United States

Department of

Agriculture

Forest Service

Pacific Northwest

Research Station

General Technical

Report

PNW-GTR-677

July 2006

Timber Products Output

and Timber Harvests in

Alaska: Projections for

2005-25

Allen M. Brackley, Thomas D. Rojas, and Richard W. Haynes
The Forest Service of the U.S. Department of Agriculture is dedicated to the principle

of multiple use management of the Nation’s forest resources for sustained yields of

wood, water, forage, wildlife, and recreation. Through forestry research, cooperation

with the States and private forest owners, and management of the national forests

and national grasslands, it strives—as directed by Congress—to provide increasingly

greater service to a growing Nation.

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, age, disability, and

where applicable, sex, marital status, familial status, parental status, religion, sexual

orientation, genetic information, political beliefs, reprisal, or because all or part of an

individual’s income is derived from any public assistance program. (Not all prohibited

bases apply to all programs.) Persons with disabilities who require alternative means

for communication of program information (Braille, large print, audiotape, etc.) should

contact USDA’s TARGET Center at (202) 720-2600 (voice and TDD).

To file a complaint of discrimination write USDA, Director, Office of Civil Rights, 1400

Independence Avenue, S.W. Washington, DC 20250-9410, or call (800) 795-3272

(voice) or (202) 720-6382 (TDD). USDA is an equal opportunity provider and employer.

Authors

Allen M. Brackley is a research forester and Thomas D. Rojas is a research

economist, Alaska Wood Utilization Research and Development Center, 204

Siginaka Way, Sitka, AK 99835; and Richard W. Haynes is a research forester, Forestry Sciences Laboratory, P.O. Box 3890, Portland, OR 97208.
Abstract

Brackley, Allen M.; Rojas, Thomas D.; Haynes, Richard W. 2006. Timber

products output and timber harvests in Alaska: projections for 2005-25.

Gen. Tech. Rep. PNW-GTR-677. Portland, OR: U.S. Department of Agriculture, Forest Service, Pacific Northwest Research Station. 33 p.

Projections of Alaska timber products output, the derived demand for logs

and chips, and timber harvest by owner are developed by using a trend-based

analysis. These are revised projections of those made in 1990, 1994, and

1997, and reflect the consequences of recent changes in the Alaska forest

sector and trends in markets for Alaska products. With the cancellation of the

long-term contracts and the closure of the two southeast Alaska pulp mills,

demand for Alaska national forest timber now depends on markets for sawn

wood and the ability to export manufacturing residues and lower grade logs.

Four scenarios are presented that display a range of possible future demands.

The range in annual demand for timber from Alaska national forests is 48 to

370 million board feet of logs annually. Areas of uncertainty include the

prospect of continuing changes in markets and competition, and the rates of

investment and innovation in manufacturing in Alaska.

Keywords: National forest (Alaska), forest sector models, lumber.
Contents

1 Introduction

2 Literature Review

5 Recent Literature

6 Timber Industry in Alaska From 1997 Through 2004

6 Tongass National Forest

6 The Forest Products Industry in Alaska

7 Demand Projections and Market Developments

8 Methods

8 Description of the Model

9 Description of Data

12 Applicability of the Model for Current Use

12 Origin of Demand Functions Used in Current Projections

14 Assumptions

15 Results

15 Alternative Projections

19 Expanded Results Illustrated by Using the Medium Integrated Scenario

19 Key Market Share Values

23 Sensitivity Analysis

23 Stumpage Price Projections

25 Maximum Derived Demand

26 Most Probable Outcome

27 Conclusions

28 Suggestions for Future Research

29 Acknowledgments

29 Metric Equivalents

30 Literature Cited
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

1

Introduction

The United States Congress (RPA 1974) has charged the U.S. Department of

Agriculture, Forest Service to maintain information relative to the future

demand for forest products from the Nation’s forest lands. In addition, the

Tongass Timber Reform Act (TTRA 1990) states that the Secretary of Agriculture will “...seek to provide a supply of timber from the Tongass National

Forest which (1) meets the annual market demand for timber from such forest

and (2) meets the market demand from such forest for each planning cycle.”

These requirements for the Tongass are more explicit than the general requirements posed by forest planning regulations that began in the early 1980s,

requiring estimates of demand for national forest timber as part of land management planning. This is the fourth report that addresses the question of what

is the demand for timber from the Tongass National Forest.1

Contextually, supply and demand for forest products is usually expressed

by softwood and hardwood species (see Haynes et al., in press, for general

discussion of supply and demand trends for forest products). Supply and

demand are being used here in their economic sense. In the context of forest

planning, they refer to a desire by producers to purchase timber in the region

and sell products in the global marketplace. Ultimately, the volumes processed

and sold depend on the ability of producers to provide products at a competitive price. In the development of land management plans, land managers will

ask what the demand is for the various products that will be produced from the

forest. From an economic perspective, the question becomes what is the

derived (from final product markets) demand for stumpage from that forest.

Round logs and rough-sawn green lumber are the traditional products

shipped from Alaska. Both export and domestic markets in the continental

48 states are large enough to absorb essentially unlimited volumes of round

logs from the region (see Warren 2005 for a summary of U.S. log exports by

customs districts). Prior to 2000, lumber shipments were linked to housing

starts in Japan. Since 2000, the bulk of the lumber produced in Alaska has

been sold in the domestic market. Given existing legislation, only limited

quantities of round logs are exported from national forests. Other owners,

1 Total timber harvest in Alaska in 1995 was 4 percent of the combined

harvest in the greater Pacific Northwest (Oregon, Washington, and coastal

British Columbia); national forests in Alaska contributed 30 percent (200

million board feet) of the Alaska total. The Tongass National Forest in

southeast Alaska accounted for 99 percent of timber harvest from Alaska

national forests in 1995.
GENERAL TECHNICAL REPORT PNW-GTR-677

2

primarily Native corporations, are the main source of log exports from the

region. Because of these conditions, demand for lumber products is the most

important determinant of demand for national forest timber.

This report projects the demand for Alaska national forest timber by using

a trend-based analysis. These projections are revisions of previous reports of

1990, 1994, and 1997. Four alternative scenarios are used to display a range

of possible future demand for Tongass timber from 2005 through 2025.

Literature Review

As part of the background for early Tongass Land Management Planning

efforts, Haynes and Brooks (1990) assessed conditions in Alaska timber

markets as of the late 1980s and early 1990s. They projected the derived

demand for Alaska national forest timber based on then existing conditions

and trends (Brooks and Haynes 1990, 1994, 1997). Results of the previous

analyses are presented in table 1. This series of projections was based on

several assumptions, almost all of which were explicit. Additional important

implicit assumptions assumed that there would be no structural changes in

markets for Alaska timber (primarily Japan); in the regions competing with

Alaska for Japanese markets (primarily other areas of North America); or, in

the mix of the forest products industry in Alaska.

All previous studies recognized that Alaska had an integrated forest

products industry. The industry included sawmills that processed high-grade

logs and pulp mills that used round wood chips produced directly from lowgrade logs for lumber production and residual sawmill chips. From 1970

through 1997, the annual volume of material processed by sawmills ranged

from 61 to 19 percent of total harvested volumes (average annual volume

during this period was 39 percent). The remaining volume went directly to

export (as logs) or the pulp mills.

In all of the previous projections, the main components of demand were

markets for export logs, dissolving pulp, and lumber exports to Japan. Derived

demand has been defined as the estimated volume of round wood harvest

required to produce volumes of demanded products. From 1970 through

1996, lumber exports from Alaska averaged 89 percent of lumber production

(annual values ranged from 60 to 95 percent). During the same period, pulp

exports averaged 79 percent of annual pulp production (annual values ranged

from 70 to 90 percent).

In all of the previous

projections, the main

components of demand were markets

for export logs, dissolving pulp, and

lumber exports to

Japan.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

3

In 1993, the pulp mill in Sitka, Alaska, closed. Brooks and Haynes (1994)

prepared an updated report to reflect this fact. A number of improvements

were also incorporated into the model during this update. Revisions included

improved estimates of harvest by private owners (Native corporations); correction of a double counting of import contribution to timber supply; improved

estimates of overrun in lumber production; improved estimates of residue

production; and changes to reflect that in some sawmills, a portion of the log

import went directly to chippers without processing to produce lumber. With

respect to these changes, the authors (Brooks and Haynes 1994) stated, “The

changes implemented in this revision of our previous model—some of which

are quite significant when considered individually—have little effect overall

on the accuracy of the historical estimates of the derived demand for Alaska

timber.” Also, this report expected that negative changes in the competitive

position of the Pacific Northwest’s timber industry resulting from efforts to

protect the spotted owl (Strix occidentalis caurina) and other species would

provide a modest advantage to Alaska.

