The Northeast Forest Industry Is There A Case For Optimism?

Published January 9, 2025

This has not been a great year for any sector of the forest industry, and it’s not clear that things are getting better on the immediate horizon. Usually, when one part of the forest product market experiences a down cycle, others do well. That simply isn’t the case today, but there’s reason for hope.

Pulp & Paper

Pulp and paper, a critical market for wood from across the Northeast, is having its challenges. After relatively strong markets in 2022 into 2023, demand (and price) dropped. As a result, we’ve seen a number of mills operating at less than capacity, curtailing wood demand and depressing pulpwood pricing. Speaking with pulp and paper mills, as well as market analysts, there isn’t an indicator of a near-term increase in demand, at least for the first half of 2025. In all likelihood, that means continued production at less than capacity at some mills and weaker than normal demand for pulpwood.

Significant investments are underway or recently completed at pulp mills in the region, often to move production away from printing and writing paper and toward packaging (particularly specialties), where demand is growing. That’s great news, and if successful, it will position the remaining mills for long-term success. That noted, as we look at new production capacity coming online in other parts of the world, mills in our region enter an ever more competitive landscape. It won’t shock me if the region sees the closure of a pulp mill next year (it will disappoint me, and I truly hope it doesn’t happen, but it is a very real possibility).

Lumber

While interest rates have (very recently) begun to climb down, there hasn’t been a clear market signal (yet) that the downward trend will continue and that this will make its way to mortgages. Because of this, housing starts have been in a general downward trend since early 2022, and the lumber market has followed. While there is a significant unmet need for housing across the region and across the country, high interest rates have deterred new buyers as mortgage costs have swelled. There’s optimism that continued interest rate cuts will send a signal that mortgage costs are coming down, unleashing a wave of new housing construction and lumber demand. While signals currently point in that direction, a change of administration has the potential to change this outlook.

However, right now, we’re looking at weak demand, with a number of sawmills operating well below capacity (or completely curtailed). With reduced capacity, which means reduced log demand, I have heard of landowners across the region – including some major landowners – facing real challenges moving logs. Once housing starts to pick up, there’s every reason to expect that we’ll see lumber mills moving back toward capacity – first spruce-fir mills, then hardwood and white pine.

Biomass

While there are many reasons to support using wood to create electricity, cheap power isn’t one of them. Biomass plants across the region continue to face challenges, as the cost to purchase wood and operate a plant is often higher than the wholesale cost of electricity. We’ve seen plants adapt to this challenge in multiple ways – the most common moving toward seasonal operations – where power is made during the higher price electricity seasons of winter and summer, and generation is reduced (or in some cases completely curtailed) during the shoulder seasons of spring and fall. Of course, a few facilities have power purchase agreements with local utilities that allow them to operate profitably year-round; this seems to be the only way we’re going to see true baseload generation from these facilities.

On a positive note, at least one new biomass plant – with a state-mandated 15-megawatt power purchase agreement – is under development in northern Maine. It’s still a long way from construction and operation, but development activity is underway and may create a market for low-grade wood. Similarly, a small project in Vermont’s Northeast Kingdom is under development that would use an innovative process to create biogas that is then used for electricity generation. While large-scale biomass electricity generation won’t return as a major market across the region (at least not in the near future), it’s clear there are niche opportunities when policy, technology, and wood supply all line up.

Logging Sector

When markets are down, loggers struggle. While every situation is unique, I am speaking with more and more loggers who are adding business lines that… aren’t logging. There are plenty of logging firms doing dirt work, and that’s nothing new but certainly growing. I am also seeing firms get into firewood processing, portable sawmills, land clearing, and trucking. All of these, of course, is compatible with logging, but it’s telling that an increasing number of logging firms are seeking to diversify their revenue streams with existing assets and business relationships.

Logging continues to face some very real demographic challenges (all of rural America faces a demographic crisis as the population ages, but it is very visible in our logging sector). While there are certainly young people entering the industry – and there are now some great programs to train operators, so they start with a valuable skill set – we need more. In addition to finding people to sit in seats and run processors, skidders, feller bunchers, and forwarders (or stand with a chainsaw in hand), we also need to rethink how to make it affordable for a younger person to enter a business that requires an incredible investment of capi­tal. I suspect that the coming years will see enormous innovation in this space – not out of desire but out of necessity.

Landowners

The entire industry rests upon forest landowners – large and small. Without landowners growing and harvesting wood products, the loggers and mills aren’t going to be doing much. Of course, the same is true for each leg of the stool – landowners, loggers, mills – but it starts in the forest. Landowners I speak to aren’t doing well in today’s timber market, and many are looking for (or have initiated) ways to get additional revenue. This isn’t anything particularly new – for decades, large landowners have sold off “highest and best use” lands for development and sold easements.

More recently, we’ve seen large-scale solar and wind projects developed on timberland (in the case of solar, now former timberland), where the lease payments significantly exceed what a landowner might expect from traditional forest management for the same acre. There’s certain to be much more solar, and wind developed, and new opportunities could be unlocked in the future if additional transmission capacity is built into rural areas.

