inrs kingsley katahdin oct 2016 draft
TRANSCRIPT
Katahdin Revitalization Speaker SeriesThe Future of Maine’s Forest Economy
October 27, 2016Millinocket, Maine
Eric KingsleyInnovative Natural Resource Solutions LLC
[email protected] 207‐233‐9910
Innovative Natural Resource Solutions LLC• Founded in 1994• Offices in New Hampshire and Maine• Focus at the intersection of forest industry, energy and economic development
• Author of Maine Future Forest Economy Project (2005)• Services include:
‐ consulting in renewable energy‐ advocacy‐ forest management and protection‐ forest certification and sustainability
• Clients from the private, non‐profit and government sectors• Conducted work in all regions of North America• www.inrsllc.com
The Wood
The Markets
‐
1
2
3
4
5
6
7
8
Maine Timber Harvest, 1940 ‐ 2014Millions of Cords
‐
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
2007 2008 2009 2010 2011 2012 2013 2014
Maine Timber Harvest by ProductData Source: MFS Timber Processor Report
Data in tons (INRS conversion)
SW Sawlog HW Sawlog SW Pulpwood HW Pulpwood Biomass
23%
51%
26%
5%
31%
64%
0%
10%
20%
30%
40%
50%
60%
70%
Biomass Pulpwood Sawlogs
Volume and Value from a Timber HarvestMaine, Statewide, 2014
Volume Value
Employment in the Maine Forest Products IndustryDirect Jobs Only, 2001 ‐ 2015
‐
5,000
10,000
15,000
20,000
25,000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Wood Pellet Manufacturing**
Timber Tract Operations
Biomass Electric**
Forestry Support
Office Furniture
Engineered Wood Product
Forest Products Truckers*
Household / Institutional Furniture
Sawmills
Logging
Other Wood Product
Pulp & Paper Mills
Changes in Maine Forest Industry Employment2001 – 2015 (Direct Jobs Only)
‐70%
‐60%
‐50%
‐40%
‐30%
‐20%
‐10%
0%
10%
Pulp & Pap
er M
ills
Logging an
d Forestry
Forest Produ
ctTrucking
Sawmills
Woo
d Prod
ucts M
fg
Engine
ered
Woo
d
Woo
d En
ergy
Total
Markets for Low‐Grade
‐
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
2008 2009 2010 2011 2012 2013 2014 2015 2016e
Estimated Pulpwood Consumption by Maine Pulp MillsEstimates Based Upon INRS Data
‐
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
2014 2016
Maine Pulpmill Wood Use(tons)
Hardwood Spruce ‐ Fir Hemlock ‐ Pine
Since 1999, the Northern Forest region has lost 11 pulp mills
New York‐ Deferiet‐ Lyons Falls
New Hampshire‐ Groveton‐ Berlin
Maine‐ Westbrook‐ Bucksport‐ Old Town‐ Lincoln‐ Millinocket‐ East Millinocket‐ Madison (May 2016)
Emails you ne
ver e
xpected…
Key Items from Verso bankruptcy filingCoated paper market• Traditional markets face decline• “The coated paper industry faces long‐term, structural decline” • Driven by a move to digital in key markets (magazines, catalogues)
Total NA coated paper market decline 16% between 2010 ‐ 2014• A strong US dollar has increased imports• Reduced market size and increased imports led to available market decrease of 8% between 2014 – 2015
• Total US paper demand (coated and uncoated) predicted to shrink by 3% 2015 – 2016
• Capacity reductions expected to continue (not specific to Verso or any company)
Pulp and Paper• Pulp and paper mills remain region’s largest consumer of wood products, and represent significant fixed infrastructure.
• Mills produce a variety of products, including market pulp, communication papers (coated and uncoated), and tissue. Each of these markets is unique.
• The Northern American paper industry has been shrinking, both in output and capacity. Individual mills often do well, but new investment in production is extremely limited in the U.S.
