Introduction

Pulpwood, the smaller trees typically chipped for making wood pulp or oriented strand board (OSB) or wood pellets, provides balance and diversification to the forest products industry. Robust, sustainable timber markets and wood baskets feature a broad set of wood consumers. A local wood basin with no demand for pulpwood or chips is like a shoe box with one shoe: incomplete.

While roundwood (logs) deliveries satisfy most pulpwood demand across the U.S., this varies by region and mill type. In the South, chip mills supply close to 20% of total pulpwood demand. In the West, they supply close to 30%, though the total volume is smaller given that fewer pulp mills operate in the region. According to the Wood Fiber Review, the actual supply profile of each region in North America varies based on pricing and market demand. Forisk research suggests close to 60% of pulp mill wood-using demand in the U.S. is met by roundwood.

Pulpwood Drivers of Demand

Wood fiber costs account for over 50% of the total pulp manufacturing cost worldwide, so tracking wood fiber costs supports investment and operational decisions across a range of manufacturing facilities and markets within the forest sector. In North America, demand for pulpwood derives from three primary sources. First, traditional forest industry consumers, such as pulp mills and OSB plants, use pulpwood to make pulp and panel products. Second, wood bioenergy projects use pulpwood to produce pellets and electricity. Finally, pulpwood demand associated with liquid biofuels capacity is increasingly in the news, especially with growing interest in sustainable aviation fuels (SAF).

Pulpwood Supplies

Changes to pulpwood inventories over time include (1) pulpwood removals from the existing pulpwood inventory; (2) new pulpwood inventory as young trees grow and become merchantable; and (3) decreases in pine pulpwood inventory from older pulpwood trees that mature and grow into grade quality timber.  When digging deep into, for example, pine pulpwood supplies in the U.S. South, the most important characteristic for short- and medium-term projections is the age class distribution of the pine plantations (inventories) that drive industrial forest management in the region.

Pulpwood in the U.S. South

In the U.S. South, wood-using mills consume more pulpwood than grade (table). For pine pulpwood demand across 11 states, quarterly rankings in the Forisk Research Quarterly highlight Georgia, Alabama, and Louisiana as the three biggest consumers in the region.

Roundwood Demand, U.S. South, Q4 2021-Q3 2022

	Pine	Hardwood
Pulpwood Demand (million tons)	130	34
Grade Demand (million tons)	105	20
TOTAL DEMAND (million tons)	235	54
% pulpwood	55%	63%

Source: Q3 2022 Forisk Research Quarterly

When “scoring” markets for projects that require pulpwood supplies, investors prefer those that feature abundant supplies (both standing and from mill residuals), limited competition, lower prices, and sufficient logging capacity. On a relative basis across regions, this helps explain the attractiveness of the U.S. South for pulpwood-using facilities.

Interested in learning a process for tracking and analyzing the price, demand, supply and competitive dynamics of local timber markets and wood baskets? Register here for Forisk’s 2022 “Timber Market Analysis” class, offered virtually via Live Zoom on November 16th and 17th. Early registration ends November 2^nd!