Crowd-sourced perspective on trends in the Northeast forest industry - logging, forestry, markets, carbon, labor, etc. Presented at the Forest Resources Association Northeast Forum - January 2020

1. Forest Industry Trends in the Northeast:
What to Expect in 2020
Forest Resources Association
January 2020
Eric Kingsley
Innovative Natural Resource Solutions LLC
kingsley@inrsllc.com
Phone 207-233-9910

2. Innovative Natural Resource Solutions LLC
• Founded in 1994
• Offices in New Hampshire and Maine
• Focused at the intersection of forest industry, energy and
economic development
• Services include:
- consulting in renewable energy
- advocacy
- forest management and protection
- forest certification and sustainability
• Clients from the private, non-profit and government sectors
• Conducted work in all regions of North America
• www.inrsllc.com
2

3. Crowdsourced Perspective on the Forest Industry
• Every December I ask +/- 50 forest industry leaders from around the
region for quick thoughts on where things are headed
• All industry sectors
• What I am sharing is raw perspective
• I am telling you what people told me
• I may or may not agree with what is said
• All comments have been anonymized
• It’s important to hear what everyone is thinking
• If you want me to ask you next year, let me know

4. Friends:
I am hoping you can take a few minutes to quickly share a few things you are seeing
in the forest industry – opportunities, challenges, trends, etc. Anything that comes
to mind – I am looking for the full range of things we’ve seen this year and expect
to encounter in the coming year(s).
I will be using your responses – mixed with many others and my own – for a few
things I will be writing in the coming month for:
- The Northern Logger
- Farm Credit East
- Forest Resources Association
- Others that reach out
Not to limit you, but past subject areas have included – pulp and paper, biomass
electricity, sawmills, logging, trucking, land management, emerging markets, forest
certification, and carbon.
Thanks in advance – I find it incredibly helpful to get some quick thoughts from
around the region and across the forest industry.

5. Timberland
• Land Managers have not reduced their own costs to make forestry, logging,
procurement and mill operations more efficient.
• Land ownership in Maine will continue to focus on other values besides
timber as stumpage rates stagnate and new landowners become
disconnected with forest management.
• I am concerned about some of the land ownership changes. If a TIMO or
REIT, we [mill] know we get wood. When we look at high net worth
individuals, we don’t know how they will behave, or what their objectives
are
• Landowner margins are being squeezed and the trend is expected to
continue in 2020

6. Logging and Trucking
• Loggers are facing the same cost increases as sawmills and rates paid
to loggers need to increase to offset the costs. There is nowhere else
for them to go which ultimately will affect stumpage rates back to the
land.
• Logging capacity declines in Maine has great potential to constrain
the entire forest products sector growth for some time to come.
• Market loss a few years ago masked the shrinking logging workforce

7. Logging and Trucking (2)
• A shortage of loggers, a shortage of truckers
• There is not the horsepower to cut the wood
• For mills, that is more long-haul wood, more wood yards
• [Mill] now has some trucks and are using them to go get wood from
the landing
• Loggers and haulers are seeking increases, potentially emboldened by
recent legislative actions in Maine, but also due to labor shortages
and issues retaining / attracting labor

8. Sawlogs
• Spruce and Fir high grade and saw logs have lost X% or more of their
value this past season. This value loss has not been made up by other
round wood products.
• Building products will remain flat despite a robust economy as houses
shrink in size and people stay home longer and move to the cities.

9. Sawlogs (2)
• Sawing costs continue to increase due to increases in labor, insurance,
energy, transportation, parts and supplies, and equipment. Most of
the softwood lumber in Maine comes from highly automated modern
mills. In the past cost increases could be offset by capital investments
to improve efficiency. The low hanging technology fruit is no longer
there for the heavily invested Maine mills and cost increases must be
absorbed through raw material cost. Raw material is the only true
variable cost left for modern mills that produce at as low a cost
possible. So, as sawmill costs rise the price paid for logs will have to
absorb the increases.

