ne landscape committee february 15, 2012

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


Specialty papers

Label release papers

Imaging Papers

Splox Delivery system

Boise – International Falls


•

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


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


NorBord – Solway


2 x 4’s

Finger-Joint Studs

Potlatch – Bemidji


Hedstrom Lumber – Grand Marais

Paneling—Siding—Dimension Lumber—Chips/Bark


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


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


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


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


Lumber16%

Paper/Pulp47%

Engineered wood37%

Wood Utilization by Sector 2006 and 2011

Source: MFI, MN-DNR

Lumber17%

Paper/Pulp69%

Engineered wood14%

2006 2011


Cost Pressures—Timber Supply / Forest Management

$0

$10

$20

$30

$40

$50

$60

$70


• Lumber Mills– Structural timber (SFP)

• Engineered Wood Products– Siding– Fiber board

• Paper Mills – Publication and writing papers

NE Landscape Wood Product Facilities


Housing Starts


Wood Products Production Index (2007=100)


OSB Production Index (2007=100)


195

473

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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


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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


Paper Consumption


US Paper Production (index 2007=100)


Forest Product Indices (2007=100)


Production Index – Are Forest Products Still in Recession?


Steve Betzler

MN Power

The Next 10 Years – Paper Manufacturing



Dave Chura

MLEP


Logging Operation and Type – 2012


Operation Size - 2012


Membership Trend 2005-2011


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*


Energy3%

Depreciation5%

Materials9%

Logs61%

Labor22%

Source: Minnesota Forest Industries

Costs Associated with Production of Lumber


Energy10%

Other10%

Materials20%

Pulpwood40%

Labor20%


Costs Associated with Production of Oriented Strand Board


Energy25%

Materials30%

Pulpwood22%

Labor23%


Costs Associated with Production of Paper


• Transportation

• Energy

• Reliable and Affordable Timber Supply (Forest Management)

Cost Pressures Facing Industry


• 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


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



• Policy that Increase Energy Costs Negatively Impact the Forest Products Industry.

• Credit for Renewable Energy Generation?

Cost Pressures--Energy


Cost Pressures--Energy


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



Minnesota

Coal (SG)4%

Purchased68%

Biomass/Hydro (SG)28%


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 Forests – Forestland Ownership

State and local33%

Private28%

National Forest37%

Other federal2%

Forestland

5.7 MM ac.

Source: FIA


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 Forests – Who Supplies the Timber 2010

Private37%

County29%

SNF11%

State 23%



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


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%


Timberlands Age-class NE Landscape


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


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 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



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



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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


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.


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

ne landscape committee february 15, 2012

Documents