The 1997 update of demand for Alaska national forest timber (Brooks

and Haynes 1997) was necessary for two reasons. First, the pulp mill in

Ketchikan, Alaska, closed that year. This resulted in the loss of local markets

for residues and presented a major challenge to lumber producers in southeast Alaska (fig. 1). A reduction in industry scale was an additional effect of

the mill closure. Second, updated estimates of demand were required in 1997

as part of the preparation of the final Tongass Land Management Plan.

Table 1—Past projections of average annual derived demand for Alaska

national forest timber

Brooks and Brooks and Brooks and

Perioda Haynesb (1990) Haynesc (1994) Haynes (1997)

Million board feet

1983-1987 281.0 281.0 281.0

1988-1992 414.0 414.0 414.0

1993-1997 404.0 300.0 192.0

1998-2002 403.0 315.0 113.0

2003-2007 397.0 332.0 152.0

2008-2012 401.0 335.0 174.0

a Years are the period over which the 5-year averages are calculated. Data that were

not historical at the time of the projection are in bold.

b

The base projection assumed two pulp mills would continue operating and 50-year

contracts continue in force.

c

Base projection assumed that one pulp mill would remain operating.
GENERAL TECHNICAL REPORT PNW-GTR-677

4

The first change incorporated into the 1997 update was that new suppliers

(primarily Scandinavia) were moving into the Japanese market. Simultaneously, traditional products manufactured from old growth (baby squares)

were being replaced with laminated wood products. Another change in this

model resulted from the fact that efforts to protect the spotted owl and other

threatened species in the Pacific Northwest had worked their way through the

stumpage and product markets. In hindsight, the 1994 assumptions relative to

a modest advantage to Alaska were proved overly optimistic. Reductions in

federal timber harvests in Oregon and Washington eliminated the Pacific

Northwest as one of Alaska’s competitors in overseas and U.S. domestic

markets. Canada, however, remained a significant competitor and quickly

gained market share.

Brooks and Haynes (1997) characterized the future demand for national

forest timber as, “...having a high degree of uncertainty because of the magnitude of the recent changes in the Alaska forest sector, and because many of the

factors that will determine the size and type of industry in the future cannot be

predicted.” They went on to state that level and reliability of timber supplies

Figure 1—Alaska by region. Source: State of Alaska 2006.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

5

from the Alaska national forests are only two of a number of sources of

uncertainty. Other factors include rates of economic growth in key markets,

changing technology, tastes and consumer preferences, and strength of competition.

Recent Literature

The final 1997 Tongass Land Management Plan led to several follow-on

studies related to economic topics. Crone (2005) provided a synthesis of

these studies, but the most relevant to our work was the study by Stevens and

Brooks (2003). They examined “the hypothesis that markets for Alaska lumber and logs are integrated with those of similar products from the U.S. Pacific

Northwest and Canada.” Japan is the destination market for these three regions. Their study performs cointegration tests on paired log and lumber data.

Results from the tests show that Alaska western hemlock (Tsuga heterophylla

(Raf.) Sarg.) and Sitka spruce (Picea sitchensis (Bong.) Carr.) logs share an

integrated market with logs originating in British Columbia and the U.S.

Pacific Northwest. However, the authors noted that the results for lumber

proved strong but not unequivocal.

The overall conclusion from the cointegration tests confirms the assumption that Alaska’s forest products exports and production share at least an

imperfectly integrated market with Canada and the U.S. Pacific Northwest.

Consequently, Alaska’s forest products industry is “sensitive to international

market conditions, including competition from other North American regions”

(Stevens and Brooks 2003). The authors implied that, given the imperfect

integration with competitors in North America, Alaska’s high manufacturing

costs of forest products play a key role in limiting the region’s market share in

Japan.

Finally, the Stevens and Brooks (2003) study did not challenge the view

that Alaska species represent unique qualities. The authors, however, considered that the high-value logs and lumber obtained from old-growth Sitka

spruce and Alaska yellow-cedar (Chamaecyparis nootkatensis (D. Don)

Spach) represent a very small amount of Alaska’s total forest production. As a

result, the uniqueness in the quality of Alaska species has very little bearing on

Alaska’s market share in the imperfectly integrated commodity markets within

which Alaska competes.
GENERAL TECHNICAL REPORT PNW-GTR-677

6

Timber Industry in Alaska From 1997 Through 2004

Tongass National Forest

What is the most appropriate use for the lands in the Tongass National Forest?

The controversy has continued both at the local and national levels. Various

advocacy groups continue to litigate the Tongass Land Management Plan of

1997. As this report is written, litigation at the Ninth Circuit Court has been

remanded back to the District Court of Alaska. Simultaneously, specific

offerings of the timber sale program have been continually challenged creating uncertainty in the availability of national forest timber sales.

The Forest Products Industry in Alaska

Another outcome of the 1997 Tongass Land Management Plan was that since

2000, capacity and production information has been collected directly from

producers. This information is reported in publications by Kilborn et al. (2004)

and Brackley et al. (2006) and used in relating the demand for national forest

timber to annual timber sale programs.

In 2000, total annual capacity of all mills in southeast Alaska was approximately 340 million board feet (mmbf) Scribner scale of logs. The actual

volume of timber delivered to the mills in 2000 was 87 mmbf. Since 2002, the

active capacity has stabilized at 250 mmbf, and annual volume of logs processed in 2002, 2003, and 2004 were 40 mmbf, 32 mmbf, and 31 mmbf,

respectively. From 2002 through 2004, production has been at a level of 12

to 16 percent of total capacity.

The latest capacity report (Brackley et al. 2006) also indicates that there

have been major shifts in the markets served by Alaska sawmills. Prior to

1997, up to 95 percent of production was exported to Japan. Since 2000,

exports have fallen and the volume shipped to domestic markets has ranged

from 60 to 83 percent of production. Western hemlock continues to be the

major species processed by Alaska mills (50 to 56 percent). Shipments to the

continental 48 states are destined for sale as shop lumber or as niche market

specialty products.

A federal grant program was approved ($4 million) in 2001 and 2002

to assist producers with the purchase of drying and secondary processing

equipment. A recent review of the impacts of the grants (Nicholls et al., in

press) determined that mills in Alaska now have the ability to dry approximately 6.6 mmbf annually. It is estimated that 0.8 mmbf of dry, surfaced

lumber was produced in 2004. Producers drying lumber also reported that

the dry, surfaced lumber was well received in local markets. One producer

Since 2000, capacity

and production

information has been

collected directly

from producers.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

7

reported that the gain from drying and planing was marginal, but the ability

to sell products has vastly improved. Given updated grading rules for Alaska

lumber, some of the small mills are now selling dimension lumber and competing with local building supply stores selling lumber from outside of Alaska.

Demand Projections and Market Developments

Traditionally, Japan has accounted for up to 90 percent of the economic

activity in the region defined as “North Asia” by the Food and Agriculture

Organization (FAO). For the period 1994-2010, FAO (1997, 1998) projected

steady increases in production, imports, and consumption of sawn wood

products in this region. Approximate rates of growth were as follows: production 1.2 percent, imports 7.7 percent, and consumption 2.2 percent. Exports

from the region were expected to decline.

In reality, the FAO projections overestimated demand for all round wood

and sawn products. The Japanese banking crisis in the 1990s caused housing

construction to decline to some of the lowest levels recorded in recent decades. Contrary to FAO projections, economic indicators associated with lumber production continue to fall. Real changes are masked by the increasing

levels of substitution of laminated products for traditional solid wood products. These noted problems, however, are insignificant when compared to

developments in China.

In the past 5 years, reported rates of growth for the Chinese economy have

ranged from 12 to 17 percent. China has only recently joined international

organizations such as the World Trade Organization (WTO) and FAO. Because

of their previous isolated stance, reliable statistical information that defines

economic conditions in China is not currently available and may not be available in the near future. However, we are aware of firms that are now shipping

material to China instead of Japan. Value-added manufacturing once done in

Japan is now taking place in China. Finished goods (value-added forest products) from China are now being shipped to Japan and other world markets.

The current situation is chaotic, but experts agree that the emergence of China

as a major producer, consumer, and exporter of forest products will most likely

result in increased levels of demand for all forest products.

