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Timber trends and prospects for North America

D. Darr and D. Boulter

David R. Darr is Chief of the Economics Trade and Market Research Branch of the United States Department of Agriculture (USDA) Forest Service.

David W.K. Boulter is Director of Economic Studies at the Economic and Statistics Directorate of Forestry Canada.

This article is based on a study undertaken jointly by the United States Forest Service and Forestry Canada (the national forestry agencies in these two countries). It assesses the prospects for timber supply and demand in North America to 2005, beginning with a discussion on the North American forest resource in terms of its size, location and ownership distribution by both area and volume. The following sections cover the trends in, and prospects for raw material supply and forest product demand. Finally, the implications of the forecast forest product demand for timber are considered.

The forests of North America are an important, diverse and dynamic resource. Total forest land covers some 749 million ha or about 40 percent of the total land area. About 453 million ha (60 percent of forest land) are considered commercially productive. This productive forest land base is relatively evenly divided between Canada and the United States. Although Canada's total forest land base is considerably larger than that of the United States, because of its northern climate and resulting slower growth rates and shorter growing season, the Canadian productive proportion is considerably smaller. In addition, large areas of forest land in Canada, particularly in northern areas, have not yet been inventoried.

In the United States, the major softwood species is Douglas fir

A proportion of this productive forest land is currently set aside for noncommercial forest uses such as wildlife, wilderness and other forest reserves and parks (14 million ha in the United States and 8.9 million ha in Canada). The total productive, stocked and non-reserved forest land in North America (the potential industrial land base) amounts to approximately 404 million ha. In Canada, this forest land is almost equally divided between east and west. In the United States, in excess of 141 million ha, or 72 percent, of the productive and available forest land is concentrated in the eastern part of the country.

Forest land ownership

There are distinct differences between the United States and Canada in the pattern of forest land ownership. For the United States as a whole, 72 percent (140 million ha) of productive and available forest land is owned by private individuals or companies. In Canada, 81 percent of the stocked, productive and available forest land is under the ownership and jurisdiction of the provincial governments.

Timber volumes

It is estimated that the productive and available forest lands in North America contain about 46 800 million m³ of timber, almost equally divided between the United States and Canada. On an aggregate basis, coniferous species predominate, representing just over two-thirds of the total. In Canada, spruce alone accounts for 40 percent of the coniferous volume while Jack and Lodgepole pines and true firs (excluding Douglas fir) jointly represent an additional 39 percent. Hemlock and Douglas fir are also abundant, but these are predominantly found in British Columbia. In the United States the major softwood species are Douglas fir with about 19 percent of total softwood volumes, followed by Loblolly and short-leaved pines, jointly representing about 14 percent of the total. A wide variety of other species is also abundant.

In terms of hardwood species, poplar accounts for 57 percent of the total volume in Canada, while the United States hardwood inventory is dominated by red and white oaks, representing in excess of 32 percent of total inventory volumes.

Natural forest productivity

One measure of the productivity of forest land is the amount of wood per unit area that can be produced in a given time period in fully stocked stands. Fully 34 percent of United States productive forest land (69.7 million ha) is rated as high productivity land, in the sense that a fully stocked natural stand will support growth rates in excess of 6 m³/ha/annum. About one-half of this high productivity forest land is located in the southeast of the United States. Although equivalent information is not available for Canada, it is revealing that the estimated average annual increment on productive and available forest land in Canada is only 1.7 m³/ha. However, it should be noted that there are substantial regional variations within Canada. The average for western Canada is 1.8 m³/annum; in British Columbia it is 2.1 m³/annum.

In Canada, spruce accounts for more than 40 percent of coniferous volume

Trends and prospects for raw material supply

The first section of this article gave a snapshot of the current size, extent and nature of the North American forest resource. This represents the capital stock available to support the commercial forest industry. The growth of this capital stock determines its potential to provide a flow of resources over time. In this section, we turn to the implications of these statistics for timber supply to the commercial forest industry over the next two decades.

