Timber Mart-South
Warnell School of Forest Resources, The University of Georgia, Athens, Georgia 30602-2152
3rd Quarter 1998
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Market Conditions
Depressed stumpage markets were widespread throughout the South, with reports of overstocked mill inventories, loggers on quotas, and too much salvage wood on the market. Many reported holding off sales until prices picked up. The quarter was characterized by mill downtime and closures, with little to no new capacity announced.
The upward trend seen in pine sawtimber stumpage prices which began in the second quarter of 1996 has taken a downward fall. Third quarter pine sawtimber prices averaged $36.66/ton, off $5 a ton from last quarter, a level not seen since 1996.
Hardwood sawtimber stumpage prices were down $1.60 a ton southwide, falling back to prices seen this time last year. Dry weather allowed access into most tracts early in the quarter and an oversupplied hardwood market was reported in most states. Texas, however, reported grade hardwood bringing in excellent prices this quarter.
Pulpwood stumpage prices showed similar movement this quarter, with both pine and hardwood markets reported as being very slow. In Florida, very little green wood was on the market with such low prices being paid for fire salvage wood. Some areas of south Georgia felt the impact of the Florida fires, as salvage wood impacted regional prices.
Southwide pine pulpwood stumpage averaged $9.82/ton third quarter, a price not seen since third quarter last year. Hardwood pulpwood prices dropped considerably third quarter, averaging $4.93/ton southwide. Multiple states reported an oversupply of both hardwood and pine pulpwood with heavy inventories at mills and woodyards depressing prices.
News During the Quarter
Chesapeake Building Products Co. has converted its West Point, VA hardwood sawmill to pine. This is the second Chesapeake mill to switch from hardwood to pine, with the first occurring in 1994 at Princess Anne, Maryland.
Crown Vantage Inc.'s previously announced plan to sell the St. Francisville, LA pulp and paper mill has been abandoned after bids did not meet company expectations. The company plans to continue exploring restructuring ideas (See TMS Newsletter, 2nd qtr., 1998).
Rayonier plans to invest $14 million in its Swainsboro, GA sawmill to increase lumber recovery and enhance cost competitiveness. Drying and finishing facilities as well as enhanced process control technology will be added. Completion is expected sometime in the year 2000.
Temple-Inland Forest Products announced plans for a new sawmill at Pineland, TX along with the expansion of its finger-jointing capabilities in Diboll. The Pineland mill will replace the company's plywood mill at the site and the expansion at Diboll will utilize some of the site's existing facilities.
Boise Cascade Corp. announced the closure of their pine sawmill at Fisher, LA. The company cited a limited timber supply, increasing timber prices, and mill inefficiencies as reasons for the shutdown. Boise plans to close this and three other mills in the Western U.S. by year-end.
Champion International Corp. announced it will curtail production of southern bleached kraft pulp at its Courtland, AL pulp and paper mill for 60 days beginning October 1. This curtailment reflects weak pulp markets and higher-than-normal pulp inventories. The Courtland mill produces approximately 30,000 tons of market pulp per year. The Company also scaled back production at its Canton, NC uncoated freesheet paper facility by shutting down three paper machines for about a week during August.
Florida Coast Paper LLC at Port St. Joe planned downtime for six weeks in August and September. Last year, the kraft linerboard mill took 5 months of downtime during the second and third quarter due to weak containerboard markets.
Georgia-Pacific Corp. announced the closing of its market pulp operations at Port Hudson, LA and Ashdown, AR for at least two years. The closures will result in about 1.5 million tons of reduced annual hardwood pulpwood consumption between the two mills. The Company also plans to reduce production at four other market pulp mills. "With the economic downturn in Asia and its weaker currencies, southern hardwood market pulp is not a viable product" said A.D. Pete Correll, chairman and CEO. The closures, combined with slowdowns at other mills and diversions of market pulp to internal uses will decrease G-P's total market pulp capacity and current production by more than 455,000 mtpy, or 23% of last year's production. G-P will continue to produce 1.5 million metric tons of softwood market pulp and northern hardwood kraft, selling about one million metric tons on the market and using the rest internally. G-P's Leaf River mill in New Augusta, MS will supply 502,000 mtpy of southern softwood kraft and southern hardwood kraft. The market pulp curtailments, along with containerboard mill outages elsewhere, may reduce G-P's wood use by almost 10 percent.
International Paper plans to take downtime at its hardwood pulp mill at Natchez, MS from September 12 to October 7 for maintenance and market reasons.
J.M. Huber at Crystal Hill, VA was down for a day in August after a press fire occurred causing minor damage at their OSB mill.
Louisiana Pacific announced plans to sell five lumber and two treating mills as the Company refocuses on its lumber business, selling mills which are more focused on localized speciality markets. The mills to be closed are located in Chilco-Sandpoint, ID, Eatonton and Statesboro, GA, Hattiesburg and Philadelphia, MS and New Waverly and Silsbee, TX. Combined, the sites annually produce about 150 million board feet of lumber equal to 12% of the Company's output. As part of the refocusing strategy, L.P plans to expand and upgrade certain other facilities throughout North America which offer longer-term strategic capabilities. No specific details were released.
Plum Creek permanently closed their plywood plant in Joyce, LA on August 1, leaving the site's sawmill running. The plywood plant was purchased along with the sawmill from Riverwood International Corp. in 1996 (See TMS, Newsletter, 3rd qtr., 1996).
St. Laurent Paperboard Inc. plans to cease hardwood market pulp production at its West Point, VA mill in November. This will reduce the pulpwood consumption at the facility by about 500,000 tpy, or 20%. Last year, the mill consumed about 2.56 million tons of roundwood and chips. The company also plans future closure or sale of its Elizabeth City, NC barge chip mill sometime in the fourth quarter of this year (See related story in Company Restructuring section page 3).
