Timber industry looks at future without IP
Published 2:06 pm Monday, March 1, 2010
“The nightmare came alive.”
Timber industry experts agree that when International Paper Co. announced that it would close the Franklin paper mill by spring that it was like a bad dream had come true.
“When IP closed the sawmill last year, we all thought it was devastating,” Paul Burby, owner of Carolina East Forest Products LLC in Ahoskie, N.C., said Monday. But the nightmare, he said, came after he and others in the industry wondered “just think if the paper mill shut down.”
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Today, Burby and his counterparts are trying to adapt to the new landscape and are bracing for more change once the IP mill — a purchaser of pine pulpwood and hardwood pulpwood — closes its doors.
According to Terry Godwin, a forestry consultant with GFER Forestry Consultants PLLC, the market for pine pulpwood should be fine in both the long and the short run.
“There are other markets for pine pulpwood,” Godwin said Tuesday. “Although prices are going to go down a little, and at certain times of the year pine pulpwood is going to get really cheap, overall the prices are going to be OK.”
Other mills are filling the void being left by IP, including Georgia Pacific in Emporia and Skippers, Domtar in Plymouth, N.C., West Fraser in Seaboard, N.C., and KapStone Kraft in Roanoke Rapids, N.C.
Burby said 100 percent of his business once went to IP. Today it’s about half, with the other mills making up the other half.
He worries about what will happen once IP closes.
“I’m afraid there are going to be tight quotas at the other mills,” Burby said. “When IP shuts down, the other mills will have all of this extra wood to buy. They’ll get all of the wood they want and not have to pay a lot of money for it.”
Burby said his trucks typically drive 70 miles from Ahoskie to deliver timber, but have recently traveled as far as 90 miles.
“Franklin was right in the middle of everything,” Burby said. “It was in the bull’s eye of the timber tracts that we used to buy.”
Godwin said that under normal conditions haulers would travel 60 miles.
“Pulpwood is a low-value product,” Godwin said. “There’s not much margin in it for transportation. I would say that 75 miles is the furthest that you’re going to want to haul pulpwood, and that’s in extreme conditions.” He added that extreme conditions include especially wet weather, and if a mill was about to run out of wood.
“At that point, the mills will reach out further to buy wood,” Godwin said. “As the product gets more value then you can truck it further.”
It’s a different story for hardwood pulpwood.
“That product is going to become really hard for loggers to get rid of because there are only a few other markets of any significance,” Godwin said.
According to Godwin, those markets are Rayonier at Jarratt, Georgia Pacific at Skippers and Smurfit-Stone at West Point, the third of which “takes a lot of hardwood, but unless they were to open a wood yard down this way, loggers aren’t going to be able to pay much for the hardwood here because they’re going to have high trucking costs taking it up to West Point.”
Nevertheless, that’s where trucks with Blackwater Transport Inc. of Franklin are going.
“It’s putting our trucks on the other end of hell, and then they’ve got to bobtail back here,” Michael Tillett, shop foreman for Blackwater Transport, said Tuesday. “When they used to deliver (to IP) in Franklin, the trucks would park and were home. Now they’ve got a 100-mile trip to get home.
“We’re making out, but it’s not going to be like it once was.”
Tillett said his company isn’t thinking about leaving Franklin, but had discussed the idea of establishing facilities elsewhere, including New Kent or Charles City counties.
“We almost need to relocate our shop for where we’re hauling the wood,” Tillett said. “If we relocated, we would be closer to where the action is. A hundred miles is a long way to truck wood.”
Burby was also not optimistic about the hardwood pulp market.
“With IP closing down, that’s going to shut down swamp logging,” Burby said. “It will probably be a challenge from now on, because it will be more expensive logging, and therefore will require a higher price at the mill.”
Timber tract owners
Godwin said it was especially important for timber owners to educate themselves on their holdings and how they fit in the current business climate.
“It makes it more important now that they understand what they have,” Godwin said. “Then they need to know how and when is the best time to sell.”
There was some disagreement over whether the pending closure of the IP mill already is affecting timber owners.
According to Burby, “Things have slowed up, but a lot of landowners are trying to get their tracts of timber cut before IP shuts down.”
Said Godwin: “I’ve not heard from any landowners that said ‘hey we better sell right now or else we’re not going to be able to sell.’ Selling timber really depends on the landowner’s objectives. Right now, prices on pulpwood are at an all-time high because of the recent bad weather. We should see good prices on pine in the future, even after the paper mill closes. Some people are selling just because the prices have spiked up.”
But Godwin added that some timber owners probably should sell now.
“If you own a hardwood swamp and you could sell it right now, you might want to go ahead and do that,” Godwin said. “Hardwood pulpwood could be hard to get rid of if we don’t get another market (to buy it).”
Future timber buyers?
Godwin is optimistic that a new buyer will emerge to take locally grown timber.
“I really believe that with the resource that we’ve got here that somebody else is going to utilize it,” Godwin said. “Somebody is going to move here and use this resource.”
Some business ideas that he believes are feasible include a sawmill and a wood-to-energy biomass plant, either using existing IP facilities or having a new plant.
“We’ve just got too good of a resource here,” Godwin said. “There are some challenges ahead, but it’s not going to be the end of the world. Don’t throw your cards in just yet.”