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Economist says future looks good for Southern forest industry

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At least one economist and a local timber products manufacturer see a bright future for the Southern forest industry.

Lynn Michaelis, president of Strategic Economic Analysis, told participants at the Georgia Forestry Association conference last month that the next 10 years could be the decade of forestry in Georgia.

Hal Storey, vice president at S.I. Storey Lumber in Armuchee, also sees a positive outlook for the industry — with one caveat.

Storey said the softwood lumber agreement with Canada is due to expire in October 2015, and there’s been little movement to negotiate a new one. The trade agreement addresses the U.S. contention that the Canadian industry is unfairly subsidized by provincial governments.

Still, Storey said his company has had a good year.

“It’s a little slower now than it was a few months ago, but this feels like a more typical pre-recession year,” Storey said. “We feel good about where we are and the industry as a whole.”

Michaelis said the economy has been as unpredictable as the World Cup, but the state is well-situated to take advantage of a rebound.

“Georgia’s abundance of trees could position the state to reap some big rewards: more production, new jobs, greater revenues. A triple play,” said Michaelis.

The economist believes that one of the factors that should benefit the Georgia forestry industry is a comeback in the housing sector. Since the Great Recession, demand for new homes was almost nonexistent — until the last 18 months.

Rome-Floyd County building official Howard Gibson said permits his office has issued for single-family housing starts through the first six months of 2014 are up 10 percent from a year ago.

That number might be a little deceiving, because the difference is between 30 and 33, but Gibson said the few builders doing anything seem to think the situation is picking up.

“We just don’t have that many builders anymore,” he said. “There are a couple that are into dealing with speculative houses, and the others are pretty much pre-sold deals.”

Eric Abercrombie is a spokesman for Georgia-Pacific, which now owns the large sawmill behind the International Paper linerboard plant in Coosa. He said G-P has seen a slow but uneven recovery in its building products division.

“We haven’t even returned to the level of demand that we experienced several years ago,” Abercrombie said.

Storey said his business specializes in commercial applications, and although he follows housing market data to help calculate prices, his work depends little on the industry.

A significant amount of the timber produced at the Storey mill involves treated bridge timbers. Some of that is used in projects where the developers wants a rustic feel for a road or trail in the development.

“That business was flat for a long time, but we’ve definitely seen that come back in the last two and a half years,” Storey said.

Michaelis said the second factor leading to a bright future is the continuing demand for lumber in China. He said demand there is expected to remain strong as the country builds for its population, which is shifting from a dense, urban lifestyle to a slightly more suburban way of life.

Storey said China has been seeking more and more Southern yellow pine. He said the Chinese also are interested in importing whole logs.

“What the future is with that is anybody’s guess,” Storey said.

A third factor that bolsters Michaelis’ optimism, he said, is that other timber-producing regions simply are not able to meet the demand that is continuing to grow.

“The Canadian lumber industry cannot expand. In fact, it’s shrinking,” Michaelis said. “Canadian lumber capacity will drop from a peak of 39 billion board-feet in 2005 to under 31 billion board-feet over the next few years.”

The issue in Canada is a beetle infestation that has been around for several years.

Michaelis also cites the growth of the wood pellet industry, especially in the Southeast. The pellets are largely used to fuel European power plants.

Storey said that Varn Wood products in Hoboken, Georgia, near Waycross, has become a major producer of the pellets that are being exported to Europe. Several pellet mills have been constructed across Georgia in the last five years.

Georgia Biomass built a facility outside Waycross that can accommodate more than 250 log trucks a day and can produce well over 750,000 metric tons of wood pellets annually.

Taking all the factors together, Michaelis believes the timber industry in the South has lots of room for growth.

“Georgia has 24.3 million acres of timberland, strong infrastructure, experienced foresters and two vibrant ports — crucial to meeting U.S. and international demands,” Michaelis said.

Abercrombie at Georgia-Pacific said he could not speculate what the future looks like over the next three to five years.

“We acquired the Rome facility through a transaction with International Paper, and that’s an example of our long-term view of growth and confidence in the future,” Abercrombie said. “We’re investing in our facilities across the board to ensure that we’re there and can grow with the customers’ needs once the demand does come back.”

Storey said the softwood lumber agreement with Canada is critical because, without it, the U.S. industry could be back to the same position it was in nine years ago — with Canadian mills flooding the U.S. market.

“We’d be back at looking at another legal challenge to the anti-dumping, but we’re not there yet,” Storey said. “We’re hopeful that they will realize that we’re not going to rubber-stamp the agreement we had, because there are some issues that need to be corrected.”

He said duties on U.S. timber are collected at the border by the Canadian government, and there is some indication that some of those duties are being put back into the system as de facto subsidies for the Canadian mills.

“There are ways to fix all that and still remain friends and have viable trade back and forth across the border. But you’ve got to come to the table to talk about it first,” Storey said.