10. Cross Laminated Timber
• Mass timber will continue to grow in market – but will there be a
facility in Maine and when is a question.
• Several large companies are making large CLT investments around the
country which will make it very difficult for someone to invest in CLT
in Maine. The capital announcements made by these large
companies will satisfy demand nationally for quite a few years.
Unfortunately, I believe the CLT window of opportunity for Maine is
closing quickly.

11. Pulp & Paper
• Our paper mills have invested a lot of money in the past few years and we
need them to be profitable long term. The entire industry benefits with
long term stability. Having too much demand for any product that comes
from our forests is not good for long term stability.
• Pulp and paper will continue to consolidate, restructure, and convert assets
from Graphic into Packaging, Tissue, and Specialty products.
• Despite the market rationalization over the last several years, pulp and
paper is redefining themselves, the strongest of the mills are surviving and,
in some cases, thriving, and new market entrants are beginning to
experience some success.

12. Emerging Markets
• There is definitely reason to be optimistic about the future for
landowners and loggers. The idea that Maine’s trees have many
other uses besides the traditional pulp, lumber and fuel wood. And
that some of these other uses, such as bio-chemicals, plastics, liquid
fuels, etc. may generate much higher raw material values, creates
excitement and an expectation of good times ahead.

13. Emerging Markets (an old perspective)
“…once wood is reduced to a pure and stable chemical it provides the base on
which the chemist can build a hundred different products.
More and more the wood pulp and paper industry is joining forces with the
chemical industry.
It is conceivable that the forests of the United States and Canada within the next
half century will supply us not only paper for many varied purposes… but also
quantities of foodstuffs, alcohol, and chemical raw materials from parts of the
wood which we are only beginning to use today.”
President, International Paper
John Hinman, January 31, 1948

14. Trade
• Imports and trade issues rise in importance as the US economy is
targeted by globalization.
• The issues with the Chinese markets in general, and the exporting of
both logs and lumber specifically, has been a concern, especially
within the hardwood sawlog markets. For some species, Oak
especially, this has been a big deal and I’m not sure that the domestic
markets can or will make up the difference.
• Trade issues (tariffs on Chinese imports, softwood lumber agreement,
etc.) continue to negatively affect those dependent on the border
mills and other international markets

15. Labor
• Attracting younger workers to our industry will be a challenge. We
are losing our connection to the land.
• Attracting labor to our industry will require some element of
immigration reform.
• Work force and labor continue to be an issue….we need to keep our
young people in the state, and attract others as well

16. Climate
• I also see the changing climate, and the weather fluctuations
specifically, as being a concern for the logging sector mostly.
• Precipitation events are getting more frequent and severe which have
adversely affected timing and access to harvest areas.
• These weather events, and the subsequent changes in ground conditions,
have, and perhaps will continue to, fostered some contractors to start looking
at changing their operations and equipment mix.
• Forest pests need to be given additional thought and consideration as
the climate warms

17. Carbon
• At some point US policy will regain a focus on Carbon neutrality and re-
engage in climate change mitigation.
• Carbon credit expansion represent a significant risk to ongoing sustainable
harvesting in the US.
• Some real concerns about carbon markets
• Climate change is a huge opportunity for forest owners….we need to be a
meaningful part of the conversation and “own” the benefits forests bring.
Absent our presence, others will dictate what benefits forests bring to the
table, and what the value is.

18. Carbon (2)
• Continued emphasis on how prolifically wood permeates society will
be important, especially in the carbon discussion and climate change
discussion
• Emphasis on the entire carbon life cycle of wood needs to be
reinforced, wood products impacts, etc.
• Did you see the proposed legislation in Massachusetts to stop all
management in state-owned land for the stated purpose of increased
carbon storage?

19. Discussion and Questions

20. Eric Kingsley
Innovative Natural Resource Solutions LLC
Phone 207-233-9910
Email kingsley@inrsllc.com
20DRAFT - FOR REVIEW AND DISCUSSION ONLY