Pulpwood Supply and Demand Development in the South, Little Growth Elsewhere

Peter J. Ince and Irene Durbak

This long-range outlook derives from analysis of pulp and paper markets and pulpwood de- modities with respect to population mands for wood panels. The analysis projects modest increases in pulpwood demand beyond and GDP, with varying potential for 2010, with decelerating growth in paper and paperboard consumption; increased demand for product substitution by electronic pulpwood in wood panels; increased imports of pulp, paper, and paperboard; and little addi- media or plastics (Zhang 1995). tional growth in paper recovery for recycling. Results point to expanded pulpwood markets, In recent decades, paperboard con- particularly for softwoods in the US South, but to limited expansion of pulpwood markets else- sumption increased more rapidly than where in the United States. paper consumption, a trend projected

ABSTRACT to continue beyond the current eco- Keywords: economics; industry; paper; pulp; timber nomic slowdown. Per capita paperboard consumption rose from 243 pounds in 1980 to 337 pounds in he US pulp and paper industry and recycling technologies—as eco- 1998, but consumption relative to consumes a large share of US nomic responses to projected market GDP in 1998 was nearly the same as in Ttimber output, more than 7 bil- conditions, and in turn capacity 1980, at 6.0 tons per million dollars of lion cubic feet per year of roundwood change influenced projected market real GDP (in 1992 dollars). Paper- pulpwood and wood residues, plus equilibria. The robust structure of our board demands weakened in the cur- large volumes of recycled ﬁber. In addi- model and overlap of projections with rent economic slowdown, but eco- tion, pulpwood demands are increasing historical data allowed for extensive nomic recovery is projected to propel in the expanding US wood panel in- testing and calibration of model per- paperboard consumption levels to 350 dustry. The current Resources Plan- formance; average annual errors be- pounds per capita by 2010 at 5.2 tons ning Act (RPA) Timber Assessment tween historical and projected equilib- per million dollars of real GDP and (Haynes, in press) includes this base- rium product demands, production 418 pounds per capita by 2050 at 4.0 line analysis of fiber markets in the levels, pulpwood supply, and recycling tons per million dollars of real GDP. pulp and paper sector along with pulp- rates were generally less than 1 percent. Per capita paper consumption (ex- wood demands for wood panels. cluding building paper) rose from 326 AF&PA pulp and paper data series Paper and Paperboard pounds in 1980 to 407 pounds in (1998) were the main source of histor- Markets were analyzed and pro- 1998, but consumption relative to real ical data used in this analysis and jected for all paper products (e.g., GDP declined during that period, shown in this article. Projections were newsprint, printing and writing paper, from 8.0 to 7.3 tons per million dollars derived independently using the tissue and sanitary paper, and packag- of real GDP. Per capita paper con- USDA Forest Service North American ing paper) and all paperboard products sumption has receded during the cur- Pulp and Paper Model (NAPAP) (e.g., containerboard, bleached board, rent economic slowdown but con- model, which is maintained at the For- and recycled paperboard). Basic growth sumption is projected to recover to 401 est Products Laboratory. Using assumptions for economic determi- pounds in 2010 and gradually rise to a NAPAP, we projected changes in re- nants of population and per capita peak at 414 pounds around 2030, at gional production capacities for pulp gross domestic product (GDP) are il- 4.9 tons per million dollars of real and paper manufacturing processes— lustrated in ﬁgure 1 (p. 22). Domestic GDP. Paper consumption is then pro- including shifts between virgin fiber demand relations vary among com- jected to decline slowly to 391 pounds

