
4
Jan,
200
5
May
, 200
5
Sep
, 200
5
Jan,
200
6
May
, 200
6
Sep
, 200
6
Jan,
200
7
May
, 200
7
Sep
, 200
7
Jan,
200
8
May
, 200
8
Sep
, 200
8
Jan,
200
9
May
, 200
9
Sep
, 200
9
Jan,
201
0
May
, 201
0
Sep
, 201
0
Jan,
201
1
May
, 201
1
Sep
, 201
1
Jan,
201
2
Composite Framing Lumber Index ($/1,000 thousand board feet)
Source: Random Lengths
Sea-Sno mill to closeSeattle-Snohomish Mill Co. Inc., of Snohomish, Wash., notified employees last week that the mill would close permanently in March, according to the Everett Herald newspaper. Megan McMurray, owner of the mill, said the collapse of the housing market was a major factor in the decision to shut down. The mill had about 50 employees, and produced green Fir and dry Hem-Fir lumber. 1/24/2012
NE Landscape Committee, Feb 15, 2012
$0
$100
$200
$300
$400
$500
$600
$700
Jan,
200
3
May
, 200
3
Sep
, 200
3
Jan,
200
4
May
, 200
4
Sep
, 200
4
Jan,
200
5
May
, 200
5
Sep
, 200
5
Jan,
200
6
May
, 200
6
Sep
, 200
6
Jan,
200
7
May
, 200
7
Sep
, 200
7
Jan,
200
8
May
, 200
8
Sep
, 200
8
Jan,
200
9
May
, 200
9
Sep
, 200
9
Jan,
201
0
May
, 201
0
Sep
, 201
0
Jan,
201
1
May
, 201
1
Sep
, 201
1
Jan,
201
2
Composite OSB Composite Index ($/1,000 sq’ feet)
Source: Random Lengths
Hambro exits particleboard industryHambro Forest Products has closed its particleboard facilities in Lenoir, N.C., and in Arcata and Crescent City, Calif. Hambro intends to sell its plants in Lenoir and Arcata and will mothball the Crescent City facility to ensure it could be reopened if market conditions warrant in the future. The company cited a prolonged slump in demand for the closures. Hambro had produced particleboard since 1964. - 12/13/2011
NE Landscape Committee, Feb 15, 2012
Paper Consumption
NE Landscape Committee, Feb 15, 2012
US Paper Production (index 2007=100)
NE Landscape Committee, Feb 15, 2012
Forest Product Indices (2007=100)
NE Landscape Committee, Feb 15, 2012
Production Index – Are Forest Products Still in Recession?
NE Landscape Committee, Feb 15, 2012
Steve Betzler
MN Power
The Next 10 Years – Paper Manufacturing
NE Landscape Committee, Feb 15, 2012
Logging Infrastructure
Dave Chura
MLEP
NE Landscape Committee, Feb 15, 2012
Logging Operation and Type – 2012
NE Landscape Committee, Feb 15, 2012
Logging Infrastructure
NE Landscape Committee, Feb 15, 2012
Operation Size - 2012
NE Landscape Committee, Feb 15, 2012
Membership Trend 2005-2011
NE Landscape Committee, Feb 15, 2012
Logging Infrastructure
NE Landscape Committee, Feb 15, 2012
Cut to Length $500,000Conventional $600,000Grinder $250,000Chipper $150,000Trucking:
Lowboy $20,000Van Trailer $7,500Walking Floor Trailer $20,000Semi Tractor $45,000Trailer w/ Ctr Mount Ldr $25,000
*reflects estimated market value of used equipment with mid range hours/use
Average Capital Investment*
NE Landscape Committee, Feb 15, 2012
Energy3%
Depreciation5%
Materials9%
Logs61%
Labor22%
Source: Minnesota Forest Industries
Costs Associated with Production of Lumber
NE Landscape Committee, Feb 15, 2012
Energy10%
Other10%
Materials20%
Pulpwood40%
Labor20%
Source: Minnesota Forest Industries
Costs Associated with Production of Oriented Strand Board
NE Landscape Committee, Feb 15, 2012
Energy25%
Materials30%
Pulpwood22%
Labor23%
Source: Minnesota Forest Industries
Costs Associated with Production of Paper
NE Landscape Committee, Feb 15, 2012
• Transportation
• Energy
• Reliable and Affordable Timber Supply (Forest Management)
Cost Pressures Facing Industry
NE Landscape Committee, Feb 15, 2012
• Access (all season access)
• Maintain forest road infrastructure and bridges– Indentify good access high productive areas for long-term
management
• Increase transportation weights (interstate)– MN Law allowing additional weight hauling with sixth axel
estimated savings of $8.3 million, annually.
Cost Pressures--Transportation
NE Landscape Committee, Feb 15, 2012
Annual On-Highway Diesel Price
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
1979 1983 1987 1991 1995 1999 2003 2007 2011
Nominal Price Real Price (Feb 2012 $)
Dollars per gallonForecast
EIA Short-Term Energy Outlook, February 2012
Cost Pressures--Transportation
NE Landscape Committee, Feb 15, 2012
• Policy that Increase Energy Costs Negatively Impact the Forest Products Industry.
• Credit for Renewable Energy Generation?
