As I travel West Virginia and the surrounding states visiting loggers and sawmills, it is very evident we are in a very impactful downturn in the wood industry. From loggers to sawmillers, from truck drivers to salespeople, from equipment dealers to fuel suppliers, we all feel the effects of the downturn in our industry.
There are some bright spots in this market, and we will get into them also but to put a little perspective into why all this is happening boils down to a few key things. The first one is China. Whether we like to admit it or not does not matter but the fact is China is the major player for the export market in hardwood lumber and to a lesser extent, logs.
I am not going to go into a lot of detail, but their economy is at a turning point where their old economic model is no longer working, and every aspect of their society is affected. The world’s second largest economy has seen real estate growth basically stop. The Chinese consumer is not spending and as a result there is deflation. China’s overall debt is at more than 300% of their gross domestic product, essentially meaning that no foreign investor wants to go near that and the ones there are pulling out. So, that does not sound good for our business, or does it?
The second reason is how we dealt with COVID. The government figured out pretty quickly how to shut the country down, but never really came up with a good game plan on how to get it started back up and we are affected by that to this day. From parts to people — we still have major problems getting both. Add to that the resulting inflation and increased costs on everything. Other factors include the strong dollar, which makes our lumber and logs more expensive to foreign buyers, and the price for trucking. There are several other factors but these, in my opinion, have been the biggest contributors.
Not one to live in the past we need to move forward and see what bright spots there are in our industry. One is interest rates. They have been kept pretty steady since 2023. If rates go down (as some are predicting), spending increases usually follow and, to some extent, that means more lumber flows domestically.
As we all know, the white oak market continues to demand more logs (at least as of this writing) in many areas, and poplar is moving to several different markets. This low-grade wood. What do we do going forward? Yes, we have markets for our pulp and blocking type logs most weeks, but how about some thought to a market that can also use the low-grade wood.
Where are we on converting old coal power plants to biofuel (chips), biochar, cogeneration, or even trigeneration plants? There is a lot of money out there to utilize this “carbon neutral” renewable resource? ($27 billion at last count) I know some of these ideas have fallen “out of fashion,” but I strongly believe they are a viable industry that can benefit from the resource we have available in West Virginia and the surrounding states There are a lot of details that go along with each of these but here in West Virginia we have many coal fired power plants sitting idle — why not look into what they can do when they are converted to a renewable resource?
This article is focused on putting options out there. I will admit that converting a coal fired plant will be expensive, but we have loggers in place and sawmills ready to sell chips that can provide a clean fuel at a reasonable price right here, right now! There are meetings that have taken place and there is enthusiasm for this to happen! I believe with the right funding and the right price for the resource this can be a viable industry in West Virginia. We have talked to several individuals who work in this field and they have shared the basics of what we need to do (down to the kilowatt per minute pricing).
I know this does not solve the problems for the lumber industry trying to move a valuable product, but as we do more research there are ideas out there that may help. In future articles we will attempt to break some of these down. The once vibrant markets of the past here in the east are all but gone — but what about the future? Do we have the ability to revive this industry here at home. We did it with oil (the U.S. is now the world‘s 4th leading exporter of oil) why can’t we do it with the wood industry here at home?
If you have any questions or want to be part of this conversation please contact Jerry Sisler (scllogs@gmail.com) or (patrick.donnelly1@mail.wvu.edu). We would be glad to hear what you have to say to keep moving this forward!