20 Journal of Forestry • March 2002 per capita in 2050, at 3.7 tons per mil- sumption is projected to increase mod- jection period. Other paperboard and lion dollars of real GDP. estly throughout the projection period, building paper consumption is pro- Demand trends vary greatly among reaching more than 60 pounds per jected to remain at around 100 pounds individual paper products. Per capita capita by 2050. per capita throughout the projection newsprint consumption peaked histor- Among paperboard commodities period. ically at 113 pounds in 1987 and de- growth trends are more consistently Overall US per capita consumption clined to 89 pounds in 1996. News- upward for containerboard grades. Per of paper and paperboard is projected to print consumption picked up recently capita consumption of containerboard increase at a decelerating rate, while (to around 96 pounds in 1999), but (linerboard and corrugating medium) consumption per unit of real GDP is consumption is projected to fall to 81 climbed from 166 pounds in 1980 to projected to gradually decline, consis- pounds by 2010 and to 43 pounds by 246 pounds in 1999 (48 percent). Per tent with historical trends of recent 2050, reflecting gradual long-run sub- capita consumption of all other grades decades. Figure 2 (p. 22) illustrates his- stitution by electronic media. Likewise, of paperboard (other recycled paper- torical and projected trends in per consumption of unbleached kraft board and bleached paperboard) plus capita US paper and paperboard con- packaging paper is projected to gradu- building paper was at 101 pounds in sumption (including building paper) ally recede, reflecting continued substi- 1999, slightly above consumption lev- and consumption per million dollars of tution of paper bags by plastic, although not declining so rapidly as in the past two decades. On the other The West will continue to see hand, per capita consumption of printing and writing paper has increased, little growth in pulpwood supply and rising from 142 pounds in 1980 to 232 demand, with serious implications for pounds in 1999, boosted by compli- mentary demands for computer print- management of forest health, fire ers, office copiers, and print media. hazards, and watershed quality. Printing and writing paper consumption is projected to increase but at a decelerating rate of growth, climbing els of the 1980s but slightly below con- real GDP. Following the current eco- above 250 pounds per capita by 2020 sumption levels of the 1960s and nomic slowdown, per capita consump- and reaching a peak above 260 pounds 1970s. With projected economic ex- tion is projected to return to recent around 2030, with gradually declining pansion in the base scenario, per capita peak levels of around 750 pounds by consumption relative to real GDP. Tis- containerboard consumption is pro- 2010 and then rise to 809 pounds in sue, toweling, and sanitary paper prod- jected to reach 256 pounds by 2010 2050. The historical pattern of deceler- ucts increased in per capita consump- and 324 pounds by 2050, while con- ating growth in demand observed in tion from 38 pounds in 1980 to just sumption relative to real GDP is pro- the latter half of the 20th century is over 50 pounds in 1999, and con- jected to gradually recede over the pro- projected to continue, with average

Photo credits, left to right: Pallets, Society of American Foresters Archives; paper roll, Society of American Foresters Archives; logging truck, Gerald W. Williams; aerial view, South Carolina Forestry Commission

March 2002 • Journal of Forestry 21 compound growth in per capita con- Real GDP per capita Population (1987 dollars) (millions) sumption declining to just 0.2 percent 45,000 450 per year over the next 50 years. Con- sumption of paper and paperboard per 40,000 GDP per capita 400 Population million dollars of real GDP is projected 35,000 350 to gradually decline from 13.6 tons in 1998 to 11.2 tons in 2010 and 7.7 tons 30,000 300 in 2050. 25,000 250 With projected increases in US pop-

20,000 200 ulation and per capita GDP (ﬁg. 1), US paper and paperboard consumption is 15,000 150 projected to increase in total tonnage 10,000 100 from 103 million tons in 1999 to 112 million tons by 2010 and 159 million 5,000 50 tons by 2050. Population, economic 0 0 growth, and end-use assumptions drive the demand projections. However, be- 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 cause of decelerating demand growth, Figure 1. Historical and projected trend assumptions for US population and per capita gross the projected annual increase in ton- domestic product (GDP). nage over the next 50 years is just 0.8 percent, less than one-third the average growth rate of 2.8 percent from 1960 Pounds Tons per million 1992 per capita dollars GDP to 1999. 900 20

800 18 Production and Trade The baseline trade outlook projects 700 16 continued increases in paper and pa- 600 14 perboard imports particularly over the next decade, with little growth in US 500 12 paper and paperboard exports and only 400 10 modest weakening in the exchange

300 8 value of the US dollar. The trade outlook is consistent with trends of recent 200 Consumption per capita 6 years, during which the US dollar Consumption per million dollars real GDP 100 4 gained value appreciably and the gap between US imports and exports of 0 2 paper and paperboard widened. 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 US paper and paperboard imports surged in recent years, attracted by the Figure 2. Historical and projected trends in US per capita paper and paperboard consumption and strong US dollar. Exports declined as consumption per unit of real gross domestic product (GDP), in 1992 dollars. a result of the Asian economic decline Source: Historical data from AF&PA (1998). in 1997 and 1998 and, more recently,

