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Historic, Archive Document Do assume not content reflects current scientific knowledge, policies, or practices. TIMBER SUPPLY AND DEMAND 1995 AlaskaNationalInterestLandsConservationAct Section 706(a)ReporttoCongress USDAForestService,AlaskaRegion Report Number 15 - January 1996 USDA United States Prepared By Alaska RIO MB 355 Department of Forest Region 1997 Agriculture Service The United States Department ofAgriculture (USDA) prohibits discrimination in its programs on the basis ofrace, color, national origin, sex, religion, age, disability, political beliefs, and marital or familial status. (Not all prohibitedbases applyto all programs.) Persons withdisabilities whorequire alternative means forcommunication ofprogram information (Braille, large print, audiotape, etc.) should contact the USDA’s TARGET Center at (202) 720-2600 (voice and TDD) To file a complaint, write the Secretary ofAgriculture, U.S. Department ofAgriculture, Washington, D.C., 20250, or call 1-800-245-6340 (voice) or (202) 720-1127 (TDD). USDA is an equal employment opportunity employer. ANILCA Sec. 706(a) Report Preface This isthefifteenthreportprepared inaccordancewith Section706(a) ofthe AlaskaNationalInterest Lands ConservationAct (ANILCA), whichrequires the Secretary ofAgricultureto monitorandreportan- nually ontimbersupply anddemandin SoutheastAlaska. Thefollowingpagesprovide asummary oftim- bersale activity inthe regionandareview ofthe primary factors affectingtimbermarkets infiscalyear 1995. As requiredby Section706(a) ofANILCA, this reportwaspreparedinconsultationwithrepre- sentativesfromthe State ofAlaska, the affectedNative Corporations, the SoutheastAlaskatimberindustry, the SoutheastAlaskaConservationCouncil, andthe SoutheastAlaskacommercialfishingindustry. Copies ofthis reporthavebeensubmittedto the Committee onEnergy andNaturalResources ofthe U.S. Senate andthe CommitteeonNatural Resources oftheU.S. House ofRepresentatives. Additional copies maybe obtainedbywritingto: DirectorofEcosystemPlanningandBudgeting USDA Forest Service, AlaskaRegionalOffice P.O. Box21628 Juneau, Alaska 99802 1 TimberSupply andDemand Table ofContents Preface i Executive Summary iv Introduction 1 TimberSupply 2 Tongass TimberProgram OverviewFY 1995 2 Factors InfluencingTimberSupply fromthe Tongass 2 Status oftheTimberPipeline 3 OtherSourcesofTimber 4 TimberDemand 6 Quantity ofTimberConsumedandExportedinFY 1995 6 The WoodProducts Industry in SoutheastAlaska 7 Industry Update 8 MarketsforWoodProducts from Southeast Alaska 1 AppendixA. Reference Tables 17 List of Figures Figure 1. Tongass National ForestTimberPipeline - September30,1995 4 Figure 2. Annual Average Employment inWoodProducts Industries - Southeast Alaska 8 Figure 3. AlaskanLumberExports - AverageUnit Value 10 Figure4. Price Averages forFramingLumberinU.S. Markets 11 Figure 5. MarketPulpPrices: Delivered inU.S. 15 ll 1 ANILCA Sec. 706(a) Report A Reference Tables in Appendix Table A-l. Employmentinthe WoodProducts Industry - SoutheastAlaska FiscalYears 1981-1995 18 Table A-2. Volume ofTimberOffered, Sold, andHarvestedonthe TongassNationalForest Fiscal Years 1988-1995 19 Table A-3 Tongass NationalForestLogExports . CalendarYears 1977-1994 19 Table A-4. InternationalExportsofAlaskanWoodProducts -FiscalYears 1981-1995 20 Table A-5. TimberHarvestandImports for Southeastand Southcentral Alaska FiscalYears 1983-1995 21 Table A-6. SoftwoodLumberand CantExports fromAlaska-Volume and Valueby Destination FiscalYears 1988-1995 22 Table A-l. SoftwoodLogExportsfromAlaska-Volume andValueby Destination FiscalYears 1988-1995 23 Table A-8. MarketPulpExports fromAlaska - VolumebyDestination-FiscalYears 1988-1995 24 Table A-9. MarketPulpExports fromAlaska - Total Valueby Destination-FiscalYears 1988-1995 25 Table A-10. MarketPulpExports fromAlaska -UnitValueby Destination-FiscalYears 1988-1995 26 Table A-l1. ChipExports from Alaska - Volume andValueby Destination FiscalYears 1988-1995 27 Table A-12. Annual TimberHarvest- TongassNationalForest -FiscalYears 1909-1995 28 Table A-13. Japanese Imports ofSoftwoodLogs andLumber CalendarYears 1983-1994 29 Table A-14. Economic Growthand Currency' ExchangeRates - Alaska’s Primary7 TradingPartners 30 Table A-15. Housing Starts inJapan 3 Table A-16. FY 1995 Tongass TimberSale Offerings 32 Table A-17. Tongass Volume UnderContract9/30/94vs. 9/30/95 33 Table A-18. ConversionFactors 36 ill TimberSupplyandDemand Executive Summary • APCAnnounces WrangellMillClosure AlaskaPulp Corporation(APC) announcedthe indefinite shutdownofthe Wrangellmill, effec- tive November30, 1994. Withalogcapacity of 110 MMBF, the Wrangell millwasthe largest sawmill inthe regionandemployed230 people. The millwasalso pivitol intheWrangell economy, accountingfor22 