The US South is poised to become a critical softwood resource for regional and global forest product markets.
The US South softwood timber resource is large, highly cost-competitive, and increasingly critical for the global supply of several forest products. In 2020, an estimated 12% of the world’s conifer timber harvest was in this region. With highly productive pine plantations, log prices are among the lowest in the world. They are also very stable. These advantages are attracting investment in forest products manufacture. Softwood lumber production grew by 74% between 2010 and 2021, reaching 35% of North American and 10% of global supply (Figure 1). During the same period, wood pellet production increased fivefold and now represents almost a quarter of global supply, mainly destined for the European energy sector.
The region is ideally placed to serve the North American market for forest products, and that will remain the focus for most manufacturers. But with emerging softwood supply constraints globally, and strong demand in Asia and elsewhere for softwood-derived products such as construction lumber, wood pellets, and paperboard for packaging, the US South softwood resource will play an important critical role. In many cases, this will be in competition with the New Zealand and Australian forest industries.
Competition in Asian log markets
The Asian softwood log market is one example of where increased supply from the US South can impact New Zealand and Australian exporters. Few other regions can increase softwood log exports to compensate for Russia’s log export ban and an expected decline in exports from bark-beetle damaged Central European forests. Even New Zealand and Australia will struggle to expand softwood log exports, with harvest levels considered to be near full potential.
Softwood log exports from the US South grew from less than 60 thousand m3 in 2010 to almost 2 million m3 in 2021, mainly to China. The US South remains a relatively small exporter compared to New Zealand, which currently exports around 20 million m3. But with declining supply from Russia and Central Europe, it will likely expand exports further. There is also increasing Chinese interest in the US South for wood chips, to supply the latest wave of pulp and paper mill expansion expected over the next 2-3 years, requiring softwood which is increasingly challenging to source in Asia-Pacific.
Opportunity for Australasian know-how
Low softwood costs in the US South are mainly due to the relatively low and declining stumpage prices that forest owners receive. Harvesting and log transport costs are not particularly competitive. During the period 2000-2020, delivered prices for softwood logs softwood stumpage prices fell by 4.5% per year in real terms while harvest and log transport costs increased by 0.2% per year. Forest industries have enjoyed declining wood costs but forest owner returns are compromised. This is unusual in an international context, where the evolution of harvesting and haulage technology have generally helped reduce operations costs – driving lower delivered wood costs while also ensuring strong returns for forest owners.
In many ways, logging operations in the US South are similar to New Zealand and Australia; pine plantations dominate, mixed sawlog-pulp log regimes are most common, and harvesting is mainly full-length stem extraction for processing at a central landing. The conditions are ideal to adopt many of the harvesting innovations that have become in Australasia, including full mechanization of felling, the use of advanced harvesting heads, and log-making optimization. Trials have demonstrated the potential for these technologies in the US South – including reduced costs, improved safety, and value recovery – but there remains a significant opportunity for widespread implementation.
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In a new Focus Report: US South Softwood Industry – Outlook for the world’s most important softwood fiber basket, the consulting companies Wood Resources International (WRI) and O’Kelly Acumen establish a fact base around current forest resources and industry in the Southern US. The study provides predictions on likely developments of future wood supply and forest industry expansion and discusses the impacts these factors will have on global wood markets. It also highlights what the implications of these developments will be for timberland owners, stumpage rates, and roundwood prices. For more information about the study, visit the WRI website.