Table 1. US wood fiber supply, historical and projected to 2050. Elements of fiber supply 1986 1996 2010 2020 2030 2040 2050 ...... Millions of short tons (pulpwood on dry-weight basis) ...... Softwood pulpwood 69.1 69.3 67.4 78.2 89.4 97.1 105.5 Roundwood harvest 39.2 46.2 50.9 63.1 74.6 83.9 92.3 Wood residues 29.9 23.1 16.5 15.1 14.8 13.2 13.2 Hardwood pulpwood 38.4 50.5 49.0 55.1 59.2 60.1 59.6 Roundwood harvest 30.3 42.8 40.5 46.1 50.2 51.1 50.5 Wood residues 8.1 7.6 8.5 9.0 9.0 9.1 9.1 Hardwood agrifiber 0.0 0.2 0.0 0.0 0.1 0.2 1.7 Total pulpwood 107.5 120.0 116.4 133.3 148.7 157.4 166.9 Recovered paper 22.4 42.6 55.8 63.0 69.8 74.9 79.7 Total pulpwood and recovered paper 129.9 162.6 172.2 196.2 218.5 232.3 246.5

22 Journal of Forestry • March 2002 because of weak competitiveness Million short tons owing to the strong US dollar. Paper 175 and paperboard imports are projected Consumption Production to reach 23.6 million tons by 2010 150 Imports (about 6 million tons higher than cur- Exports rent levels). Imports are projected to 125 climb more gradually after 2010 as US softwood pulpwood supplies become 100 more abundant, but projected paper and paperboard imports reach 35 mil- 75 lion tons by 2050, roughly double 50 current import levels. Relative to the recent peak in US paper and paper- 25 board exports (10.4 million tons in 1997), exports are projected to remain 0 depressed at around 8 million tons 1970 1980 1990 2000 2010 2020 2030 2040 2050 over the next decade, reaching 8.6 million tons in 2010, 11.1 million Figure 3. Historical and projected trends in US paper and paperboard production, consumption, tons in 2030, and 10.7 million tons in and trade. Source: Historical data from AF&PA (1998). 2050. Figure 3 illustrates historical and projected US paper and paperboard production, consumption, and Billion Billion trade on a tonnage basis. cubic feet cubic feet An important projected shift affect- 14 14 ing US fiber supply is an increase in 12 12 softwood pulpwood supply, primarily from southern pine plantations, al- 10 10 though limited growth is projected for hardwood pulpwood supply in the 8 8 South beyond 2010. Consequently, 6 6 wood pulp production capacity is projected to remain concentrated in the 4 4 South, but hardwood market pulp production is projected to decline as im- 2 2 ports increase substantially from Latin 0 0 America and elsewhere (from 2.3 mil- 1986 1996 2010 2020 2030 2040 2050 1986 1996 2010 2020 2030 2040 2050 lion tons in 2000 to 7.2 million tons in 2050). Conversely, US production of Hardwood agrifiber Pulpwood exports softwood market pulp is projected to Hardwood residues Panel mill receipts increase, with exports increasing from Hardwood roundwood Pulp mill receipts Softwood residues 3.8 million tons in 2000 to 5.4 million Softwood roundwood tons in 2050. Canada has been and is projected to Figure 4. US pulpwood supply by source and destination, historical and projected. remain a significant element in the North American pulp and paper sector, around 2010 and then recede gradually pulpwood harvest in the South, decel- and the largest source of US imports, to levels characteristic of the past erating trends in paper recovery for re- but Canadian producers are not pro- decade, reaching 102 million cubic cycling, and limited growth in hard- jected to gain dominant US market meters in 2050. Wood residues are the wood pulpwood and wood residue shares in any major commodity area. dominant element of pulpwood re- supply. Table 1 shows historical and With declining US consumption of ceipts at pulp mills in Canada (more projected wood fiber supply. newsprint in the long run, Canadian than 60 percent), and expansion in The rate of paper and paperboard producers are projected to increase pro- residue supply is determined by pro- recovery for recycling in the United duction and export of printing and jected trends in Canadian lumber pro- States increased from less than 30 per- writing paper and of paperboard. Pro- duction. cent of consumption to 48 percent in jected pulpwood receipts at Canadian 2000, but growth in recycling is slow- wood pulp mills climb from around Wood Fiber ing down. The recovery rate is pro- 107 million cubic meters in 1998 to a The US wood fiber outlook is char- jected to climb gradually to 50 percent peak at 126 million cubic meters acterized by expansion in softwood by 2010 and then remain at that level

