Increase linked to weak housing sector, new pellet facilities
The slowing housing market, combined with increased demand from facilities that make wood pellets for fuel, should boost pulpwood prices in southern Georgia, Alabama and the Florida Panhandle as mills compete for raw materials, an expert in the forest products industry said Wednesday.
Pellet mills operate on wood waste and residual chips – byproducts of lumber production. But, lumber mills throughout the South have cut production in response to the weak housing market, said Daniel Stuber, operations manager for timber price information provider Forest2market.
Lumber mills in Monroeville, Ala., and Fulton, Ala., recently cut their shifts from two to one, and a mill in Eufaula, Ala., recently shut down. More lumber mill curtailments are expected until the housing market recovers.
Meanwhile, more pellet mills are coming online, including facilities in Selma, Ala., and Cottondale, Fla., which are competing with a healthy pulp and paper industry for raw materials.
“If pellet mills can’t get enough wood chips, they have to find raw materials somewhere else,” Stuber said. “Ultimately, they turn to pulpwood.”
The weakening national economy is expected to impact paper manufacturing. However, demand from European utility companies for wood pellets should keep pulpwood prices elevated. European utilities have turned to wood fuels to produce power in order to lower their greenhouse gas emissions in accordance with the Kyoto protocol – an international treaty that the United States has not ratified.
“Demand from European power companies will have a tremendous impact on forests in this region,” Stuber said. “Timberland owners are likely to benefit from the added demand.”
The forest products industry in Georgia, Florida and Alabama employs almost 140,000 people with an annual payroll of more than $7 billion.
Based in Charlotte, N.C., Forest2Market has developed sophisticated analytical tools to accurately forecast timber prices. For more information, visit www.forest2market.com.
