It’s been a few months since our last newsletter, and boy oh boy how things have changed. In April, I wrote about how the lack of logging and trucking capacity, paired with a healthy demand from the mills, resulted in high fiber costs. At the time, I wrote that while our trees are plentiful and forests are managed sustainably, there was a great need to get people back into equipment seats.
Well, after an unseasonably wet summer with several serious flooding events, loggers have faced significant challenges getting equipment into the woods, creating even more turmoil for our loggers and truckers following a challenging winter season with unseasonably warm temperatures. It rained nearly every day in June, and it hasn’t been much drier since. The ground is saturated and roadways around the state have washed out.
To quote an oldie but goodie by The Manhattan Transfer, “Trickle, trickle, splash, splash. Tell me how long this rain will last. The rain keeps dropping, there aint no stopping. Tell me how long this rain will last!”
While loggers and truckers have dealt with challenges on the supply end, our pulp and paper mills and sawmills have grappled with issues on the demand side of the equation.
Pulp has lost significant value since the beginning of the year with demand for paper products softening as well. As a result, mills in Maine and across the country have cut back on production and reduced wood purchases, resulting in lower fiber prices for loggers and landowners. Year-over-year, paper and paper board production has dropped by 9%, print and writing paper production dropped by 16%, newsprint is down 4%, packaging is down 9% and tissue is down 2%.
These reductions are concerning; however, they are expected to be temporary and are driven by high inflation, which in turn caused reduced demand and destocking. In other words, these trends aren’t permanent and market demand for these products is expected to recover in the short term.
The Federal Reserve’s attempt to lower inflation by rapidly increasing interest rates to a 22-year high has had a chilling effect on solid wood markets by slowing the demand for housing starts. Fewer housing starts has translated to a lower demand for structural lumber, siding, hardwood flooring, panels and other solid wood products. As our board member Eric Kingsley explains in a recent article, despite high interest rates, there is a pent-up demand for new housing that will hopefully be unleashed once interest rates decline.
Also relevant to our region, but not to Maine specifically, ReEnergy recently closed the Black River facility in New York after losing the ability to participate in the state incentive program for renewable energy. This illustrates the profound impact that policies set by lawmakers can have on our industry and rural economies. This is why the Maine Forest Products Council was established more than 60 years ago. As an organization, we bring all facets of our industry together to serve as one strong, unified voice in Augusta and Washington.
Speaking of coming together, I hope that you all can join us on September 17 and 18 in Bangor at the Cross Center for our 63rd annual meeting. This event is always a crowd favorite, and it is usually around this time that staff begins to fret over the final details – including the RSVP list! Now is the time to register, if you haven’t done so already, and to sign up for sponsorships. This year’s lineup includes some really exciting speakers and tours, so I hope you can join us. For more information, and to register, visit maineforest.org/63rd-annual-meeting. We hope to have RSVPs finalized by Friday, September 8. See you soon!