From 1997 through 2004, lumber imports into Japan declined 25 percent

from 12.6 million cubic meters (5,338 mmbf) to 9.5 million cubic meters

(4,025 mmbf) annually. During the same period, exports from the United

States were reduced by 84 percent. In 1997, exports to Japan were in the form

of solid wood products designed to meet the needs of Japan’s traditional post
GENERAL TECHNICAL REPORT PNW-GTR-677

8

and beam construction. From 2000 through 2004, shipments of laminated

products to Japan increased by 43 percent. The sources of the laminated

products were Scandinavia and other nations. In summary, demand for traditional products decreased, but some of the reductions were offset by new

sources of supply.

Methods

Description of the Model

The original Brooks and Haynes (1990) model applied a material-balancing

approach to calculate the derived demand for forest products produced in

southeast Alaska. Its conceptual basis was the same as that used for projecting regional demand for national forest stumpage in early planning efforts

(Haynes et al. 1981). At that time, there was interest in understanding the possible price impacts of various levels of national forest harvest flows consistent

with product demand and timber supplies from other landowners. A model

was developed that combined several economic concepts and resulted in a

regional (or in this case, forest) estimate of the stumpage volume demanded.

Mathematically, derived demand for national forest timber is the dependent variable of interest to users. It is developed by estimating the round

wood equivalent of all material used to produce products from Alaska and

subtracting the volume harvested from other landowners. The remaining

amount is the derived demand for material (logs) from the Tongass National

Forest. Independent variables used to calculate derived demand include

statistics that describe volume of timber (consumed, produced, imported, and

exported), volumes of pulp products, and conversion factors to determine raw

material required to produce products. When considering market statistics,

lumber and pulp are products that are consumed. Trade data are reported and

tracked in terms of these products as opposed to raw timber. Given technical

knowledge and understanding of production systems and associated conversion factors, the model works backward and calculates volumes of timber

required to satisfy derived demand for products. After the fact, estimates of

derived demand can be compared with historical data (actual volumes of timer

harvested) to test the reliability of projections.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

9

The original Brooks and Haynes model evolved from 1989 through 1997

as a Lotus2

 spreadsheet application (Lotus Software 1983). Figure 2 presents a

diagram of the original model as it existed in 1994. At that time, the integrated

industry used both high- and low-grade logs. The major product produced

from high-grade logs was rough-green lumber. Low-grade logs were chipped

and processed by pulp mills to produce dissolving pulp. Almost all of the

sawn (97 percent) and fiber products (80 percent) were exported to Japan.

Figure 3 presents a diagram of the revised model used in this project,

which is now an Excel spreadsheet (Microsoft Corporation 1999). Portions

of the model that describe pulp production no longer exist, and as a result

have been eliminated. The revised diagram also reflects assumptions relative

to the flow of timber from various owners to mills in the region. It has been

assumed, for instance, that logs from Native ownerships are exported and not

available to local mills. This assumption is based on historical conditions.

Description of Data

The major data sources are much the same as before and include USDA Forest Service, Pacific Northwest Research Station, Production, Prices, Employment, and Trade in Northwest Forest Industries (Warren 2005); Japan WoodProducts Information and Research Center (JAWIC 2006); FAOSTAT of the

United Nations (FAO 2006); and United States International Trade Commission (USITC 2005). The basic information from the above sources was in

almost complete agreement (exports volume of lumber to Japan reported by

one source agree with imports from that source as reported by JAWIC). The

JAWIC report also provided detailed information relative to Japan’s forest

products industry that was not available from other sources.

The logical agreement of data from various sources results from a cooperative effort of international agencies such as the WTO. This, however, is a

relatively recent development and has not always been the case. In the conversion process, it became obvious that past data inconsistencies had been

logically balanced to the most correct values. As updates were made to trade

data, corrections were incorporated. Data users (economists, modelers, etc.)

have a choice of updating data in the model or proceeding with the original

2

 The use of trade or firm names in this publication is for reader information

and does not imply endorsement by the U.S. Department of Agriculture of

any product or service.
GENERAL TECHNICAL REPORT PNW-GTR-677

10

Figure 2—Structure and material flow of the original Brooks and Haynes (1994) model. GLI / OVRR = gross log

input divided by overrun, and NF = national forest.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

11

values. In this project, we updated model values when they were reported as

corrections in the published sources.

Although data from the various sources were consistent, it was determined

that the data relating to lumber exports from Alaska from 2000 through 2004

were understated because of transshipments. That is, an increasing amount of

lumber is shipped to Washington (reported as a domestic shipment) and then

resold and shipped overseas. In the past, large volumes of lumber were shipped directly from Alaska ports to foreign markets. The export documents

reflected these shipments. As the volumes of exports decreased, there was

an increased use of container shipments. Container shipments move by barge

from Alaska to Tacoma, Washington, where they are reloaded for shipment to

foreign ports. The export documentation is prepared in Tacoma and it is listed

Figure 3—Structure and material flow of the revised model (shaded areas represent those removed from original

model). GLI / OVRR = gross log input divided by overrun, and NF = national forest.

the data relating to

lumber exports from

Alaska from 2000

through 2004 were

understated because

of transshipments.
GENERAL TECHNICAL REPORT PNW-GTR-677

12

as the port of export. A comparison of the above noted data sources and the

capacity reports (Brackley et al. 2006; Kilborn et al. 2004) indicates that only

about 10 percent of Alaska exports are reported in the traditional trade data.

Applicability of the Model for Current Use

Until 1997, Japan was the major market for Alaska forest products. The longterm cutting contracts were held by firms closely linked by ownership to Japan

or a history of selling large volumes of product to Japan. Since 1997, these

ownership interests have sold their holdings in Alaska. A new type of owner

is producing forest products in Alaska. In some cases, the new owners have

a history of selling products in the domestic market. In at least one instance, a

firm with historical roots in the U.S. Pacific Northwest and long-term customer

relationship in the region moved to Alaska in search of types of timber no

longer available in Washington and Oregon. This firm’s problem was supply

and not markets. It appears that many of the small producers are finding that

production of a dry, planed, and graded product is increasing their access to

local markets. In addition to the changes in North America, the housing

market in Japan has been dormant since 1998-99 and is just now showing

signs of recovery. Regardless, it appears that the traditional link between

Alaska and Japan may have become greatly diminished.

The Brooks and Haynes model was constructed based on the assumption

that the major determinant of derived demand would be markets for lumber

and pulp in Japan. All of the traditional elements of Japanese markets are in

a state of flux. Just as in the United States, the high standard of living and

associated costs of labor in Japan are resulting in the loss of many traditional

jobs and the substitution of lower cost goods from China. As production shifts

from Japan, the recipient of resources is changing from Japan to China, or

other nations with low labor cost.

One logical solution for the suitability and continued use of the Brooks

and Haynes model would be to revise it to represent recent changes in Pacific

Rim forest products trade flows. Currently, this is not possible given the lack

of available Chinese economic data.

Origin of Demand Functions Used in Current

Projections

In 2004, Japan’s housing industry grew 2.5 percent (Nagahama 2005a) after a

decade of little growth. In the same report, Nagahama noted that regardless of

the increase in housing starts, imports of sawn lumber continued to decline.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

13

Nagahama (2004b, 2005b) and Japan Lumber Journal (2005) also reported

that in 2004, imports of glulam increased at an annual rate of 13 percent.

In addition, during the previous year China had captured 21 percent of the

Japanese glulam market (Nagahama 2005b). China’s share of the glulam market resulted from a rapid increase in production capacity supported by substantial Japanese investments in manufacturing in China. It is anticipated that

similar shifts of manufacturing facilities to China will take place for many

other engineered wood and value-added products.

Sasatani et al. (2005) reviewed niche market opportunities for Alaska

forest products in Japan. They concluded that there are numerous opportunities to market Alaska forest products in Japan given favorable economic

changes (weakened U.S. dollar vs. yen) and Japan’s traditional values for

quality products.

Annual production of solid wood products in China was reviewed by

Butterworth and Lei (2005). In 2005, marketable housing starts in China

increased about 5 percent. The highlights of this report predicted that log,

lumber, and wood-based panel productions were forecast to increase 5, 10,

and 15 percent, respectively, in 2006.

Based on the above sources of information, there will likely be a high and

almost unprecedented demand for forest products in the Pacific Rim market.

For the first time in history, however, there is a question if the Pacific Rim price

will be sufficient to compete with domestic markets. During the past several

years, Alaska producers have found ready markets for their products in

domestic (Alaska and continental 48 states) markets.

