Page 14 - Georgia Forestry - Issue 4 - Fall 2024

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PRODUCT LIFECYCLE
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MACROECONOMIC OVERVIEW:
A Historical and Current Perspective
Marshall Thomas, president of F&W Forestry, delivered a macroeconomic analysis at the 2024 Georgia Forestry Conference, emphasizing that the for- estry industry, like any sector, goes through a lifecycle. He presented a product lifecycle curve that reflects the industry’s stages: development, growth, maturity and eventual decline.
“Any industry and any product within an industry goes through these cycles,” said Thomas. “It’s inevitable. It happens every time.”
Georgia’s forestry industry, which ini- tially thrived on naval stores and lumber production, has evolved over time with the introduction of products such as pulp and paper. Thomas pointed out that despite significant growth, the industry now faces an inflection point. As it adjusts to modern market demands, factors such as mill closures due to reduced demand and overall changing consumer prefer- ences have placed strain on Georgia’s supply chains. Thomas noted that the regional market dynamics, particularly in neighboring states, have had a profound impact on Georgia’s forestry sector.
“With all the mill closures and new products we’re talking about, it’s a dif- ferent landscape today,” said Thomas.
These mill closures in South Carolina, Florida and Alabama have reduced demand in those areas and freed up wood to flow into Georgia, creating an oversupply, which has resulted in lower
prices for landowners selling timber in the affected areas. The excess supply of wood, recognized as a valuable raw material for making green products such as aviation and shipping fuel, is now available to help the world transition to a carbon-neutral economy. We just need to attract the industry that can use the material.
REGIONAL MARKET CHALLENGES:
A View from Augusta
Alex Nixon, a landowner and certified forester in the Augusta area with over four decades of experience, provided a ground-level view of the challenges faced by Georgia’s forest owners, particularly in his region. Nixon spoke candidly about the difficulties resulting from mill closures and international trade pressures.
“South Carolina losing the old Cham- pion mill at Canton, and then WestRock at North Charleston, decimated the pulp- wood markets in the western side of the state, putting tremendous pressure on mills in Georgia, especially Augusta and Savannah,” said Nixon.
One of the unintended consequences of these mill closures has been an influx of forest residuals piling up across the state, leaving forest owners with few options to manage the excess.
“There’s a surplus of residuals, and it’s starting to create a bottleneck,” said Nixon. “With fewer mills to take in pulp- wood and residuals, landowners are either sitting on excess material or having to
export it at a loss. It’s affecting the entire supply chain.”
The buildup has driven down prices for forest residuals, forcing many landowners to explore alternative markets, such as bioenergy or even overseas buyers.
The Augusta region, heavily reliant on its local mills, has been particularly hard-hit by recent market shifts. Nixon explained how changing housing market dynamics and lumber imports from coun- tries like Brazil have further exacerbated the situation.
“We’re importing specialty lumber that doesn’t go into what I call tract hous- ing,” said Nixon. “Ever since the Great Recession, we’ve been told 1.5 million housing starts were the happy medium nationwide. Now, we’re looking at around 975,000 housing starts this year, a third less than needed.”
The reduction in housing starts has led to decreased demand for timber, placing even more pressure on local mills.
Labor, too, presents a significant challenge. Nixon underscored the dire situation faced by the logging industry, noting the challenges of rising costs and an aging workforce.
“I don’t see how the ones that are still standing stay in business,” said Nixon. “Labor costs have skyrocketed, diesel prices have run up, and there are shortages of trained labor. And the average logger in the Deep South is still 57 years old.”
This aging workforce, combined with increased operational costs, has left many in the industry questioning the long-term viability of their businesses.
12 | GEORGIA FORESTRY
“There’s a surplus of residuals,
and it’s starting to create a bottleneck. With fewer mills to take in pulpwood and residuals, landowners are either sitting on excess material or having to export it at a loss. It’s affecting the entire supply chain.”
— Alex Nixon, Augusta landowner and certified forester