Cost Pressures--Energy
NE Landscape Committee, Feb 15, 2012
Cost Pressures--Energy
NE Landscape Committee, Feb 15, 2012
Annual Residential Natural Gas Price
0
2
4
6
8
10
12
14
16
1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011
Nominal Price Real Price (Feb 2012 $)
Dollars per mcfForecast
EIA Short-Term Energy Outlook, February 2012
Cost Pressures--Transportation
NE Landscape Committee, Feb 15, 2012
Minnesota
Coal (SG)4%
Purchased68%
Biomass/Hydro (SG)28%
Source: Minnesota Forest Industries
Energy—MN Forest Products Industry
Capital investments of more than $500 million in co-generation facilities.
More than 1.2 million tons of wood waste are used to generate electricity.
Mills with co-generation facilities meet 11-75 percent of energy needs.
32 percent of energy needs are self generated (SG)
28 percent of energy is produced from biomass or water (hydro).
NE Landscape Committee, Feb 15, 2012
NE Landscape Forests – Forestland Ownership
State and local33%
Private28%
National Forest37%
Other federal2%
Forestland
5.7 MM ac.
Source: FIA
NE Landscape Committee, Feb 15, 2012
NE Landscape Forests – Timberland Ownership
Private34%
State and local38%
National Forest28%
Forestland
4.6 MM ac.
Source: U.S. Department of Agriculture, Forest Service, Northern Research Station
NE Landscape Committee, Feb 15, 2012
NE Landscape Forests – Who Supplies the Timber 2010
Private37%
County29%
SNF11%
State 23%
Source: U.S. Department of Agriculture, Forest Service, Northern Research Station
NE Landscape Committee, Feb 15, 2012
37%
52%
11%
34%
38%
28%
0%
10%
20%
30%
40%
50%
60%
Private County/State Federal
% S
old
or T
imbe
rland
Ac.
% Timber Sold
% Timberland
Harvest and Timber Sold (2006-2010 avg) by Ownership
Source: U.S. Department of Agriculture, Forest Service, Northern Research Station, MFI, MN-DNR
NE Landscape Committee, Feb 15, 2012
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
0-20 years 21-40 years 41-60 years 61-80 years 81-100 years 100+ years
acre
s
1977199020032010
Year Total 0-20 years 21-40 years 41-60 years 61-80 years 81-100 years 100+ years1977 4,067,016.00 20.1% 20.7% 36.2% 14.5% 5.6% 2.9%1990 4,454,931.00 20.0% 18.8% 27.6% 21.0% 7.5% 5.1%2003 4,549,202.00 19.5% 15.1% 23.0% 26.8% 9.2% 6.4%2010 4,580,364.00 18.6% 15.9% 21.4% 26.7% 10.5% 6.9%
Source: U.S. Department of Agriculture, Forest Service, Northern Research Station
Timberlands Age-class NE Landscape
NE Landscape Committee, Feb 15, 2012
0
100,000
200,000
300,000
400,000
500,000
600,000
0-20 years 21-40 years 41-60 years 61-80 years 81-100 years 100+ years
acre
s
1977
1990
2003
2010
Source: U.S. Department of Agriculture, Forest Service, Northern Research Station
Year Total 0-20 years 21-40 years 41-60 years 61-80 years 81-100 years 100+ years1977 1,511,620.00 9.5% 9.0% 13.2% 4.1% 1.1% 0.2%1990 1,604,005.00 10.1% 7.1% 10.4% 7.1% 1.1% 0.3%2003 1,580,523.00 10.8% 7.0% 8.3% 7.3% 1.2% 0.2%2010 1,594,196.00 10.8% 7.7% 7.5% 7.2% 1.5% 0.2%
ASPEN Timberlands Age-class NE Landscape
NE Landscape Committee, Feb 15, 2012
NE Landscape Forests – Harvest, Mortality and Growth (timberlands)
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2006 2007 2008 2009 2010
Harvest Mortality Net Growth Total Growth
Source: U.S. Department of Agriculture, Forest Service, Northern Research Station
NE Landscape Committee, Feb 15, 2012
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
1987
1990
1991
1993
1996
1999
2001
2003
2004
2005
2006
2007
2008
2009
2010
2011
Year
Co
rds
Mn-Harvest
Demand
Growth
Mortality
Net Growth
Average Annual Growth compared with Harvest
Source: U.S. Department of Agriculture, Forest Service, Northern Research Station
NE Landscape Committee, Feb 15, 2012
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What we know:
Areas where the forest products industry and logging infrastructure was lost greatly impacts impacts forest health, over time. Aging forests become more susceptible to insects disease and eventually will be set-back with large scale disturbances, wildfire.
Viable Forest Products Industry = Healthy Forests
NE Landscape Committee, Feb 15, 2012
Key Points
• Remaining Industry and Infrastructure has survived some extremely tough times
• Contractions will continue in the U.S.
• how can MN forest products industry survive
• What can the NE Landscape Committee do to encourage a climate of modernization, expansion and recruitment
• The variables that the NE Committee can influence
• Forest management
• infrastructure (roads, access, planning)
• improving forest health
• Increasing forest productivity, higher quality timber, more volume per acre.
NE Landscape Committee, Feb 15, 2012
Key Points -- Sawmills
Sawmills
• Hurt by reductions in overall harvest volume
• Favoring saw timber guidelines in leave tree guidelines’
• many of these blow down
• Rotation ages of red pine stands getting high
• Final harvest and regeneration of pine stands
• Thinning intensity, should we be thinning more often
• Intense competition for saw timber
• Markets are still not the best
• May see additional mill shutdowns in the state, if supply situation does not improve