United States harvest trends

For the contiguous states (excluding Alaska and Hawaii), the softwood harvest increased by 58 percent between 1962 and 1986. Much of this increase occurred after 1970, reflecting the large demands for wood use in housing and other forest products in the United States. The bulk of the increase occurred in the southeast where the softwood harvest virtually doubled. The harvest in the northeast also showed a dramatic increase of more than 80 percent. In contrast, western increases were in the order of 30 percent for the same period.

Since 1962, the harvest has increased for each ownership class; however, the share coming from industrial forest lands has undergone a relative increase while the share from national forest lands has declined. In 1986, about 76 percent of the total softwood harvest came from forest industry and other private lands.

Trends in the hardwood resource are dominated by private lands in the east. Between 1962 and 1976, hardwood harvests were relatively stable but since that time they have virtually doubled. Factors contributing to this increase include a growing demand for fuelwood, increased pulping of hardwoods and the development of a hardwood structural panel industry in the northeast.

Despite the harvest increases, both softwood and hardwood inventories mainly increased during the period. For the contiguous states, the overall growth to harvest ratio in 1986 was I.11 for softwoods and 1.47 for hardwoods.

Major factors affecting United States supplies

The current growth and removal balances for timber show that the hardwood forests and eastern softwood forests could support additional harvests. However, the actual harvest over the next 20 years will depend upon ownership objectives, past investments in forest management, stumpage prices and institutional constraints.

TABLE 1. United States net annual growth and removal balances by region in 1986 (million m³)

Region

Softwoods

Hardwoods

Total

Northeast

Net growth

36.5

19.6

156.1

Removals

20.5

56.2

76.7

Southeast

Net growth

165.6

129.7

295.3

Removals

162.6

83.7

246.3

Total east

Net growth

202.1

249.3

451.4

Removals

183.1

139.9

323.0

Rocky Mountains

Net growth

55.4

4.8

60.2

Removals

23.8

0.8

24.6

Pacific Coast

Net growth

103.1

19.2

122.3

Removals

138.7

4.1

142.8

Total west

Net growth

158.5

24.0

182.5

Removals

138.7

4.1

142.8

Total United States1

Net growth

360.6

273.3

633.9

Removals

321.9

143.9

465.8

1 Forty-eight contiguous states

Oak-dominated hardwood forests in the eastern United States

For private lands, market forces will be a predominant factor. Stumpage prices in the United States have shown wide fluctuations for the past decades but have generally followed an upward trend. Demand rather than supply shifts have had the most important impact on these movements. If demand increases, causing stumpage prices to rise, further increases in timber supply are likely where inventories are sufficient.

Timber sale offerings from public lands are usually determined by institutional constraints rather than by the market. As a general rule, these institutional constraints are aimed at a sustained volume of timber output. On this basis, harvests from national forest lands may gradually increase over time. However, there is a degree of uncertainty in this forecast. In both the west and the south, these lands provide habitats for a number of animal species considered to be threatened or endangered. Timber management activities must be altered to ensure conservation of these species' habitats and this may have the effect of reducing timber available for sale.

Future prospects for United States timber supplies

Given the constraints on supplies from public lands, any increases in harvests up to 2005 must almost certainly come from private lands. In the east, the timber inventories on private ownerships have been growing for decades, and there is volume available to respond to demand increases. In the west, the old-growth inventories on private ownerships are being rapidly depleted, and by 2000 they will be largely gone. After 2010, plantations initiated in the past ten years will reach merchantable size in the south and the Pacific northwest. Given the level of planting and forest management in the past decade, there is every reason to be optimistic about the long-term timber supply. In the interim, high demand could create opportunities for a more intensive use of hardwoods. It could also create trade opportunities for other suppliers such as Canada.

TABLE 2. Canada's potential net annual growth and removal balances, by region in 1985 (million m³)

