Biomass, pulpwood and saw logs make up almost all the wood harvested in the Northeast.

Each is important to the sustainability of the region’s forestry industry, but due to the current state of the economy the industry is facing a handful of economic challenges as well as a few opportunities.

Housing starts, a reliable indicator of market health, has enjoyed a sustainable climb the past couple of years. But it collapsed once the COVID-19 pandemic hit.

With that said, lumber prices have held reasonably steady. This is due to mills in the Southeast, Pacific Northwest and Canada electing to reduce capacity and, therefore, limit supply to reflect the decrease in demand. In addition, the forestry industry was largely deemed essential across the U.S., so in many places building has continued.

Even with the drop in housing starts and home sales slowing nationally, home repair and remodeling has increased significantly. Home centers such as Lowe’s and Home Depot have reported record demand. Most of that demand is from small-quantity purchases, but these “little sales” add up.

Tough times for mills

Most Northeast mills — though not all — operated at close to “normal capacity” in spring and mud season. Inventory of logs and sawn lumber has grown to record levels, which could be a sign of tough times ahead. Adding to this surplus may be the stall in building permits across the Northeast, as towns and cities have been operating at reduced capacity due to COVID-19.

A bright spot for hardwood mills is that export markets have recovered somewhat as workers return to manufacturing businesses in places such as Asia.

Through the spring and early summer, log prices have softened partly from normal spring and mud season conditions, and partly from pandemic effects. Overall, this summer will tell us more about the solid wood market.

Shrinking residuals, CLT potential

Anyone who purchases a cylinder (log) and sells a rectangle (board) needs a market for everything that’s not in that rectangle. The market for this residue has shrunk, and this is a dangerous sign for a healthy industry.

The restart of Old Town, Maine’s, softwood mill has been welcome news, but that has been offset by the Jay, Maine, explosion that decimated the Androscoggin Mill’s pulp processing capacity.

Cross-laminated timber (CLT) is a market that has lots of unrealized potential in the Northeast. These large-scale, prefabricated panels can be used for construction and are favorable due to their solid engineering and strong design while also being lightweight.

While there is promise for this resource and market, ground has not yet been broken on a CLT manufacturing facility in the region. Given its high potential, future plants, if built in the region, are likely to use spruce or fir lumber. Long term, this could also provide a market for hemlock and potentially white pine, as promising research out of University of Massachusetts Amherst suggests.

Biomass looks bleak

In short, at least for the foreseeable future, it looks like biomass electricity will not be viable without public support. This conclusion comes from a combination of the cost to pay staff and facility operations, the fuel per megawatt-hour to run these facilities, and more.

Renewable Energy Certificates are available for some facilities. For those that qualify, these may be a key piece of their operations. However, once offshore wind and other lower-cost renewables establish a foothold in the region, the biomass electricity industry will largely be uneconomical.

In addition to wood being used for electricity, it’s energy can also be used for heat. There are many biomass heating projects that have traditionally competed very well in the Northeast and rural areas that rely on oil for heating. However, the return of low oil prices may spell limited near-term growth for wood heat.

These facilities have been bolstered by the existence of Thermal Renewable Energy Certificates (T-RECs) in New Hampshire, Massachusetts and soon Maine for wood heating, which can provide significant money to support these operations.

Pulp and paper uncertainty

The health of pulp and paper is very mill-specific. The product mix of these mills has shown to be critical during COVID-19 due to tissue, paper towels and wipes being in very high demand.

Some specialty uses are very strong. Packaging demand is increasing as large distribution companies such as Amazon, UPS and FedEx report increased use of their delivery services.

There has been a drop in demand from printing and writing paper because of schools and offices closing, and halted brochure use from lack of traveling consumers

There are many questions for the pulp and paper industry that will have to be answered:

What we do know is the current recession is bigger than anyone expected, and the economic reopening has left many unanswered questions. Ultimately, the solution lies in millions of individual decisions to get an idea of what the “new normal” will look like.

Emerging industries

An emerging industry is a new wood-based insulation facility under construction in Madison, Maine. This plant expects to begin commercial production in 2021 and will use softwood chips to create home wood fiber insulation for the residential and light commercial construction market.

Companies have been looking across the Northeast for new opportunities in biofuels, biochemicals, cross-laminated timber, nanocellulose and more.

For better or worse, the forest industry is accustomed to boom-and-bust cycles and is experienced in handling them. Northeast markets are incredibly well-positioned compared to other parts of the country, and the forest resources and supply infrastructure is incomparable to other regions.

In addition, the region’s consumers live near Northeast timber markets.

This time presents an opportunity for the forestry industry to develop new technology and test product innovation that can attract new markets while maintaining traditional markets.

Kingsley is a partner in Innovative Natural Resource Solutions LLC (INRS), a natural resource industries consulting firm with offices in New Hampshire and Maine.

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