A group of industry analysts finds the U.S. forest products industry has fallen far behind in producing new things out of wood.
“Many traditional forest product markets have matured or declined,” the U.S. Endowment for Forestry and Communities report stated. “Yet the sector’s research and development funding — essential to innovation — has fallen and its R&D capacity has withered.”
The report, released on Oct. 6, found the wood products sector invested just six-tenths of a percent of its sales revenue toward research and development, while the U.S. manufacturing sector average was six times as much. Specific industries like biomedicine spend 12 percent or more.
Report authors were Robin Jolley of American Forest Management Inc., Tim Punke, formerly of Weyerhaeuser Co., Richard Ringeisen of the University of Illinois, Larry Selzer of the Conservation Fund and John Williams of Domtar.
“I think it accurately calls out that there’s a significant decline in public and private dollars going in,” University of Idaho Policy Analysis Group Director Dennis Becker said. “What’s happened in the last decade or two is the responsibility (for R&D funding) has fallen back on the public sector. The private sector has really pulled back in that area.”
The report noted that since the financial crisis of 2007, more than 1,000 mills and factories closed nationwide as housing starts fell 78 percent in the following two years. More than half the country’s pulp and paper mills have closed in the last 25 years, driven in part by the rise of paperless digital media. With about 56 percent of the nation’s timber coming off private forests, that’s put pressure on property owners to find other uses for their land.
“Housing starts in 2016 were barely half the January 2006 level,” the report authors wrote. “In many areas, timber markets alone are not strong enough to provide the markets and income certainty that private landowners need to maintain working forests.”
At the same time, technology research went dim. The report authors counted barely a quarter of the researchers in forest products technology, chemistry and general engineering compared to three decades ago. The U.S. Forest Service Forest Products Laboratory shrank from 725 after World War II to 141, only 50 of whom are researchers.
Todd Morgan at the University of Montana’s Bureau of Business and Economic Research said that problem grew as the timber industry moved away from its historical “vertically integrated” corporate structure.
“When you had mills that also owned the land and had logging crews and the value chain was all in one place, they were recovering the most value from the product,” Morgan said of the old style of companies like Champion International. “When you split that into the part that owns the land and the part that does the milling, that’s changed who the players are and who wants to get involved in the R&D. And what they do do, they’re using for their own competitive advantage. It’s not something to lift all boats.”
The western United States, primarily Oregon and Washington, produce about a third of U.S. lumber demand. The mostly private forests of the Southeast contribute another third, with Canada supplying the remainder. Becker said that presents a particular challenge for dry, slow-growing forests in places like Montana, Idaho, Wyoming, Colorado and Arizona.
“The low-value products from those Ponderosa pine forests have no good markets in those areas,” Becker said. “And there’s not enough federal money to manage those forests without products being removed (such as traditional sawlogs). Those areas need to create product opportunities like heat and electricity, structural applications or manufactured products. That’s where the infusion of research is really critical.”
The paper recommends more science on a variety of topics, from microcrystalline cellulose used in food and cosmetics to renewable energy production. It also calls for more strategic research effort from the federal government and universities while noting “incentives are needed both for corporate investment in R&D and for private landowners’ forest management and conservation.”
Society of American Foresters Director of Government Affairs John Barnwell agreed the industry needs to have more collaboration and clear strategic focus.
“But we don’t want basic research overlooked,” Barnwell added. “It’s important to experiment with new technology. But don’t lose sight of changing climate conditions, best management practices and work that’s actually going on in the forest.”
While the report observes that forest thinning efforts are essential for growth of large trees in the long term, “they’re prohibitively expensive if they don’t generate any income to offset the costs. Small diameter wood that was once sought by pulp and paper mills now has little value in some areas because of mill closures.”
On the other hand, companies like Columbia Falls’ SmartLam Technologies Group has seen enough success with its cross-laminated timber panels made from small wood that it plans to move into Weyerhaeuser Corp.’s former lumber mill in January. The company expects to increase production from 20,000 cubic meters a year to more than 80,000 cubic meters, and grow its workforce from 31 to 75 by the end of 2019.
Especially in the West, those forests also require multiple-use management for things like water supplies, recreation, and wildlife habitat. The authors noted society hasn’t found a good way to price those ecosystem services,
“If we do want to manage our lands, do restoration treatment, hazardous fuels reduction, and help reduce incidents of catastrophic forest fires, then we need to have an industry and capacity to do work on the ground,” Morgan said. “There’s got to be a profit there. You have to be able to make money doing it. Congress isn’t willing to write a check to subsidize all forest management activity.”