Region

Softwood

Hardwood

Total

Atlantic provinces


Potential net growth

12.3

6.6

18.9

Removals

12.5

1.8

14.3

Quebec and Ontario


Potential net growth

52.8

23.6

76.4

Removals

52.7

10.9

63.6

Total eastern Canada


Potential net growth

65.1

30.2

95.3

Removals

65.2

12.7

77.9

Prairie provinces


Potential net growth

-0.7

-4.9

-5.1

Removals

12.3

1.4

13.7

British Columbia


Potential net growth

92.2

5.3

97.5

Removals

76.9

*

76.9

Northwest Territories


Potential net growth

4.6

1.8

6.4

Removals

**

**

**

Total western Canada


Potential net growth

96.6

2.2

98.8

Removals

89.2

1.4

90.6

Total Canada


Potential net growth

161.7

32.4

194.1

Removals

154.4

14.1

168.5

* Hardwood included with softwood
** Under 50 000 m³

Oak-dominated hardwood forests in the eastern United States

Canadian harvest trends

Total Canadian roundwood production rose from about 93 million m³ in 1960 to about 169 million m³ by 1985. The largest production increases have been registered in western Canada; the harvest in British Columbia and in the prairie provinces virtually doubled over the period. A breakdown of total removals between softwood and hardwood is only available from 1970 but, since then, softwood production has remained at about 91 percent of the total.

Major factors affecting future Canadian supplies

In contrast to the United States, Canadian forests are still heavily weighted toward old-growth natural forest. The estimated volumes of mature and overmature timber are theoretically sufficient to maintain current average harvest rates for many decades, or at least to permit continued expansion of the harvest in the short term. Unfortunately, this largely physical assessment gives a somewhat unrealistic perspective on timber supply potential. There are wide variations in the quality and condition of the resource and there is limited accessibility and difficult terrain in many regions. In addition, other competing uses for the land base and growing stock as well as the environmental sensitivity of certain areas may limit harvesting operations, although these areas may not be formally reserved for other uses.

A second important factor is that each provincial forest management agency bases its harvesting policies on an independent assessment of the potential of its resource to support continuous commercial harvesting. These assessments attempt to incorporate the economic as well as the long-term physical limitations of the resource in establishing an Annual Allowable Cut (AAC). This has significant implications for the speed with which the current mature and overmature inventory can be depleted.

Future prospects for Canadian timber supplies: provincial analyses

In the Atlantic provinces (New Brunswick, Nova Scotia, Newfoundland and Prince Edward Island) about one-third of the productive and available forest land base is in mature and overmature age classes. Total estimated volume available for harvest on this land base is 688 million m'. On an aggregate basis, the estimated AAC for the entire region (including both private and public land) amounts to some 22.8 million m³. Just over two-thirds of this (15.7 million m³) is softwood. The 1985 harvest level for the entire region amounted to about 14.2 million m³. However, close to 90 percent of this (12.5 million m³) was softwood. On the basis of these figures, there is a relatively small apparent surplus of softwood and a relatively large apparent surplus of hardwood available to facilitate expansion of the harvest over the next 20 years.

North America is a net exporter of coniferous sawnwood.

Pictured is a large-scale sawmill in Oregon, United States

In Quebec and Ontario provinces, more than one-half of the productive and available forest land is in mature and overmature classes. The estimated total volume of timber currently available for harvest is 4 800 million m³. It is difficult to derive an aggregate AAC for the entire region as, unlike other provinces, Ontario public land harvests are controlled on a total area depletion basis. To translate the allowable area depletion into volume terms requires assumptions regarding gross timber yields by species groups. This exercise has been performed by a number of analysts with somewhat varying results. Estimated AACs vary between 34.0 and 45.5 million m³. In this analysis, a midrange figure of 41.4 million m³ has been used.

On this basis, the total AAC for both provinces amounts to some 89.8 million m³, not including private lands in Ontario. Approximately two-thirds of this allowable cut (59.7 million m³) is softwood. The 1985 harvest for the two provinces amounted to some 63.6 million m³. About 82 percent of this (52.7 million m³) was softwood. These figures imply that only a small surplus of softwood exists to facilitate further harvest expansion while there are relatively substantial surpluses of hardwood.

In the prairie provinces (Alberta, Saskatchewan and Manitoba), the specifics of timber supply planning vary widely, but some common elements are apparent. All three provinces set aside a certain portion of the productive forest land base as "economically inaccessible" under current market conditions. In addition, a further net reduction of the productive land base for supply planning results from the elimination of certain stands because of low volume per hectare, high elevation; steep slopes; or inappropriate species mix. The total estimated volume available for harvest in mature and overmature stands is 2 600 million m³. On an aggregate basis, the estimated AAC for the entire region (provincial lands only) amounts to some 35.4 million m³. About 57 percent of this (20.1 million m³) is softwood. The 1985 harvest for the entire region amounted to approximately 13.7 million m³ (of which 12.3 million m³ was softwood). On the basis of these figures, large surpluses of softwood and hardwood are available.