We’re also seeing an increase in forest carbon projects, where landowners sell the claim to existing carbon in the forest, as well as growth. Most of the projects to date allow continued timber harvesting, though often on a longer rotation or with additional restrictions. The carbon credit market itself is going through significant changes, where buyers are demanding increased assurances that what they are buying actually makes a difference, so expect continued evolution in this market. Finally, selling carbon is just one ecosystem service to be monetized, and we can expect to see some innovation in this space, likely with water and habitat, but plenty of other opportunities exist.

The key question for forest industries is, “Do these additional revenue sources help keep the land as a working forest or fundamentally change the use and take land out of production?” For working forest easements, wind farms, and most carbon projects, landowners receive additional revenue while the vast majority of timberland remains in production. For sales of land for development and conversion to solar, that land is removed from the timber base and is no longer part of the supply chain. When looking at additional revenue sources that landowners are evaluating, “Does the land stay as a working forest?” might be the most important question for the industry to ask.

On the Horizon

While markets right now are facing challenges, these won’t last, and the economic cycle will swing back in our favor. We’ll see some mills close as they are no longer competitive, and that’s a natural part of business. At the same time, we are on the cusp of significant innovation and new investment in the forest industry. New products – many of which are on business cycles different than traditional forest products – are being developed and brought to market across the region.

The first wave of these products is operational. At the former Madison, Maine, pulp mill, Timber HP is using softwood chips to produce insulation. The company has been ramping up production of loose fill and batts and is raising money to complete its board line. When this line is complete, expected sometime in early 2025, production (and therefore softwood consumption) is expected to increase significantly.

At the Pleasant River Sawmill in Enfield, Maine, a new company is using German technology to produce biochar, a product that can be used in a variety of soil applications (and many other higher-value markets) while locking up carbon for centuries. Standard Biocarbon began operations earlier this year, and with the recent installation of a dryer that runs off of the heat generated during the manufacturing process, it is now using mill residuals produced onsite to create a high-quality product. There’s also biochar manufacturing underway at a former biomass power plant in Greenville, Maine, and we can expect many more such ventures around the region.

Both of those facilities are operational. There’s also plenty under development. As mentioned above, a project in Vermont’s Northeast Kingdom seeks to make power and biochar utilizing an innovative wood-based biogas technology. That project is currently going through permitting, and if constructed may be a replicable, small-scale wood energy project that can be replicated in other locations.

Also under development are (at least) two biofuel projects, which seek to use low-grade wood (tops and branches, primarily) to make liquid fuel. Castlerock Biofuels is developing a project at a former paper mill in Maine’s Katahdin Region using Ensyn’s pyrolysis technology. This is a process that has decades of operational experience at a facility in Ontario, as well as recent new projects in Canada. If constructed, this project will generate around 20 million gallons of bio-oil annually, expected to be used in institutional heating applications (college campuses, hospitals, etc.). The project has permits in hand and expects to break ground in 2025.

Another biofuel technology, Biofine, is expected to break ground on a project at the Former Lincoln Pulp & Tissue mill in Maine in 2025. This technology has been running a pilot project with the University of Maine for years and is now poised to move to commercial operations. The output from this facility will be a drop-in biofuel, able to be used in home heating applications in place of oil. This project, smaller in scale than the Castlerock Biofuels project, has applied for all permits and expects to begin construction in 2025.

After years of false starts by several companies, a cross-laminated timber (CLT) and glulam beams project is getting serious. Developers that have been evaluating this space for several years have now selected a site and initiated efforts to build a project that will use northeast lumber (spruce-fir from Maine and New Hampshire, and perhaps hemlock as well) to produce large panels that can be used in mid-rise construction. While this market has been growing nationally, and there are several buildings in the region utilizing CLT, the region has had to rely upon panels manufactured elsewhere, usually using wood from other regions. If built, this project will provide projects in the Northeast with an opportunity to utilize panels manufactured here, using wood grown and sawn here.

Finally, a couple of projects are under development that aren’t using innovative technology but will provide important markets for wood in the region. Godfrey Forest Products, which has successfully developed mills, is working to bring an oriented strandboard plant to the site of the former pulp mill in Jay, Maine. If constructed, this project will use around a million green tons of wood annually, providing an important new market for pulpwood. At the long-dormant Quimby Mill in Bingham, Maine, a plywood mill is under development, with some equipment on-site and more work to be done.

In Closing

This region is uniquely positioned near an enormous collection of consumers and has the land, infrastructure, and talent to have a prosperous and dynamic forest industry.

While markets for many forest products are challenged right now, that won’t last. What’s important to the entire industry is that we retain a viable working forest land base, logging infrastructure that can efficiently harvest and transport wood (and make enough money doing so to attract new entrants), and have outlets for a full range of forest products. That requires keeping (most of) what we have while building upon new opportunities and innovative technologies as they emerge.

*This article was originally published in the Northern Logger Magazine’s December 2024 Issue.