March 2002 • Journal of Forestry 23 Pulpwood ply throughout the projection period Billion cubic feet Figure 4 shows historical and pro- (table 1, fig. 4). Hardwood pulpwood jected trends in US pulpwood supply, supply becomes more limited in the 14 West balancing domestic pulpwood supply South over the next two decades, with North 12 by source and by destination (round- declining hardwood inventory. Southeast South-Central wood receipts at wood panel mills, Hardwood as a share of total US 10 such as OSB mills, are regarded as pulpwood supply on a volume basis pulpwood in this study). Destinations (including roundwood for wood pan- 8 for domestic pulpwood supply include els) was about 33 percent in 1986 and 6 receipts at domestic wood pulp mills 39 percent in 1996. Hardwood is pro- (by far the largest category), round- jected to be 39 percent of total US sup- 4 wood receipts at wood panel mills, and ply in 2010, but then hardwood falls

2 pulpwood exports. Roundwood re- back to 37 percent by 2030 and 33 ceipts at wood panel mills are projected percent in 2050. Softwood roundwood 0 to more than double and rise from 6 (excluding residues) was 38 percent of

1986 1996 2010 2020 2030 2040 2050 percent of total pulpwood supply in total US pulpwood supply in 1986 and 1996 to 14 percent in 2010 and 18 41 percent in 1996. Softwood round- Figure 5. Projected annual US pulpwood supply percent in 2050. US pulpwood exports wood is projected to rise in the next by region, 2010–50. are projected to decline with world- decade to 46 percent of total pulpwood wide expansion of global fiber supply supply and then increase to 53 percent through the end of the projection pe- from wood ﬁber plantations. by 2030 and 58 percent in 2050. riod. Higher recovery and recycling Projected expansion in pulpwood This analysis evaluated the market rates are inhibited by relatively slow ex- supply is concentrated in the eastern outlook for hardwood agriﬁber supply, pansion in paper and paperboard pro- United States and primarily in the reflecting development of short-rota- duction capacity. South. Figure 5 shows projected equi- tion woody crops such as hybrid Supply of manufacturing residues librium supply quantities by region, in- poplars on agricultural lands. Hard- for pulpwood has declined since the cluding roundwood, manufacturing wood agrifiber was analyzed using an 1980s, with reduced softwood lumber residues, and agrifiber supply. In- assumption that the biological produc- production in the US West and increased supply of pulpwood from soft- tivity of such crops in the US South creased production of wood products wood roundwood in the South is facil- could be doubled over the next several that generate fewer residues for pulping itated in the long run by intensified decades relative to productivity levels (e.g., oriented strand board [OSB]). softwood timber management based of the late 1990s, with future gains at- Projected growth in supply of wood on southern pines (chiefly loblolly tributable to genetic engineering and residues remains limited in the decades pine). Softwood roundwood is the other yield improvements. The as- ahead. largest element of US pulpwood sup- sumed productivity gains resulted in approximately 25 percent reductions in delivered pulpwood costs for hybrid Billion cubic poplars and cottonwoods. Neverthe- feet per year less, hardwood agrifiber does not be- 16 come economically competitive in this

14 analysis until after 2030, when real prices for hardwood pulpwood 12 stumpage in the South are projected to be higher than recent historical peak 10 levels (and higher-than-projected soft-

8 wood stumpage prices). Hardwood agriﬁber supply is then projected to ex- 6 pand in the last decade of the projec- 1979 RPA equilibrium tion period, but the projected equilib- 4 1989 RPA equilibrium 1993 RPA update rium supply quantity is only 1 percent Historical and current RPA 2 of total pulpwood supply in 2050. Even though wood panel produc- 0 tion is boosting roundwood pulpwood

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 demand, total pulpwood supply is receding relative to paper and paper- Figure 6. Trends in US pulpwood consumption at wood pulp mills, historical and comparison of RPA board consumption and production, projections. Note: To allow comparison to previous RPA projections, data include pulpwood receipts largely because of gains in paper recy- at wood pulp mills only and exclude pulpwood receipts at wood panel mills. cling and rising imports of paper and