Fully 63 percent of the productive and available forest land in British Columbia is in mature and overmature classes. The estimated volume currently available for harvest on these lands is 7 300 million m³. The most recent comprehensive planning documents (dated 1985) indicate a total AAC for all regulated lands in the province of 70.8 million m³. More recent information from the provincial government indicates that the AAC has increased to 72 million m³ since that time. The harvest from regulated lands in the province has averaged about 71.5 million m³ per annum over the past several years. An additional average harvest of approximately 9.1 million m³ has been realized from unregulated, largely private lands in the province. Virtually all the harvest in the province is of softwoods.

With respect to regulated lands, the above figures suggest that little surplus is available. However, the methods used by the provincial government to arrive at the AAC are much more intensive than in other jurisdictions, and approximately 50 percent of the productive forest land base in the province is removed from consideration in supply planning. In effect, the current AAC is calculated on the basis of one-half of the physical land area currently available for commercial harvesting.

Trends and prospects for forest products demand

The United States has long been the major market for Canadian exports of softwood lumber, newsprint and wood pulp. Similarly, Canada is a major market for United States exports of softwood lumber and other products. In keeping with the North American context for this report, trends and prospects for forest product demand are presented for North America as a whole. Thus, the presentation focuses on North American domestic consumption, exports outside the continent (hereafter referred to as offshore exports) and imports from outside the continent (offshore imports).

North America is self-sufficient for most timber products. The main exception is for non-coniferous plywood which consists mainly of panels made from tropical species, especially those from Indonesia. Imports account for some two thirds of North American consumption of non-coniferous plywood.

The region is a net exporter of coniferous sawnwood, paper, paperboard, wood pulp, pulpwood and logs. Pulpwood and coniferous logs have the Pacific Rim as the major market. Sawnwood and fibre-based products have a more diversified market that includes Europe. European and, increasingly, Pacific Rim countries are the major destinations for non-coniferous logs.

Factors influencing domestic and export demand

Although various factors affect markets for individual products, in general, demands for forest products are tied to population and the economy. Thus, the overall trend in North American consumption has been upward. Projections of population and economic activity underlie projected North American consumption of forest products.

Demand in the export market depends on demand conditions in the importing countries; exchange rates; competing sources of supply; the supply and demand situation in North America; and tariff and non-tariff factors. Export markets for North America have traditionally been the industrialized countries and this should continue, with Japan and Europe as the main sources of offshore demand.

TABLE 3. North American offshore trade outlook for specific products

Date

Production

Imports

Exports

Consumption

Coniferous sawnwood (million m³)

1960

82.7

0.1

5.1

77.6

1970

92.9

0.1

9.0

83.9

1980

110.4

0.1

14.6

95.8

1985

128.0

0.2

10.6

117.4

1995

141.1

0.1

12.6

128.5

2000

138.7

0.1

13.7

125.0

2005

144.4

0.1

15.1

129.3

Non-coniferous sawnwood (million m³)

1960

15.8

0.4

0.1

16.1

1970

17.9

0.5

0.2

18.2

1980

18.2

0.6

0.7

17.4

1985

15.6

0.6

0.7

15.5

1995

24.3

0.6

1.2

23.7

2000

25.7

0.6

1.2

25.1

2005

27.4

0.6

1.2

26.8

Coniferous plywood (million m³)

1960

7.7

neg.

0.1

7.6

1970

14.1

neg.

0.4

13.7

1980

15.9

neg.

0.8

15.1

1985

19.2

neg.

0.7

18.5

1995

24.7

neg.

1.0

23.7

2000

26.2

neg.

1.1

25.1

2005

28.0

neg.

1.2

26.8

Non-coniferous plywood (million m³)

1960

1.1

0.6

neg.

1.8

1970

1.8

1.9

neg.

3.7

1980

1.1

1.1

neg.