Many people and organizations in Alaska would like to return to an

integrated industry that uses both high- and low-grade material. An integrated

industry results in better utilization and larger volumes of operable wood,

which in effect lowers unit operating costs. Studies by McDowell Group

(2004), Leonard Guss Associates,3

 and Brackley and Davis (2004) have

reviewed problems associated with medium-density fiberboard (MDF) production in southeast Alaska. Leonard Guss Associates identified high-grade MDF

in thin sizes as a fiber product in short supply in Japan and China. The Guss

study also suggested that sufficient resources existed in southeast Alaska to

support two medium-size plants. Additional studies by Wahl (2004) and

3

 Leonard Guss Associates, Inc. 2005. Technical and economic feasibility of

constructing a medium density fiberboard plant in southeast Alaska. 107 p.

Unpublished report. On file with: University of Alaska Fairbanks, Sitka

Forest Products Program, P.O. Box 6410, Sitka, AK 99835.

An integrated industry

results in better

utilization and larger

volumes of operable

wood, which in effect

lowers unit operating

costs.
GENERAL TECHNICAL REPORT PNW-GTR-677

14

Nagahama (2004a) confirmed the increasing demand for MDF products

and noted that manufacturing of the product in Japan increased 2.4 percent

in 2003. The increased demand for this product is caused by a shift from thin

plywood to thin MDF. In general, MDF is a fiber-based product that can be

produced from low-cost material in the form of low-grade trees and residual

products. On the other hand, solid wood, a relatively expensive raw material,

is required for production of plywood.

Another uncertainty is the extent to which sustained high prices for oil

might force the development of alternative sources of energy. Currently

unused components of harvested trees (low-grade logs, small-diameter stem

material, branches, leaves, needles, bark, and various mill wastes) represent

sources of biomass that have the potential to reduce dependency on oil. It

is difficult to quantify the expected future demand for biomass material, but

current legislation is designed to find uses for available material. It is possible

that an integrated industry will return to Alaska as a result of the need to

replace traditional sources of energy with some form of bioenergy.

Assumptions

The following assumptions have been made to facilitate the current demand

projections:

• Historically, the major component of the previously defined FAO’s north

Asia market was Japan. The new Pacific Rim market includes Japan,

Korea, China, India, and other nations. In this model, all projections of

future demand are for the Pacific Rim market. The historical data for

Japan represent demand generated by a population of 127 million people.

The Pacific Rim represents a population in excess of 2,430 million people.

• Export products will be considered synonymous with high-value

products. The products may be exported or shipped to domestic markets.

Producers will select markets based on price.

• Alaska producers have unlimited access to domestic markets, both in

Alaska and the continental 48 states.

• Lumber products shipped from Alaska have been classified as sawn wood.

Large solid sawn wood products are currently being replaced with

engineered wood products (truss products, glulam, etc.) that contain small

solid sawn wood components. Projections in this report will be considered

an aggregate of all traditional sawn wood and engineered products.

• Most of the production from southeast Alaska mills is assumed destined

for sale as shop lumber or niche market products. Small amounts of

lumber are milled and sold as dimension lumber.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

15

• High-quality logs harvested from Native lands will be sold to export

markets.

• Existing chip markets are sufficient to use chips currently produced by

southeast Alaska mills, until a local chip-using industry is established. A

result of this assumption is that in the short term, Alaska mills will have

little incentive to maximize chip production. The entire focus of the

industry will be maximization of high-quality and specialty lumber

products.

• State lands will supply up to 6.8 mmbf of timber annually to mills in

southeast Alaska. This figure is 6 mmbf less than the volume of available

timber reported by the McDowell Group (2004). The 6.8 mmbf volume is

adjusted to account for small and rejected sales.

• We assume that investment risk will be acceptable. Returns from forest

products manufacturing will allow recovery of capital required to fund

necessary improvements.

• In the rebuilt model, no attempt has been made to account for low-grade

material. The model does, however, report chip volumes that are available

from sawmill production. In the all-lumber scenarios (see scenarios 1 and

2 below), utility logs may be unused, sent directly to sawmill chippers, or

exported. Specific disposition of utility logs will depend on market

conditions at the time of harvest and processing.

• The volume of sawn wood imports by the defined Pacific Rim market will

increase over the next 20 years to a level equal to Japan’s imports in

1997. Subject to the assumption about export products being synonymous

with high-value products, Alaska lumber will move to export markets.

Projections of expected Pacific Rim sawn wood consumption, imports,

exports, and production are presented in figure 4.

• Proposed harvests may be increased by salvage operations required to

remove dead trees resulting from attack by insect and disease. Projected

harvests do not include salvaged volumes.

Results

Alternative Projections

We developed four scenarios to display alternative futures of Alaska’s forest

sector and the resulting demand for national forest timber. These scenarios

have been labeled as follows:

Scenario 1—Limited lumber production

Scenario 2—Expanded lumber production

Scenario 3—Medium integrated industry

Scenario 4—High integrated industry
GENERAL TECHNICAL REPORT PNW-GTR-677

16

Figure 4—Pacific Rim consumption, production, imports, and exports of sawn wood, 1965-2004, and

projections for 2005-25.

The model settings and characteristics of the scenarios are presented in

table 2. Results of the model runs based on these four scenarios are listed

in table 3, along with the Brooks and Haynes (1990, 1994, 1997) projections

of demand for comparison.

The first two scenarios (limited lumber and expanded lumber) assume

that lumber exports to the Pacific Rim will increase steadily over the projection period. The level of exports will increase to those experienced in the

1990s. With existing projections of future demand, this is a conservative

view of expected exports to the Pacific Rim. In the limited lumber scenario

(scenario 1), Alaska market share remains constant and increase in production is a direct response to Pacific Rim shipments. In the expanded lumber

scenario (scenario 2), Alaska regains market share to a level that was experienced in the last decade. Given the lack of a market for low-grade and utility

logs, the industry must process some low-quality material (see assumption

relative to low-grade material). This is an implicit assumption, not reflected by

the model settings.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

17

Table 2—Characteristics of scenarios to define demand for Alaska timber

 Scenario

Limited Expanded Medium High

lumber lumber integrated integrated

Characteristic production production industry industry

Million cubic meters

Pacific Rim lumber imports: 

Starting 8 077 8 077 8 077 8 077

Ending 11 042 11 042 9 099 10 098

 Percent

AK share NA marketa: 

Starting 0.39 0.39 0.39 0.39

Ending .39 1.14 1.60 2.34 

Estimated low-grade (utility)

in sawmill log mixb 33 33 10 10 

Demand stimulation No Yes Yes Yes

 

Market for low-grade logs No No Yes Yes

Number of fiber plants 0 0 1 2

Thousand cubic meters per year

Capacity — — 175 350

Dry metric tons

Raw material — — 160 320

Year

Year first plant comes online — — 2008 2008

Year second plant comes online — — — 2012

— = not applicable.

a

 AK is Alaska market, and NA is North American market.

b

 Estimating amounts of utility grade logs in material delivered to sawmills for use as a saw logs meeting

the definition of a number 2 saw log at least 12 feet long. Utility log volumes in timber sales should not

be directly related to these volumes.
GENERAL TECHNICAL REPORT PNW-GTR-677

18

The last two scenarios (medium integrated and high integrated) are based

on slightly lower estimates of Pacific Rim lumber imports. In the medium

integrated scenario (scenario 3), exports increase until 2012 and then remain

constant. In the high integrated scenario (scenario 4), exports increase until

2012, remain constant from 2013-18, and then increase from 2019 onward.

As presented in table 2, a facility that will use low-grade logs is added in 2008.

In the high integrated scenario, a second facility that will use low-grade logs is

added in 2012. An implicit assumption of these two scenarios is that given the

increased level of harvest, a higher quality mix of logs will be available for

sawmills. Improved log quality will result in reduced amounts of low-grade

lumber production.

The integrated industry scenarios (scenarios 3 and 4) are based on reports

and recommendations by the McDowell Group (2004) and Leonard Guss

Associates (see footnote 3). These reports discussed world demand for MDF

and availability of raw material in southeast Alaska. It was implicitly assumed

that the existing forest products industry in southeast Alaska could make the

transition from current conditions to an integrated industry. In reality, a critical

element of the transition is timing with respect to an evolving sawmill industry.

Therefore, a feature of our analysis is expansion that roughly synchronizes

with expanding sawmill chip supply.