Stone Container Corp. announced plans to idle its Panama City, FL kraft linerboard mill for two months beginning July 31. This downtime follows the mill's month-long shut down first quarter of the year (See TMS Newsletter, 1st qtr., 1998).
Temple-Inland Inc.'s linerboard mill at Orange, TX sustained damage as a result of a power surge from a lightning strike. The mill is expected to be fully operational again by the end of the quarter.
Union Camp Corp. took about 70,000 tons of downtime in its linerboard mills and 16,000 tons of downtime in its uncoated freesheet mills during the quarter.
Boise Cascade Corp. announced restructuring plans which will reduce its plywood capacity by 11% and lumber capacity by 28%. The plan is to adjust production to available timber supply and focus on the Corporation's value-added engineered wood products. Included in the plan is the closure of sawmills in Elgin, OR, Horseshoe Bend, ID, and Fisher, LA, and a plywood plant in Yakima, WA. (See related story in Mill Closures/Downtime and , Outages, page 2).
Bowater Inc. is selling its pulp and paper mill in Dryden, Ontario to Weyerhaeuser Co. for $520 million. Bowater's Crown forest licenses will be transferred to Weyerhaeuser.
Jefferson Smurfit Corporation and Stone Container Corporation anticipate the previously announced merger of the two companies to be completed shortly after stockholders approval meetings set for November 17 (See TMS Newsletter, 2nd qtr., 1998).
Mead Corp. announced reorganization plans including the sale of a hardwood sawmill in South Range, MI and approximately 50,000 acres of surrounding timberland as part of an effort to divest non-strategic assets.
St. Laurent Paperboard Inc. announced plans to implement a major product restructuring effort in the next three years. The Company is moving toward a long-term business strategy of producing higher-margin, value-added graphic linerboard for the packaging industry. Following the November curtailment of market pulp production, the Company plans to upgrade the West Point mill's product mix by converting some of the existing kraft linerboard capacity to premium white-top liner. Additionally, a new off-site processing facility will replace the current mill-site chipping operation. The new facility will be constructed and operated by a third-party contractor to be selected later this year. As a result of this initiative, the Company will close down its NC chip mill. To accomplish these strategic goals, the Company plans to undertake a phased $56 million capital expenditure program over the next three years, starting in the fourth quarter of 1998 (See related story in Mill Closures/Downtime and Outages section page 3).
Tenneco Inc., is considering a restructuring strategy which includes combining its containerboard mills and corrugated box operations into a separate company. The separation would include the company's mills at Counce, TN, Valdosta, GA, Tomahawk, WI, and Filer City, MI. Tenneco produces 2.11 million tons of linerboard and corrugating medium at the four plants. A final decision is expected in October or November.
Union Camp Corp. announced a series of reorganization and restructuring actions to further improve its profitability. Cutbacks in research and development were mentioned with the planned closure of the Company's corporate laboratory at Princton, N.J.
Shareholders have approved the $2.47 billion merger of Bowater Inc. and Avenor Inc., creating the largest newsprint producer in North America. Bowater, based in Greenville, SC, generated $1.48 billion in sales last year. Together with Canadian pulp and paper company Avenor, it would have had a 1997 sales volume of $2.87 billion. Additionally, Bowater recently purchased a 250,000 tpy newsprint mill in Korea. With the Korean and Canadian mills, Bowater's capacity will rise to about 2.3 billion tons, the world's second largest newsprint producer.
Deltic Timber Corp. is soon to be owners of almost 400,000 acres after the completion of a 16,300 acre timberland purchase in Arkansas. The mature pine timberland was owned by RII Timberland Partners and is located in Bradley, Columbia, Dallas, and Union counties.
International Paper announced plans to purchase a 90% interest in OAO Svetogorsk, an integrated pulp and paper mill located 85 miles northwest of St. Petersburg, Russia. The mill produces 250,000 metric tons per year of pulp and paper This is the first U.S.-based forest products company to make a major investment in Russia. The deal does not include any timberland, yet I.P. cited the government-guaranteed wood source as a cost advantage. I.P is expected to finalize the transaction by the fourth quarter.
Kimball International, Inc. announced the acquisition of the largest privately-owned land parcel in the State of Kentucky, an 11,700 acre site in Crittenden and Union Counties bordering the Ohio River. The property, owned by Alcoa, the world's leading producer of aluminum, has high quality native hardwood timber and provides for a potential expansion of Kimball's furniture manufacturing facilities.
Sappi Ltd. announced plans to sell all of its timberland acreage in western Maine to Plum Creek for $180 million. As part of the sale, Plum Creek has agreed to a 40-year timber supply contract to sell fiber to Sappi's mill in Skowhegan, ME. Sappi plans to rely on purchased wood to supply its mills in Hinckley and Westbrook, ME. The acquisition of the 905,000 acre tract will bring the total ownership of Plum Creek, the sixth largest private timberland owner in the nation, to over 3.3 million acres.
Strategic Timber Trust Inc., a timberland investment fund headquartered in New London, NH, announced acquisition of about 90,000 acres of mostly mature pine timberland in Louisiana. The value was reported between $2,500 and $2,775 per acre!
The Timber Company (G-P's timberland management company) announced plans to sell about 61 thousand acres of hardwood timberland in West Virginia to the Forestland Group LLC, a timberland investment fund based at Chapel Hill, NC. These properties, which were identified as nonstrategic to the company's core business, are located in Logan and Mingo counties. After the sale, The Timber Company will continue to own and manage approximately 235,000 acres of forestland in West Virginia. G-P owns a nearby OSB mill at Mount Hope.
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