24 Journal of Forestry • March 2002 paperboard. The total supply of pulp- ating product demands, to the advent timber, and yet pulp and OSB mill ca- wood in the United States (roundwood of increased paper recycling in the pacities in the West have receded in and residue receipts at wood pulp 1980s and 1990s (Ince 1994, 1999), recent years and are not projected to mills, pulpwood exports, and round- and most recently to an ongoing eco- increase significantly. Financial risks wood pulpwood for wood panels) in nomic recession and revisions of the to investment in the West, including dry weight per ton of paper and paper- US trade outlook with rising product uncertain timber supplies from public board consumed in the United States imports. Nevertheless, pulpwood har- lands, appear to preclude large-scale receded from 1.38 tons in 1986 to vest is still projected to increase be- investments in new pulp mills or OSB 1.28 tons in 1996. This ratio is pro- yond 2010, primarily in the eastern mills within the region. Thus, the re- jected to decline to 1.04 in 2010 and United States, as projected paper region appears likely to continue facing then remains relatively constant covery for recycling grows more difficult forest health and fire hazards through the projections to 2050. Total slowly in future decades and as wood with limited opportunity for strategic pulpwood supply per ton of paper and residue supplies decline in proportion responses based on commercial timber paperboard produced in the United to fiber demands. harvest. States was 1.52 in 1986 and 1.33 in US pulp, paper, and paperboard 1996, and it is projected to be 1.20 in production capacity is projected to re- Literature Cited 2010 and 1.24 in 2050 (with increas- main concentrated in the South, as AMERICAN FOREST & PAPER ASSOCIATION (AF&PA). ing supply of pulpwood for wood southern softwood pulpwood harvest is 1998. Statistics of paper, paperboard, and wood pulp. Washington, DC. panel production). projected to expand with expanded HAYNES, R.W., tech. coord. 1990. An analysis of the tim- growth and harvest concentrated in ber situation in the United States: 1989–2040. General Emerging Opportunities and Challenges pine plantations. The projected in- Technical Report RM–199. Fort Collins, CO: USDA The baseline analysis concludes that crease in fiber supply from pine planta- Forest Service, Rocky Mountain Forest and Range Experiment Station. the needs of future generations for tions will partly displace hardwood ———. In press. An analysis of the timber situation in the wood fiber products in the United pulpwood harvest over a period when United States: 1952–2050. General Technical Report. States will be met by a combination of hardwood timber inventories are pro- Portland, OR: USDA Forest Service, Pacific North- increased domestic production and in- jected to level out and decline in the west Research Station. HAYNES, R.W., D.M. ADAMS, and J.R. MILLS. 1995. The creased imports. Paper and paperboard South. The South is projected to re- 1993 RPA Timber Assessment update. General Techni- consumption trends are projected to main the dominant US region in pro- cal Report RM-GTR-259. Fort Collins, CO: USDA continue their historical pattern of duction of wood fiber products and in Forest Service, Rocky Mountain Forest and Range Experiment Station. INCE, P.J. 1994. Recycling and long-range timber outlook. General Technical Report RM-242. Fort Collins, Per capita newsprint consumption is CO: USDA Forest Service, Rocky Mountain Forest and Range Experiment Station. projected to fall to 81 pounds by 2010 and ———. 1999. Long-range outlook for US paper and paperboard demand, technology, and fiber supply-de- to 43 pounds by 2050, reflecting gradual mand equilibria. In Proceedings of the Society of Amer- ican Foresters 1998 National Convention, 330–43. substitution by electronic media. Bethesda, MD: Society of American Foresters. USDA FOREST SERVICE (USDA-FS). 1982. An analysis of the timber situation in the United States 1952–2030. Forest Resource Report 23. Washington, DC. decelerating growth. The analysis finds pulpwood supply and demand. The ZHANG, Y. 1995. Analysis of demands for paper and pa- that projected shifts in supply and de- North and West are not projected to perboard products in the United States. PhD disser- mand will exert downward pressures see any net expansion in wood pulp ca- tation, Department of Forestry, University of Wis- on pulpwood stumpage prices for sev- pacity, although there is some pro- consin–Madison. eral decades and have little influence jected expansion in OSB capacity in on product demands or prices, as indi- the North. cated by a flat projected trajectory for The West is projected to continue Peter J. Ince ([email protected]) is research product prices despite increases in receding in pulpwood supply and de- forester and Irene Durbak is research for- paper and paperboard production and mand, with serious implications for ester, USDA Forest Service, Forest Prod- consumption. efficient management of forest health, ucts Laboratory, One Gifford Pinchot Figure 6 shows how projections of fire hazards, and watershed quality. Drive, Madison, WI 53705-2398. pulpwood demand have declined in The West is experiencing a large accu- RPA timber assessments, comparing mulation of fire-prone, small-diame- current projections of pulpwood re- ter timber, particularly on public ceipts at wood pulp mills to those of forestlands, with wood volumes the 1993 RPA update (Haynes et al. dwarfing regional capacities to harvest 1995), the 1989 RPA (Haynes 1990), and use such timber. Wood pulp mills and the 1979 RPA (USDA-FS 1982). and OSB mills are the largest com- The decline is attributable to deceler- mercial consumers of small-diameter

March 2002 • Journal of Forestry 25