percentofthe wageandsalary employmentand 3 percentofthe 1 community’stotal payroll. Anumberofthe mill employees hadworkedthereforover30 years. The millwas established inthe 1920’s, butranonly intermittently until APC (formerly AlaskaLumberandPulp Company) tookovermanagementinthe late 1950’s. • Tongass TimberAvailability Timbersale purchasers in SoutheastAlaska harvested 221.1 millionboardfeet (MMBF) of timberfromtheTongass NationalForestinFY 19951 Thiswas the lowest level oftimberhar- . vestonthe Forest since 1963. The amountoftimberharvestedunderthe long-termcontracts (161.9 MMBF) dropped 29 percentfromFY 1994 harvest levels. Mostofthevolumewas har- vestedby KPC (146.1 MMBF)withthe remainingvolume (15.8MMBF) accountedforby activity undertheformerAPCcontract. Incontrast, thevolumeoftimberharvestedunderthe independent saleprogram (59.2 MMBF) increased23 percent. The Forest Service offeredatotalof326.6 MMBF oftimberforsale inFY 1995. Ofthis, MMBF 110.2 was offeredunderthe short-term, orindependent, saleprogramand 216.4 MMBF wasfully preparedforofferunderthe long-termtimbercontractwithKetchikanPulp Company (KPC). Thevolume oftimberactually available to the industry wasconsiderably less, however,because 125.5 MMBF ofthevolume preparedwasundercourt injunction. Asa result, the netsalevolume available forpurchase inFY 1995 included42.4 MMBFofinde- pendent sales and 158.6 MMBFofKPC long-termcontractofferings. Relative to FY 1994, 62 percentlesstimbervolumewas offeredandavailableunderthe independentsale program and27 percentlesstimbervolumewas offeredandavailable underthe KPC long-termcon- MMBF tract. Approximately 36.5 (86 percent) ofthe available independentsalevolumewas offeredduringthe last monthofFY 1995. H • Stumpqge.PricesRemain igh Stumpageprices (thevalueofstandingtimber)forTongass timberremainedhighinFY 1995, withbidaveragesforindependentsales running 19 percentoverappraised rates. Finalbidval- ues forindependentsales rangedfrom$23.01 perthousandboardfeet (MBF) to $341.70/MBF withanaverageof$278.97/MBF. Excludingpurchaserroadcredits, final bids averaged $54.96/MBF. Prices paidfortimberharvestedunderthe long-termcontracts averaged $120.75/MBFforKPC and $141.59/MBFforAPC. Excludingpurchaserroadcredits, priceav- eragesforthe long-term sales were $48.72/MBF and $1.29/MBF, respectively. 1 Unlessotherwisenoted,timbervolumes inthisreportareinclusiveofutilityvolume. IV ANILCA Sec. 706(a) Report • TimberIndustryEmploymentContinuestoDecline The closure ofthe Wrangell sawmill andtemporary layoffs inothersmall mills have reduced timberindustry employmentinSoutheastAlaskato adecade low. Anaverage of30 persons 1 were employedinsawmills during 1995, adrop of50 percentfromthe industry peakin 1991 anddown42 percentfromlastyear. Thepulp millinKetchikancontinuedto operate through- outthefiscalyear, maintaining stability inpulp industry employment Loggingemployment also appearedto have stabilized, asthe average of1,185jobswas only slightly above lastfiscal year. Incomparisonwiththedecade average of2,753 (1985-1995), average annualemploy- mentinall sectors ofthetimberindustry has declinedby 27 percent • MixedMarketsforSawnwoodProducts Exportpricesforsawnwoodproducts (dimensionlumber, cants, flitches, etc.) continuedto climb throughoutFY 1995, reflectingtightwood supplies andtheunprecedenteddecline ofthe valueofthe U.S. dollarinrelationto the Japaneseyea The averageprice paidforAlaska’s sawnwoodexportswas $702 perthousandboardfeet, anincrease of27 percentoverFY 1994. Incontrast priceaverages inthe domestic marketwere down 18 percent Anestimated 88 per- centofAlaska’s sawnwoodproducts are exported, withthe remainderdestinedforports inthe PacificNorthwest. Japanis Alaska’sprimary marketforsawnwoodproducts, receiving96 percentofthe exportvalue inFY 1995. • PulpMarketSurgestoRecordHigh Dissolvingpulpprices soaredinFY 1995 withquarterly price hikes continuingthroughoutthe fiscalyear. The averageprice forAlaska’spulp exports hitarecordhighof$915/metric tonin FY 1995. There are several indications thatdissolvingpulp marketswill remainstrongover thenextfew months. First, millclosures andmarket-relatedshutdownshave helpedto curb the oversupply inworldmarkets. Second, the marketforpaper-grade pulphas made aphe- nomenal comeback sincethe endof1993, andquarterly pricehikes of$60-$70/tonhave nar- rowedthe gapbetweenpaperanddissolvingpulpprices. Thus, the impetus formillconversion appearvery strong. Third, a poorcottoncrophas raisedcottonprices, shiftingmarketfocusto rayonandcottonsubstitutes. Fourth, newtechnologyto producethe solvent spuncellulosicfi- berknownas lyocell may providefurthergrowthfordissolvingpulp demand. Finally, the gen- eralimprovementinworldeconomies is likely toboostdemandfordissolvingpulp inthe traditionalproductlines ofrayonandacetate. v