It was implicitly assumed that the existing forest products

industry in southeast

Alaska could make the

transition from current conditions to an

integrated industry.

Table 3—Alternative projections of average annual derived demand for Alaska national forest timber

Scenario Brooks Brooks Brooks

and and and

Limited Expanded Medium High Haynesc Haynesd Haynes

Perioda lumber lumber integratedb integratedb (1990) (1994) (1997)

Million board feet

1983-1987 281.0 281.0 281.0 281.0 281.0 281.0 281.0

1988-1992 414.0 414.0 414.0 414.0 414.0 414.0 414.0

1993-1997 200.2 200.2 200.2 200.2 404.0 300.0 192.0

1998-2002 93.3 93.3 93.3 93.3 403.0 315.0 113.0

2003-2007 30.0 33.7 44.4 44.4 397.0 332.0 152.0

2008-2012 34.7 52.0 169.0 185.8 401.0 335.0 174.0

2013-2017 38.7 75.4 204.4 299.0

2018-2022 43.0 108.1 204.0 317.0

2022-2025 46.7 142.9 204.4 360.1

a Years are the period over which the 5-year averages are calculated. Data that were not historical at the time of the projection are in bold. b

 Projection assumes an industry (one or more facilities) will be created that uses pulp chips produced by southeast Alaska sawmills, lowgrade logs, and other biomass products in a fiber-based board, chemical, or energy facilities. Medium-density fiberboard is one possible

alternative. Given globalization of the forest products industry, other chemical and energy uses are possible.

c

The base projection assumed two pulp mills would continue operating and 50-year contracts continue in force.

d

Base projection assumed that one pulp mill would remain operating.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

19

The possible strategies for creating an integrated industry are functionally

unlimited. With extremely high levels of demand, the implementation time

could be reduced. We have selected the described scenarios we deemed

reasonable and possible, given the outlined assumptions.

Expanded Results Illustrated by Using the Medium Integrated

Scenario

Table 4 presents an overall view of what will result from a future that moves

in the direction of the medium integrated scenario. In this scenario, it is

assumed that an integrated industry develops a use for the fiber produced

from low-grade and utility logs. As stated earlier, it has been assumed that an

MDF plant will be built some time between 2007 and 2012. Direct use of

wood fiber for energy production or manufacture of fuels, such as ethanol, is

an alternative industry that would use similar volumes of wood. Regardless of

the specific industry that develops, estimations of timber harvest by owner,

product, and the resulting volumes of products are included in table 4.

Key Market Share Values

Tables 5A and 5B present the market shares settings that have been used in

the four scenarios. The initial step in the model operation was to set import

and consumption patterns for the Pacific Rim region. These values have been

set to reflect a return to the levels of lumber consumption and imports that

occurred from 1993 through 1997. This growth has been distributed over 20

years. Given these settings, the model reflects a constant growth pattern over

the next 20 years. North American (NA) market share and Alaska (AK) market

share are a function of the described limited lumber scenario (i.e., a scenario

where the NA and AK market shares are constant would show growth proportional to the base consumption and import levels).

Table 5A shows that both the NA and AK values are constant in the

limited lumber scenario. However, in the expanded lumber scenario, the AK

share increases from 0.43 to 1.14 percent over 20 years. In the medium

integrated scenario, the AK market share increases from 0.53 to 1.60 percent

from 2005 to 2012 and then remains constant. In the high integrated scenario,

the AK share increases from 0.53 to 2.34 percent over 20 years. Whereas the

AK share of the market varies among the scenarios, the NA market share is

held constant at 49.29 percent. The net impact of these simulations, given the

previously listed assumptions, is that the market for high-value products
GENERAL TECHNICAL REPORT PNW-GTR-677

20

Table 4—Summary of historical and projected periodic Alaska timber harvest by owner, harvest by product, and production of forestproducts, 1970-2025 (medium integrated industry scenario)

Timber harvest by ownera Timber harvest by productb Production of forest productsc

Saw Fiber or Saw Fiber or Wood

National Other Timber log energy Timber log energy chip

Year Total forest Private public imports Total exports Lumber products imports exports Lumber products exports

– – – – – – – – – – – – – – Million board feet, round wood equivalentsd – – – – – – – – – – – – – – Million board feet Thousand short tons

1970 596.2 539.5 0 56.7 0 594.2 53.3 264.1 276.8 0 47.8 302.0 288.5 19.91975 551.5 489.4 7.5 54.6 4.0 615.7 43.3 282.5 289.8 4.0 43.3 341.2 298.8 56.51980 603.9 411.0 146.8 46.1 25.5 661.6 149.8 197.7 314.1 25.5 149.8 239.9 327.1 83.71985 653.0 280.7 346.5 25.8 34.5 690.6 318.3 105.7 266.6 34.5 318.3 125.7 303.0 4.61990 1031.9 413.5 596.9 21.5 12.5 1089.7 574.7 167.4 347.6 12.5 574.7 204.2 379.2 48.51995 791.5 200.2 568.0 23.3 10.3 832.1 545.5 95.9 190.7 10.3 545.5 117.0 177.2 116.32000 596.2 539.5 0 56.7 0 478.2 359.4 80.7 38.1 0 359.4 98.4 0 141.92005 311.9 44.4 210.6 55.6 0 317.4 212.1 48.1 57.3 0 212.1 58.6 0 148.32010 358.9 169.0 105.1 84.8 0 358.9 102.2 124.4 132.4 0 102.2 151.7 115.1 214.1

2015 392.5 204.4 103.8 84.8 0 392.5 102.2 171.2 119.1 0 102.2 208.8 82.5 214.12020 392.5 204.4 103.8 84.8 0 392.5 102.2 171.2 119.1 0 102.2 208.8 82.5 214.12025 392.5 204.4 108.3 84.8 0 392.5 102.2 171.2 119.1 0 102.2 208.8 82.5 214.1

Note: Totals may not equal column entries owing to rounding errors and the balancing methods. Bold numbers indicate data that were not historical at the time of theprojection.a Historical data reconciled to reported total.b Product totals reconciled to derived demand.c Products reconciled to derived demand.d Round wood equivalent is the volume of logs or other round products required to produce given quantities of lumber, plywood, wood pulp, paper or other similar

products, after deducting the proportion of wood raw material input that is obtained not from logs or round wood but from plant byproducts or recycled wood fiber.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

21

Table 5A—Historical (1995-2004) and assumed (2005-25) values for key elements in the limited lumber, expanded

lumber, medium integrated, and high integrated production scenarios

Alaska share of North American shipments to North American share of Pacific Rim softwood