2.2

1985

0.9

1.6

0.1

2.4

1995

1.6

1.7

0.1

3.2

2000

1.8

1.6

neg.

3.4

2005

2.1

1.6

neg.

3.7

Paper (million tonnes)

1960

22.1

0.2

1.3

21.0

1970

31.6

0.3

1.5

30.4

1980

40.1

0.4

2.4

38.1

1985

44.2

1.5

1.6

44.1

1995

52.7

1.7

2.9

51.5

2000

58.5

2.3

3.3

57.5

2005

64.8

2.9

3.4

64.3

Paperboard and building board (millions de tonnes)

1960

17.1

neg.

0.6

16.5

1970

27.6

neg.

2.3

25.3

1980

33.7

neg.

3.6

29.9

1985

35.1

0.1

2.8

32.8

1995

42.6

0.2

3.8

39.0

2000

45.0

0.2

3.9

41.3

2005

47.7

0.2

4.1

43.8

Oriented strand board and waferboard (million m³)

1960

-

-

-

-

1970

-

-

-

-

1980

0.7

-

-

0.7

1985

3.7

-

-

3.7

1995

8.6

-

-

8.6

2000

9.3

-

-

9.3

2005

10.9

-

-

10.9

Particleboard (million tonnes)

1960

0.5

neg.

neg.

0.5

1970

3.4

neg.

neg.

3.4

1980

7.0

neg.

neg.

7.0

1985

8.3

neg.

neg.

8.3

1995

10.8

neg.

neg.

10.8

2000

11.8

neg.

neg.

11.8

2005

12.1

neg.

neg.

12.1

Coniferous logs (million m³)

1960


neg.

0.3


1970


neg.

11.5


1980


neg.

13.3


1985


neg.

16.9


1995


neg.

14.6


2000


neg.

13.5


2005


neg.

13.5


Non-coniferous logs (million m³)

1960


0.4

0.1


1970


0.1

0.1


1980


neg.

0.4


1985


0.1

0.3


1995


neg.

0.5


2000


neg.

0.5


2005


neg.

0.5


Veneer (million m³)

 

Imports

Exports

Coniferous

Non-coniferous

Coniferous

Non-coniferous

1960

neg.

0,1

neg.

neg.

1970

neg.

0,3

neg.

neg.

1980

neg.

0,1

neg.

0,3

1985

neg.

0,1

0,1

0,2

1995

neg.

0,1

0,1

0,3

2000

neg.

0,1

0,1

0,3

2005

neg.

0,1

0,1

0,3

Note: neg. = under 50 000 m³

The following points figure prominently in the general North American view of trade prospects:

· in general, the outlook for world markets is one of maturity in the industrialized countries;

· additional sources of supply for industrialized markets will come online over the next two decades; Chile, New Zealand and Brazil will all be able to supply major segments of world demand for imports by 2000;

· in some instances, traditional importing regions have plantation programmes of their own;

· there may be some relatively small export opportunities to the newly industrializing countries (NICs), for example, the Republic of Korea;

· market opportunities in China will continue to be uncertain as long as the politics of the country remain unstable; from 1992, Europe may offer export opportunities for North American producers, but the establishment of true market patterns is likely to take years;

· the North American market is expected to continue its solid growth in consumption of all timber products;

· exchange rates are still impossible to project with any degree of certainty. Given these expectations, the projections offered in Table 3 are generally conservative, but North American production and consumption are basically expected to continue with historical patterns of growth.

Implications for raw material demand

For solid wood products, there has been a trend toward improvements in conversion efficiency, with more veneer and lumber being recovered from the same volume of roundwood. For example, in Canada in 1970, an average of 2.67 m³ of roundwood was required to produce 1 m³ of lumber and plywood. By 1984, the roundwood input requirement had declined to 2.14 m³. Increased recovery was facilitated by the installation of computer-assisted scanning devices that permitted optimization of log lengths and cutting patterns, thereby maximizing processing recovery. Utilization has also improved at the logging site. For example, in the United States in 1962,37 percent of the softwood growing stock volume was left as residue at a logging site; in 1986 less than 10 percent was left.

