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Spring 2002 Volume 7, Issue 1 (0.3Mb)

Timber Markets Mixed

Pulpwood markets in the Southeast have been weakened by several factors. First, a recession in the United States and in other countries that trade with the United States has weakened demand for pulp and paper. Second, continued consolidation in the forest products industry has reduced one of the cornerstones of capitalism-competition. Third, three drought years with prospects for a fourth have caused few seasonal interruptions in the supply of wood fiber for mills. Finally, many pine trees planted under the Conservation Reserve Program are now large enough to thin and have increased the supply of pine pulpwood. Because the CRP program was originally designed to take highly erodible cropland out of row-crop production, many of the CRP sites are ones that can be logged during wet weather, which has been lacking in most regions of the Southeast.  What is ahead for the pulpwood market?  Of course, no one knows for sure and in our global economy, events halfway around the world can affect us in the United States. Recent weather predictions show a wetter and cooler pattern for the South. As we begin the spring, the economy appears to be rebounding, although predictions are for a slow recovery. Changes in Timber Markets Mixed weather patterns may help local markets, but may provide only temporary relief. Consolidation in the forest products industry will likely continue and markets will likely be dominated by one or two mills in many regions. Markets for both hardwood and pine saw timber have fared much better. Housing starts have continued to be a bright spot in a lackluster economy and have defied the usual recessional trend of falling. The average size of new houses has continued to increase, thus requiring more lumber. Demand for saw timber is expected to be good for the next several months.  Speaking of mergers, the latest merger involved Mead Corporation and Westvaco Corporation.  Last August, the two companies announced a merger that would create a global company with leading positions in packaging, coated and specialty papers, consumer and office products, and specialty chemicals. The enterprise value of the combined organization was in excess of$10 billion. The new company is known as Mead Westvaco Corporation, with $8 billion in annual revenues. The elimination of the duplicate services and positions has begun in several areas of the combined companies.