Pacific Rim lumber imports

Limited Expanded Medium High Limited Expanded Medium High

Year lumber lumber integrated integrated lumber lumber integrated integrated

Percent

1990 6.63 6.63 6.63 6.63 88.37 88.37 88.37 88.37

1991 5.03 5.03 5.03 5.03 88.69 88.69 88.69 88.69

1992 4.03 4.03 4.03 4.03 88.27 88.27 88.27 88.27

1993 3.97 3.97 3.97 3.97 88.00 88.00 88.00 88.00

1994 3.02 3.02 3.02 3.02 84.10 84.10 84.10 84.10

1995 1.33 1.33 1.33 1.33 79.43 79.43 79.43 79.43

1996 .70 .70 .70 .70 80.06 80.06 80.06 80.06

1997 .90 .90 .90 .90 67.24 67.24 67.24 67.24

1998 .38 .38 .38 .38 69.75 69.75 69.75 69.75

1999 .57 .57 .57 .57 64.23 64.23 64.23 64.23

2000 1.23 1.23 1.23 1.23 59.88 59.88 59.88 59.88

2001 1.36 1.36 1.36 1.36 55.38 55.38 55.38 55.38

2002 .47 .47 .47 .47 50.38 50.38 50.38 50.38

2003 .39 .39 .39 .39 47.28 47.28 47.28 47.28

2004 .39 .41 .45 .45 49.29 49.29 49.29 49.29

2005 .39 .43 .53 .53 49.29 49.29 49.29 49.29

2006 .39 .45 .62 .62 49.29 49.29 49.29 49.29

2007 .39 .47 .73 .73 49.29 49.29 49.29 49.29

2008 .39 .50 .85 .85 49.29 49.29 49.29 49.29

2009 .39 .52 1.00 1.00 49.29 49.29 49.29 49.29

2010 .39 .55 1.17 1.17 49.29 49.29 49.29 49.29

2011 .39 .57 1.36 1.36 49.29 49.29 49.29 49.29

2012 .39 .60 1.60 1.60 49.29 49.29 49.29 49.29

2013 .39 .63 1.60 1.64 49.29 49.29 49.29 49.29

2014 .39 .66 1.60 1.69 49.29 49.29 49.29 49.29

2015 .39 .70 1.60 1.74 49.29 49.29 49.29 49.29

2016 .39 .73 1.60 1.80 49.29 49.29 49.29 49.29

2017 .39 .77 1.60 1.85 49.29 49.29 49.29 49.29

2018 .39 .81 1.60 1.91 49.29 49.29 49.29 49.29

2019 .39 .85 1.60 1.96 49.29 49.29 49.29 49.29

2020 .39 .89 1.60 2.02 49.29 49.29 49.29 49.29

2021 .39 .93 1.60 2.08 49.29 49.29 49.29 49.29

2022 .39 .98 1.60 2.14 49.29 49.29 49.29 49.29

2023 .39 1.03 1.60 2.21 49.29 49.29 49.29 49.29

2024 .39 1.08 1.60 2.28 49.29 49.29 49.29 49.29

2025 .39 1.14 1.60 2.34 49.29 49.29 49.29 49.29

Note: Bold numbers indicate data that were not historical at the time of the projection.
GENERAL TECHNICAL REPORT PNW-GTR-677

22

Table 5B—Shares of Alaska

lumber output going to export

and domestic markets, for all

scenarios

Export Domestic

Year share share

 Percent

1990 95.00 5.00

1991 85.00 15.00

1992 60.00 40.00

1993 70.00 30.00

1994 60.00 40.00

1995 82.00 18.00

1996 71.00 29.00

1997 39.80 60.20

1998 7.82 92.18

1999 12.02 87.98

2000 28.30 71.70

2001 28.30 71.70

2002 17.70 82.30

2003 17.70 82.30

2004 31.00 69.00

2005 17.00 83.00

2006 17.00 83.00

2007 17.00 83.00

2008 17.00 83.00

2009 17.00 83.00

2010 17.00 83.00

2011 17.00 83.00

2012 17.00 83.00

2013 17.00 83.00

2014 17.00 83.00

2015 17.00 83.00

2016 17.00 83.00

2017 17.00 83.00

2018 17.00 83.00

2019 17.00 83.00

2020 17.00 83.00

2021 17.00 83.00

2022 17.00 83.00

2023 17.00 83.00

2024 17.00 83.00

2025 17.00 83.00

Note: Bold numbers indicate data that

were not historical at the time of the

projection.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

23

displays moderate growth and returns to past levels. A marketing program is

one way for Alaska producers to capture additional market share. The marketing program would be based on superior quality (production of a dry, surfaced, and attractively packaged product) and strength values of the Alaska

product.

Given these basic conditions (Pacific Rim consumption and imports, NA

market share, AK market share), there are almost unlimited ranges of settings

that can be tested by using the model that would produce essentially the same

results. We have selected these settings because they convey responses reported by economic experts in North America and onsite in Pacific Rim

nations.

Sensitivity Analysis

Model sensitivity and response resulting from tables 5A and 5B values have

been shown by comparing selected scenarios and independent variables (table

6). In table 6, the derived demand in the form of exports and domestic production are presented for the limited lumber, expanded lumber, and high integrated scenarios. For comparative purposes, the table also presents the North

American share of Pacific Rim imports to give an idea of the relative size of

the market available to Alaska producers.

Stumpage Price Projections

Past timber projections have also reported price projections for Alaska stumpage. These projections have been developed from relations linking Alaska

stumpage prices to stumpage prices in competing regions. The selection of

competing regions has narrowed over time, reflecting changing markets for

Alaska forest products. Currently, we use the U.S. Pacific Northwest market.

Specifically, we develop stumpage price projections for southeast Alaska

from softwood stumpage prices for timber harvested on the western side of

Washington and Oregon. The underlying relations reflect that there is similar

price movement in the two regions as the result of market arbitrage in shared

markets for softwood lumber. Arbitrage is the process of buying and selling

in two or more markets to take advantage of (and thereby eliminate) price

differences. Some differences in prices among regions are based on differences in transportation costs (to markets) and other factors; however, these

differences are minimized through arbitrage.

We develop stumpage price projections

for southeast Alaska

from softwood stumpage prices for timber

harvested on the

western side of

Washington and

Oregon.
GENERAL TECHNICAL REPORT PNW-GTR-677

24

In earlier sections we have described the growing role that Pacific Northwest softwood lumber markets have played for Alaska producers. After adjustments for the loss of log export markets and reductions in federal harvest

flows, the Pacific Northwest is once again expanding softwood lumber production, especially in the commodity grades (see Haynes and Fight 2004 for

a discussion of lumber production by grade). This expansion is largely supported by private timber whose volume is expected to increase and whose size

and species mix are expected to remain roughly stable (Zhou et al. 2005).

The historical and projected stumpage prices for southeast Alaska and

the Pacific Northwest West (western Washington and Oregon) are shown in

table 7. Although not entirely obvious in the table, prices in the two regions

diverged after 1990 as prices in the Pacific Northwest surged (peaking in

1993). During this time, federal harvests were first stopped by injunction and

then reduced by the adoption of the Northwest Forest Plan. Projections of

future softwood lumber markets can be taken from the RPA Timber Assessment Update (Haynes et al., in press). These projections envision a future

where total U.S. forest products consumption increases 38 percent by 2050.

Softwood lumber consumption is expected to increase 27 percent with U.S.

production increasing by 21 percent. Increased lumber imports from a growing variety of sources continue to moderate lumber price increases. United

States timber harvests grow by 30 percent with an increasing proportion

Table 6—Sensitivity analysis: 5-year average values used to calculate annual derived demand

Alaska share of North American North American share of Japan Alaska shipments to domestic

shipments to Pacific Rima or Pacific Rim importsa marketsb

Limited Expanded High Limited Expanded High Limited Expanded High

Year lumber lumber integrated lumber lumber integrated lumber lumber integrated

Million board feet lumber tally

1985 119.5 119.5 119.5 1,770.2 1,770.2 1,770.2 6.3 6.3 6.3

1990 174.0 174.0 174.0 3,041.6 3,041.6 3,041.6 30.1 30.1 30.1

1995 74.7 74.7 74.7 3,617.9 3,617.9 3,617.9 42.2 42.2 42.2

2000 18.1 18.1 18.1 2,196.8 2,196.8 2,196.8 80.3 80.3 80.3

2005 8.1 8.1 10.9 1,924.2 1,924.2 1,924.2 33.6 37.3 47.7

2010 8.3 11.8 25.8 2,146.7 2,146.7 2,146.7 40.7 57.5 125.9

2015 9.1 16.5 39.0 2,348.3 2,348.3 2,348.3 44.5 80.3 190.6

2020 10.0 23.0 46.3 2,569.2 2,569.2 2,569.2 47.8 112.1 226.1

2025 10.7 29.9 55.7 2,760.5 2,760.5 2,760.5 52.4 146.1 272.1

Note: Bold numbers indicate data that were not historical at the time of the projection.

a

Values are 5-year averages from model table 5, resulting from report tables 5A and 5B settings.

b

Values are 5-year averages from model table 3, resulting from report tables 5A and 5B settings.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

25

coming from managed stands, mostly in the South and Pacific Northwest.

These trends contribute to expectations that stumpage prices in both the

South and Pacific Northwest will grow slowly in the next five decades, averaging 0.3 percent per year.

The data and projections shown in table 7 suggest relatively constant

stumpage prices in the future. Chip prices can also be expected to remain

constant in real terms. The recent price movements in southeast Alaska suggest that there is increasing variability around long-term average stumpage

price, partially reflecting how small changes in quantities can have large

impacts on stumpage prices. This is especially true in relatively small regional

markets like southeast Alaska.