• Maine will remain a paper producing state for well into the future• I expect reduced pulpwood consumption, and reduced prices for pulpwood (a bunch of factors in this one, not just demand).
• The closures are NOT cyclical
Challenges to the Pulp & Paper Industry• You will hear
• High taxes• High energy costs• High wood costs• And so on
• There are all very real, and present real challenges to the industry
• Mills and regions now fighting over a shrinking pie• They aren’t the fundamental issue, which is change in the marketplace, and a capital intensive industry that is hard to change with any reasonable speed
Biom
ass
Biomass Electricity
(MWh)
“Green” Attributes(Renewable Energy Certificate)
Electricity (MWh)
(Wholesale)
$‐
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
Janu
ary
February
March
April
May
June July
August
Septem
ber
Octob
erNovem
ber
Decembe
rJanu
ary
February
March
April
May
June July
August
Septem
ber
Octob
erNovem
ber
Decembe
rJanu
ary
February
March
April
May
June
2014 2015 2016
Average ISO New England On‐Peak Electricity Price ($/MWH), Trailing 12 Months
What does it take to operate biomass in 2016?
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Revenue Expenses
Electricty RECs (CT) Fuel O&M
• Assumes:
• Electricity at current futures price for the next year
• RECs at current broker quote• Biomass fuel at $28, 1.7 green tons per MWH
• O&M at $30 per MWh
• With these assumptions, this is not an attractive business
23
Sawlog Markets
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Maine Sawlog Harvest by SpeciesThousand Board Feet (MBF)
Spruce / Fir Cedar Hemlock White and Red PineAsh Aspen / Poplar Beech Red MapleRed Oak Sugar Maple White Birch Yellow Birch
0
20
40
60
80
100
120
140
160
180
200
0
50
100
150
200
250
300
350
400
450
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Maine Spruce / Fir Harvest (MMBF) Northeast Housing Starts
Million Bo
ard Feet
Thou
sand
Hou
sing Starts
Emerging Products
Cross Laminated Timber• Pre‐fabricated structural wall, floor and roof panels
• Key benefits include• Ability to build mid‐rise (up to ~10 stories)
• Short construction timeline (at jobsite)
• Cost competitive• Good seismic performance
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Cross Laminated Timber• New product, limited applications in Europe, Canada and U.S.
• Being pursued aggressively by FPInnovations (Canada)
• Cost competitive for mid‐rise, institutional and industrial applications
• Renewable, sustainable material for larger‐scale construction projects $0
$5
$10
$15
$20
$25
$30
$35
$40
5 Stories 8 Stories
CLT Non‐wood
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Photos of CLT Under ConstructionExcerpted from FPInnovations Presentations
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Bio‐Based Material
• Significant opportunities to replace fossil‐fuel based products with wood‐based
• Fuels, chemicals, plastics, etc. – a field limited only by economics• To date, that has been a big limitation
• Bio‐Based Maine received funding to pursue this opportunity as a spin‐off of federal economic development efforts
• Easier said than done, but the state is well positioned, and UMO in a significant leadership role
The glass is half full…
• We have markets, and are incredibly well positioned compared to other parts of the country
• We have the forest resource and supply infrastructure (landowners, loggers, entire forest industry ecosystem) that would make other regions jealous
• We live in close proximity to (and are part of) the greatest collection of consumers in the history of the world
• There may never be a better time to be develop a project or technology that uses low‐grade, particularly softwood
60.0
70.0
80.0
90.0
100.0
110.0
120.0
130.0
Jan‐06
Jun‐06
Nov
‐06
Apr‐07
Sep‐07
Feb‐08
Jul‐0
8
Dec‐08
May‐09
Oct‐09
Mar‐10
Aug‐10
Jan‐11
Jun‐11
Nov
‐11
Apr‐12
Sep‐12
Feb‐13
Jul‐1
3
Dec‐13
May‐14
Oct‐14
Mar‐15
Aug‐15
Jan‐16
Jun‐16
Trade Weighted Exchange Rate 2006 ‐ 2016