Trends and Transitions in Forestry and Timber-Related Markets

The forestry and Timber industries are in constant flux, grappling with global and national pressures. Climate change, the rise of green technologies, housing demands, labor shortages, and shifting demographics are reshaping the sector, presenting both hurdles and exciting new avenues. This article explores the latest trends and their impact on these vital industries, highlighting emerging opportunities for growth and innovation. For this analysis, we define the forestry and Timber sector broadly, encompassing essential services (timber operations, logging, and related support), sawmill and wood product manufacturing, and pulp and paper production. A detailed breakdown of these sub-sectors is provided at the end of this article.

Current State of the Industry

• Establishments: In 2022, the sector comprised approximately 75,000 establishments. Employment is heavily weighted towards natural resources, with over 45,000 logging businesses and more than 16,000 forest support service providers. Timber and wood product manufacturing accounted for 10,500 establishments. However, the sector has seen a 9% decrease in establishments over the past five years, with a further 6% decline projected by 2027. These contractions are primarily concentrated in wood product manufacturing and logging, which have collectively lost 8,700 establishments. Increased international competition, exacerbated by a strong dollar, has hampered export competitiveness. Downstream effects, such as the shrinking paper mill industry, have also contributed to this decline.
• Employment: The sector employed over 425,000 people in 2022, remaining relatively stable over the past five years. Significant job losses in areas like paper mills (-15,100) and logging (-7,900) were balanced by gains in forest support services (+8,700), sawmills and wood production (+8,350), and prefabricated home manufacturing (+6,550). Despite this recent stability, a 7% employment decrease (-28,500 jobs) is anticipated over the next five years, with nearly all sub-industries expected to experience job losses. The sector\'s workforce is primarily concentrated in the Northeast, Pacific Northwest, and Southeast regions of the US. Maine boasts the highest employment concentration (6.1), followed by Oregon (5.8), Mississippi (4.6), Alabama (3.8), and Arkansas (3.7).
• Revenue: The natural resource segment (logging, timber services, and forest support services) generated $21.6 billion in revenue in 2022, while the Timber and wood products segment achieved $153.5 billion. Logging, with $16 billion in revenue, led the natural resource segment. Sawmills and wood production, wood paneling manufacturing, and paper mills collectively represent 83% of the Timber and wood products segment\'s revenue. Over the past five years, the sector\'s total revenue has increased by 7%. While some industries, such as paper mills (-22%), timber services (-10%), and logging (-5%), experienced revenue declines, these losses were offset by growth in forest support services (+52%), wood paneling manufacturing (+32%), and sawmills and wood production (+26%). However, this positive trend is expected to reverse, with a projected 9% revenue decline ($15.7 billion) across the sector from 2022 to 2027. This decline will be largely driven by paper mills, which are forecast to experience the most significant revenue drop, a 24% decrease or $8.7 billion.
• Supply Chain: The forestry and Timber sector exhibits strong internal supply chain connections. Industries like sawmills and wood production and forest support services act as both suppliers and consumers within the sector. Other key buyers include paper product manufacturing, public administration, wood pulp mills, logging, and Timber wholesalers.
• Exports: In 2022, wood pulp mills led exports, shipping $7.8 billion worth of products to international markets, representing 38% of all exports from the Timber and wood products segment. Other significant exporters include sawmills and wood production ($4.3 billion) and paper mills ($2.5 billion). China and Canada are the US\'s primary export partners, accounting for approximately $4.3 billion and $3 billion in exports, respectively. Mexico, Japan, and the United Kingdom are also important trading partners.
   

Key Economic Drivers

Several key economic indicators influence the forestry and Timber sector's performance:

• Trade-weighted index (Nominal Broad US Dollar Index)
• Sawmill Timber prices
• Housing starts
• Value of residential construction
• Value of private nonresidential construction
• Private spending on home improvements
   

Trade-Weighted Index

This index measures the US dollar's strength against the currencies of its trading partners. A higher index indicates a stronger dollar, making exports less competitive. While the index rose in 2022, it is projected to gradually decline through 2027, potentially boosting export competitiveness for the forestry and Timber sector.

Sawmill Timber Prices

Timber prices have a dual impact. Rising prices benefit logging and sawmill revenues but increase input costs for wood product manufacturers. After a period of volatility, including a significant spike in 2021, Timber prices are expected to stabilize, with a slight 2% decrease projected through 2027.

Housing Starts

Housing starts, a key indicator of demand for building materials, surged in 2021 due to pandemic-related factors and favorable borrowing conditions. However, a slowdown is expected in the coming years due to a cooling housing market and rising interest rates.

Workforce Challenges

Labor shortages pose a significant threat to the sector's stability and growth. In 2022, logging equipment operators constituted the largest occupation within the sector, accounting for 33,592 jobs. However, many other key occupations, such as truck drivers and material movers, face intense competition from other industries. The forestry and Timber sector will likely continue to struggle to attract and retain qualified workers in the near future.

Challenges and Emerging Opportunities

Challenges:

• Projected Revenue Declines: The sector faces projected revenue declines through 2027, primarily driven by the struggling paper mill industry. Other key industries, such as sawmills and wood production, also face headwinds from rising interest rates, slowing housing starts, and trade tensions.
• Workforce Shortages: Competition for skilled labor, particularly in key occupations like truck driving and material handling, will continue to be a major challenge.
• Climate Change: Climate change impacts, including warmer winters, wildfires, storms, invasive species, and insect outbreaks, will disrupt forestry operations. 
   

Opportunity:

• Mass Timber, Structural Round Timber, and Cross-Laminated Timber: These innovative wood products offer a sustainable and strong alternative to concrete and steel, particularly in mid-rise construction. Mass timber's growing popularity, including cross-laminated timber (CLT) and structural round timber (SRT), presents significant opportunities for the sector. SRT, utilizing minimally processed whole trees, offers superior strength and predictability, opening up high-value applications for previously less marketable timber species.
• Nanocellulose and Cellulosic Fiber: Derived from wood pulp, nanocellulose and cellulosic fiber have a wide range of applications, from concrete reinforcement to electronics, and can be produced from lower-quality wood.
• Biomass and Biofuels: Wood biomass offers a renewable energy alternative. Advanced technologies are improving the efficiency of wood fuels, such as wood pellets and compressed wood bricks, creating new market opportunities.

Implications for Business and Economic Development

Targeted development in the forestry and Timber sector requires careful consideration of regional resources. Proximity to forest land is essential. Economic and business developers can play a crucial role by:

• Developing industry-driven workforce initiatives, including apprenticeships and targeted recruitment, to address labor shortages.
• Fostering partnerships between industry, research institutions, and universities to drive innovation in advanced materials, mass construction, and bioenergy.
• Collaborating with industry groups in the wood products, forestry, greentech, and clean energy sectors to leverage funding opportunities.
• Supporting existing businesses through B2B development, market analysis, and trade show participation. (A list of suggested trade shows is included in the full article).
   

Navigating the complexities of the forestry and Timber market requires a trusted and experienced partner. Timber Tradeasia offers comprehensive solutions and expertise to help your business thrive. Contact us today to explore how we can support your growth and success in this dynamic industry. Let us be your bridge to the resources and connections you need.