Is paper production in decline?

The answer may surprise you. And industry is coming up with new innovations all the time

Is paper demand in a continuous long term decline in the U.S. and what impact will that have on landowners’ harvest plans? This question looms large in timber harvest economics, since the sale of low-grade wood is a necessity for a successful harvest.

There is some good news, according to Forest Research Group economist Jack Lutz, who writes a newsletter on forestland investment. While older paper products, like newsprint, continue their decline in demand, other products are on the increase. This is particularly true of demand for household and sanitary paper, where tonnage has increased 16.1 percent over the last 20 years. That has also been true of paperboard and packaging paper tonnage, which is up 3.2 percent over the same time.

These growth trends are more marked around the world with total paper production having increased globally by 35.9 percent. Meanwhile, total U.S. production is down by nearly 17 percent, according to an analysis cited by Forest Research Group.

Meanwhile, a 2017 report from the consulting firm McKinsey suggests that the boost in worldwide demand for consumer paper and packaging will continue to grow, driven by retail trends (think Amazon and Chinese e-commerce giant Alibaba) and increasing living standards worldwide.

Other sources of new demand are also on the horizon such as:

Wood-based jet fuel and straws.

Biofuels have been manufactured from lower value wood for decades, but literally reached new heights in 2016 when Alaska Airlines used fuel made from timber harvest residue to power a flight from its home base in Seattle to Washington, DC. The airline emphasized that wood-based jet fuel is a long way from commercialization.

But the dramatic development underscores a broad business trend--- large companies wanting to adopt renewable sources in their supply chains.

"This latest milestone in Alaska's efforts to promote sustainable biofuels is especially exciting since it is uniquely sourced from the forest residuals in the Pacific Northwest," said Joe Sprague, Alaska Airlines' senior vice president of communications and external relations

A similar move is going on at McDonald’s restaurants, where plastic straws will be eliminated in the U.S. While the replacement material in the U.S. has not been announced, at McDonald’s in the U.K. and Ireland all straws will be made of paper by sometime next year.

Energy biomass can be an attractive market for low-grade timber from harvests, but reliance on government regulations and incentives can cause it to be a very volatile market. This was proven out in New Hampshire where the legislature’s override of Governor Chris Sununu’s veto of legislation brought the market back from near death.

The law (passed over Sununu’s veto) requires the state’s utilities to buy $18 million per year from the state’s biomass power plants. New Hampshire Timber Owners Association (NHTOA) and others in the forest products industry pressed the legislature to override the veto.

“When you consider the vast impacts this bill has not on various sectors of New Hampshire’s economy, but also on (its) established and treasured value, the small cost is vastly outweighed by the benefits,” said Jasen Stock, executive director of NHTOA.

New Hampshire has nine biomass plants, according to the Biomass Power Association.

In contrast, Wisconsin has two plants (in Ashland and Cassville). Minnesota has eight biomass plants and Michigan has seven.

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