Maximum Derived Demand

Maximum derived demand volumes of wood required by each scenario are

presented in table 8. Alaska currently has an available supply of chips, but the

volume in the southeast is not sufficient to supply the total resource needs of

the recommended MDF plant size (capacity). Given this fact and an expectation of increasing chip production as a result of increased lumber production,

the startup points for the proposed fiber-using facility have been scheduled at

Table 7—Historical and projected stumpage pricesa for

southeast Alaska and the Pacific Northwest West

Year Pacific Northwest West Southeast Alaska

1982 dollars per thousand board feet

1975 121.64 36.66

1980 158.62 104.50

1985 84.57 6.76

1990 204.58 52.49

1995 363.15 28.26

2000 232.53 30.08

2002 207.95 31.45

2010 209.00 43.53

2020 244.00 53.51

2030 222.00 47.24

2040 225.00 48.09

2050 238.00 51.80

Note: Pacific Northwest West (western Washington and Oregon)

prices are for timber harvested; southeast Alaska prices are for timber sold on the Tongass National Forest. Bold numbers indicate data

that were not historical at the time of the projection.

a

 The price projections were developed by using the equation:

southeast Alaska price = -16.11 + 0.285 Pacific Northwest West

price (estimated with data for 1975 to 2002).
GENERAL TECHNICAL REPORT PNW-GTR-677

26

Table 8—Maximum projected annual demand for Alaska national forest timber by

scenario and harvest component for 2025

Cedar log Low-grade Total harvest or

Scenario Saw log exports and utilitya derived demandb

 Million board feet

Limited lumber 45.8 1.8 0 47.7

Expanded lumber 147.2 5.9 0 153.1

Medium integrated 164.4 6.6 33.5 204.4

High integrated 274.7 11.0 84.2 369.9

a “Low-grade” refers to saw log grades that are not commonly used in lumber production in

Alaska. The range of grades included in this category differs by the scenario.

b The saw log portion of harvest, net of utility volumes.

times where a major portion of the required furnish is available in the form of

sawmill chips. We have simulated the startup of the plants in 2008 and 2012

because this is an approximation of the time when chips should be available to

partially fill the needs of each plant. There are other sources of fiber that might

become available to the industry. First, when the pulp mills were active, lowgrade logs from private (Native) lands were available as a source of raw

material for pulp production. If these markets evolve again, logs from private

lands may be available. Second, it is anticipated that increasing volumes of

chips will be produced in south-central Alaska for export to Pacific Rim

markets. Although it is possible that material from this source might flow to

southeast Alaska, it is more probable that someone would build a facility to

use them in the port area. Given the above comments, it is estimated that the

maximum wood requirement resulting from the scenarios is 370 mmbf of logs

annually.

Most Probable Outcome

Given the high degree of uncertainty surrounding developments in Alaska,

we have deliberately avoided labeling a “most likely” projection. Instead,

our objective was to focus attention on key issues, such as competitiveness,

efficiency, and predicted trends, and to translate the range of views on these

issues into a range of values for parameters in our model. The model is a

framework for specifying assumptions about the future for Alaska and displaying their implications in terms of derived demand for national forest timber.

The four scenarios represent possible future outcomes. Two conditions

must exist if they are to develop. First, the supply of timber from the various
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

27

ownerships has to be orderly and predictable. Second, capital must be available to support increases to existing capacity and construction of new facilities. This second condition depends on the first. A relatively secure supply of

raw material is an essential component of scenarios that assume new investment. A future that includes constant conflict that inhibits raw material flows

will most likely create an unacceptable level of risk for investors and limit

access to capital.

In the face of the various challenges implicit in scenarios 2 through 4,

the outcome resulting from the limited lumber scenario (scenario 1) assumes

greater likelihood of occurrence as it only depends on the continuation of the

status quo. Implementing change is a major requirement in reaching the outcomes of the other scenarios. Each of those changes has its own likelihood of

occurrence.

Conclusions

From 1990 through 2004, the harvest of timber in Alaska declined by nearly

67 percent. During the same period, harvests from the Alaska national forests

have declined by 92 percent. Factors contributing to this decline included

changes in the structure of the Alaska forest sector, changes in markets for

Alaska products, and changes in conditions faced by Alaska’s competitors.

Our revised projections of average demand for Alaska national forest timber

from 2005 through 2025 range from about 33 to 370 mmbf (table 3). Four

broadly different scenarios display alternative futures for Alaska and the

resulting demand for its national forest timber. In addition to differences in the

total quantity of timber demanded, these scenarios also differ in the use of the

projected harvest. In the expanded lumber scenario, approximately two-thirds

of the total potential harvest is used to manufacture lumber in Alaska. In the

high integrated scenario, the entire saw log and utility log component of the

timber harvest is assumed to be used to manufacture products in Alaska. The

high integrated scenario may also require that low-grade timber from other

owners (Native and state lands) become available to the industry, contrary to

the assumption listed. This has happened in the past and could again occur in

the future.

Critiques of projections for Alaska rest on different opinions about values

for the major assumptions. For example, in the early 1990s the critical issue

Four broadly different

scenarios display

alternative futures

for Alaska and the

resulting demand

for its national forest

timber.
GENERAL TECHNICAL REPORT PNW-GTR-677

28

was projections of Alaska lumber exports. Jay Gruenfeld Associates4 expected

Alaska lumber exports to Japan in the 1990s to average more than 400 mmbf.

This implied that Alaska lumber production in 1990-99 would average more

than peak production in the 1970s (lumber production in Alaska peaked in

1973). A previous projection (Brooks and Haynes 1994) expected Alaska

lumber exports to increase throughout the 1990s, but to average roughly 220

mmbf. From 1990 through 1996, Alaska lumber exports averaged 118 mmbf.

Projections in 1997 suggested that exports would increase 30 mmbf annually

from the then current (1996) level and would range from 66 to 180 mmbf by

2010. Reported volumes of lumber exported from Alaska during 2000 through

2003 averaged 18.4 mmbf. During the same period, shipments to domestic

markets were 54.9 mmbf. The current scenarios estimate that lumber production by 2010 will average between 69 and 147 mmbf. All of our assumptions

suppose there will be a timber sale program on the Tongass, as mandated by

the current legislation. Obviously, if this assumption is rejected then the

ultimate outcome will differ.

Suggestions for Future Research

During the conduct of this project, it became obvious that changing conditions in Alaska and world markets are rapidly making the existing model

and approach obsolete. Future attempts to project demand for national forest

timber in Alaska will require new methods and additional information. Given

identified problems, we recommend the following research projects:

• Small and medium producers are starting to sell dry, planed, and graded

lumber in domestic markets. These producers are competing directly

against local retail lumber suppliers selling lumber from outside of Alaska.

An effort should be started to collect and maintain lumber prices in this

market so that competitive aspects can be defined.

• The transshipment problem has been identified, and an effort is needed to

develop reliable estimates of lumber exports from Alaska.

• The relative values of products shipped to export markets (e.g., value in

Japanese yen or Chinese yuan RMB [“renminbi” meaning “people’s

currency”] per cubic meter) as opposed to products shipped to domestic

markets (price in U.S. dollars per board foot tally) are not generally

available. A project should be initiated to address this issue.

4

 Jay Gruenfeld Associates. 1991. Demand for Alaskan logs and lumber in

the 1990s. Unpublished report. On file with: USDA Forest Service, Pacific

Northwest Research Station, Social and Economic Values Research Program,

Forestry Sciences Laboratory, 3200 SW Jefferson Way, Corvallis, OR 97331.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

29

• Transportation costs (methods and distances to export ports within Alaska

and the Pacific Northwest) are becoming an important cost required to

determine profit maximization marketing schemes. Research is required to

develop methods to determine cost information and make it available.

• Lumber recovery factors for shop lumber may average 20 percent below

those for dimension lumber owing to differences in nominal values used

in board foot calculations. To address this issue, two types of information

are required. First, information is lacking on how lumber is sawn and

graded (dimension rules vs. shop rules). Second, appropriate conversion

factors should be developed for both modes of production.

• If there is a continuing need to periodically update the demand for

national forest timber in Alaska, the approach should include production,

import, export, and consumption information for defined products. The

approach should convert expected or projected product volumes to

required volumes of standing timber. It should also be revised to include

changes in domestic markets (within Alaska and the continental 48 states).

From an economic perspective, the shift between markets should be

controlled by expected real price.

Acknowledgments

The authors wish to acknowledge the assistance of Maria Stiefel, technical

writer at the Alaska Wood Utilization Research and Development Center, for

her assistance with the writing and preparation of the manuscript. They also

want to acknowledge the assistance of David Brooks and thank him for his

willingness to comment and assist with the rebuilding of the original Brooks

and Haynes model.

Metric Equivalents

When you know: Multiply by: To find:

Board feet, log scale 0.00453 Cubic meters, logs

Board feet, lumber scale .00236 Cubic meters, lumber

Tons, short .9072 Dry metric tons
GENERAL TECHNICAL REPORT PNW-GTR-677

30

Literature Cited

Brackley, A.M.; Davis, E.F. 2004. A model to evaluate the technical and

economic feasibility of constructing a board plant (OSB or MDF) in

southeast Alaska. In: Proceedings of the 38th international wood composites symposium. Pullman, WA: Washington State University: 43-71.

