Report into US South softwood industry highlights pellet expansion opportunities

Sawlog supply in the US South is tightening, but a surplus of small logs and residues creates opportunities for pulp and wood pellet expansion.

Wood Resources International (WRI) shared its new focus report, ‘US South Softwood Industry – Outlook for the World’s Most Important Softwood Fiber Basket’, establishing a fact base around forest resources and industry in the US South.

The area’s softwood industry has ‘enormous potential’ for a variety of reasons, said the WRI. The region has a significant forest resource with room for expansion, low and stable wood costs, and a thriving lumber and pellet manufacturing sector.

The local forest industry is set to grow in the coming years and play a more prominent role in regional and global forest product markets. This expansion will lead to a tighter log market, but growth will still exceed harvests (drain) in most states.

In the long term, the drain could overtake growth in some states unless the productive forest area expands, harvest yields improve, or access to small woodlots and underutilised forest increases. It should be noted that wood markets are often very local, and the demand-supply balance can vary significantly in micro-markets within individual states, the WRI stated.

The sawmill industry is the largest end-user of softwood logs in the US South and is also the sector that has increased capacity the most over the past 10 years. Lumber output has grown from 26% of North American production in 2011 to 33% in 2021.

Lumber producers in the region are still not likely to be significant players in international markets due to expected strong domestic demand and declining imports from Canada. However, the continued expansion in capacity will help reduce US lumber import demand in the coming years.

Pulp mills receive approximately one-third of harvested softwood roundwood in the US South. With the pulp sector not expected to expand in the short-term, wood fibre demand will not change much. With increases in residue supply from the expanding lumber sector, there will be less demand for softwood pulplogs, a trend expected to intensify in coming years.

The WRI’s report highlights plans for increased manufacturing capacity, reduced US lumber import needs and opportunities for forest products exports from the world’s largest softwood forest product-producing region.

One of the key conclusions of the study is that the expansion of the lumber industry in the US South looks set to outpace wood fibre-based industries (e.g. pellets, panels, pulp), potentially creating a deficit in demand for small-diameter logs and sawmill residues.

Finding end-uses for smaller logs could be “the most significant predicament” for timberland owners in the region in the coming decade, said the WRI. However, the surplus of smaller-diameter logs will create long-term opportunities to expand pulp and wood pellet sectors.

The full report is available on the Wood Resources International website.

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