Brackley, A.M.; Parrent, D.J.; Rojas, T.D. 2006. Estimating sawmill processing capacity for Tongass timber: 2003 and 2004 update. Res. Note

PNW-RN-553. Portland, OR: U.S. Department of Agriculture, Forest

Service, Pacific Northwest Research Station. 15 p.

Brooks, D.J.; Haynes, R.W. 1990. Timber products output and timber harvests in Alaska: projections for 1989-2010. Gen. Tech. Rep. PNW-GTR261. Portland, OR: U.S. Department of Agriculture, Forest Service, Pacific

Northwest Research Station. 48 p.

Brooks, D.J.; Haynes, R.W. 1994. Timber products output and timber harvests in Alaska: projections for 1992-2010. Gen. Tech. Rep. PNW-GTR334. Portland, OR: U.S. Department of Agriculture, Forest Service, Pacific

Northwest Research Station. 48 p.

Brooks, D.J.; Haynes, R.W. 1997. Timber products output and timber harvest in Alaska: projections for 1997-2010. Gen. Tech. Rep. PNW-GTR409. Portland, OR: U.S. Department of Agriculture, Forest Service, Pacific

Northwest Research Station. 17 p.

Butterworth, J.; Lei, Z. 2005. China, Peoples Republic of—Solid wood

products annual 2005. GAIN Rep. CH5052. Beijing, China: U.S. Foreign

Agriculture Service, Global Agriculture Information Network. 27 p.

Crone, L.K. 2005. Southeast Alaska economics–a resource-abundant region

competing in a global marketplace. Landscape and Urban Planning.

72(1-3): 215-249.

Food and Agriculture Organization [FAO]. 1997. FAO provisional outlook

for global forest products consumption, production and trade to 2010.

Rome: Forestry Department, Forest Policy and Planning Division. 390 p.

Food and Agriculture Organization [FAO]. 1998. Asia-Pacific forestry

towards 2010. Rome: Forestry Department, Forest Policy and Planning

Division. 242 p.
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

31

Food and Agriculture Organization [FAO]. 2006. FAOSTAT [Database].

www.fao.org/forestry/site/29420/en. (January).

Forest and Rangeland Renewable Resources Planning Act of 1974 [RPA];

16 U.S.C 1601.

Haynes, R.W.; Adams, D.M.; Alig, R.J.; Ince, P.J.; Mills, J.R.; Zhou, X.

[In press]. The 2005 RPA timber assessment update. Gen. Tech. Rep.

Portland, OR: U.S. Department of Agriculture, Forest Service, Pacific

Northwest Research Station.

Haynes, R.W.; Brooks, D.J. 1990. An analysis of the timber situation in

Alaska: 1970-2010. Gen. Tech. Rep. PNW-GTR-264. Portland OR: U.S.

Department of Agriculture, Forest Service, Pacific Northwest Research

Station. 33 p.

Haynes, R.W.; Connaughton, K.P.; Adams, D.M. 1981. Projections of the

demand for national forest stumpage by region: 1980-2030. Res. Pap.

PNW-282. Portland, OR: U.S. Department of Agriculture, Forest Service,

Pacific Northwest Research Station. 13 p.

Haynes, R.W.; Fight, R.D. 2004. Reconsidering price projections for selected

grades of Douglas-fir, coast hem-fir, inland hem-fir, and ponderosa pine

lumber. Res. Pap. PNW-RP-561. Portland, OR: U.S. Department of Agriculture, Forest Service, Pacific Northwest Research Station. 31 p.

Japan Lumber Journal. 2005. Total production of laminated lumber in 2004

marked as new record with an increase of 5.9% to 1,490,000 cubic meters.

JLJ Inc. 36(8): 17-15.

Japan Wood-Products Information and Research Center [JAWIC]. 2006.

Japan Wood Market Statistics. Tokyo: January. 26 p.

Kilborn, K.A.; Parrent, D.J.; Housley, R.D. 2004. Estimating sawmill

processing capacity for Tongass timber. Res. Note PNW-RN-545. Portland,

OR: U.S. Department of Agriculture, Forest Service, Pacific Northwest

Research Station. 12 p.

Lotus Software. ©1983. Lotus 1-2-3 spreadsheet. Cambridge, MA.

McDowell Group. 2004. Timber markets update and analysis of potential for

an integrated southeast Alaska timber industry. Juneau, AK. 66 p.

Microsoft Corporation. ©1999. Microsoft Office 2000. Redmond, WA.
GENERAL TECHNICAL REPORT PNW-GTR-677

32

Nagahama, M. 2004a. Japan’s fiberboard production steady–MDF up 2004.

GAIN Rep. JA4035. Tokyo, Japan: U.S. Foreign Agriculture Service,

Global Agriculture Information Network. 2 p.

Nagahama, M. 2004b. Japan—solid wood products–domestic glulam

production explodes to meet demand 2004. GAIN Rep. JA4031. Tokyo,

Japan: U.S. Foreign Agriculture Service, Global Agriculture Information

Network. 2 p.

Nagahama, M. 2005a. Japan solid wood products annual report 2005. GAIN

Rep. JA5046. Tokyo, Japan: U.S. Foreign Agricultural Service, Global

Agriculture Information Network. 18 p.

Nagahama, M. 2005b. Japanese glued laminated product imports growing

rapidly in 2004–An update. GAIN Rep. JA5006. Tokyo, Japan: U.S.

Foreign Agriculture Service, Global Agriculture Information Network. 2 p.

Nicholls, D.L.; Brackley, A.M.; Rojas, T.D. [In press]. Alaska’s lumberdrying industry—impacts from a federal grant program. Manuscript in

preparation. Gen. Tech. Rep. Portland, OR: U.S. Department of Agriculture, Forest Service, Pacific Northwest Research Station.

Sasatani, D.; Roos, J.A.; Brackley, A.M.; Eastin, I.L. 2005. Niche market

opportunities for Alaska forest products in Japan (2005 Update). Working

Paper 100. Seattle, WA: Center for International Trade in Forest Products,

College of Forest Resources, University of Washington. 52 p.

State of Alaska. 2006. Alaska by region [Political]. Juneau, AK: Department

of Commerce, Community, and Economic Development. http://

www.dced.state.ak.us/oed/student_info/learn/region.htm. (February).

Stevens, J.A.; Brooks, D.J. 2003. Alaska softwood market price arbitrage.

Res. Pap. PNW-RP-556. Portland, OR: U.S. Department of Agriculture,

Forest Service, Pacific Northwest Research Station. 12 p.

Tongass Timber Reform Act of 1990 [TTRA]; Public Law No. 101-626,

104 Stat. 4426.

United States International Trade Commission [USITC]. 2005. USITC

Interactive Tarriff and Trade Dataweb [Database]. Version 2.7.4. http://

dataweb.usitc.gov/scripts/user_set .asp. (November).
Timber Products Output and Timber Harvests in Alaska: Projections for 2005-25

33

Wahl, A. 2004. China’s non-structural panel markets. In: Proceedings of the

38th international wood composites symposium. Pullman, WA: Washington

State University: 21-27.

Warren, D. 2005. Production, prices, employment, and trade in Northwest forest industries, all quarters of 2003. Resour. Bull. PNW-RB-247.

Portland, OR: U.S. Department of Agriculture, Forest Service, Pacific

Northwest Research Station. 171 p.

Zhou, X.; Haynes, R.W.; Barbour, J.R. 2005. Projections of timber harvest

in western Oregon and Washington by county, owner, forest type, and age

class. Gen. Tech. Rep. PNW-GTR-633. Portland, OR: U.S. Department of

Agriculture, Forest Service, Pacific Northwest Research Station. 30 p.
This page has been left blank intentionally.

Document continues on next page.

.
Pacific Northwest Research Station

Web site http://www.fs.fed.us/pnw

Telephone (503) 808-2592

Publication requests (503) 808-2138

FAX (503) 808-2130

E-mail pnw_pnwpubs@fs.fed.us

Mailing address Publications Distribution

Pacific Northwest Research Station

P.O. Box 3890

Portland, OR 97208-3890
U.S. Department of Agriculture

Pacific Northwest Research Station

333 S.W. First Avenue

P.O. Box 3890

Portland, OR 97208-3890

Official Business

Penalty for Private Use, $300