For fibre-based products, there are differences in utilization patterns between pulp-based products and the various panel products. The amount of wood required per tonne of pulp varies from about 2.5 m³ for mechanical processes to more than 5 m³ for chemical sulphite processes. Over time, the mix of pulps produced has changed considerably. These changes were brought on in part because of an increased awareness of water pollution, changes in energy costs and an increased use of non coniferous species in the United States. Improved mechanical pulping processes such as chemo-thermomechanical pulp (CTMP) may be substituted in the future for low-yield chemical pulps. Nonetheless, the average consumption of wood per tonne of pulp in North America has changed only very little, and major changes in average wood use up to 2005 are not expected.

The roundwood required for paper and paperboard production depends in part on the recycling of these products. By European and Japanese standards, recycling of paper and paperboard in North America is low (see Unasylva, 41: 163). The United States paper industry, represented by the American Paper Institute, has recently announced a goal of 40 percent recovery of paper and paperboard by 1995, compared with about 30 percent recovered today. The achievement of this ambitious goal could have major effects on the demand for roundwood pulpwood, the effects building up with time. However, potential market responses to significant increases in recycling are numerous and complex. For example, if the United States were to increase exports of waste paper, this would tend to minimize the implications for domestic roundwood markets.

The demand for roundwood in the production of wood pulp is also determined by the use of by-products in the manufacture of solid wood products. Increased production of coniferous lumber and plywood in North America since 1960 has led to a corresponding increase in output of sawdust, slabs, edgings and other usable by-products. In the United States and most of Canada, these byproducts are almost completely used for pulp, energy or reconstituted-panel manufacture.

On the other hand, the production of oriented strand board (OSB) and waferboard is based almost entirely on roundwood because of the need for quality control in the production of fibre for panel manufacture. Roundwood used in panel production generates virtually no byproducts or residues. Technology and wood utilization in this industry are straightforward and few changes are expected by 2005.

North American roundwood demand

Taking into account utilization trends, the projected increases in production of the various end-products imply substantial increases in the demand for roundwood, especially coniferous species. By 2005, the total demand for roundwood is expected to be about 76 percent higher than it was in the mid-1980s.

Until 2005, the increased output is expected to come from existing inventories. In the decades immediately following 2005, there will be substantial volumes of southern pine coming from plantations in the southern part of the United States. The increased demands projected through the turn of the century imply higher prices for roundwood when considered in relation to supplies. In the United States, for example, the price (net of inflation and deflation) for coniferous species in Washington and Oregon is projected to increase by about one-third between 1985 and 2005; for the southern United States, the price increase is forecast at more than 50 percent. These price increases are expected to provide the basis for increased output from private lands in the United States, and from the public lands in Canada. They will also reinforce incentives to the forest industry to maintain plantation programmes which will be the basis for an expansion in supplies after 2005.

In Canada, prices are the main determinant of the economic accessibility of timber in provincial forest plans. A substantial area of timber which is currently considered economically inaccessible would go into the timber base in the event of these price increases. The judgement of the Canadian cooperators in this report is that Canada has sufficient uncommitted timber inventories to meet the projected demands for its resource.

Especially for pulp manufacture, there is vast potential for the adoption of wood-saving technology which would extend the Canadian timber supply. For example, the replacement of chemical pulping processes with thermomechanical processes would effectively halve the wood-fibre needed by the pulp industry in Quebec and Ontario.

Implications for offshore trade

In the market economy of North America, supplies of timber products will meet demands. The question is at what price. The west coast of North America has had a comparative advantage over the rest of the world owing to its high-quality indigenous coniferous timber resource. Although this situation is changing on private lands in the United States, the resource will still be a major factor in world trade in 2005, and will still enjoy a comparative advantage because of its unique qualities. The temperate hardwoods of the United States also have unique properties that would maintain their presence in world markets despite upward pressure on prices.

Even if roundwood prices increase somewhat in North America, there should be minimal effects on offshore exports. Market development activities for the sale of coniferous products in Japan and Europe mainly involve the promotion of platform-frame housing. The cost of wood in such housing is a small fraction of the cost of the final structure and the land upon which it is built. Therefore, price increases for roundwood in the United States would have some effect on the success of these promotion efforts, but should not be critical.

Exchange rates are probably the most important determinants in the price of North American wood delivered to offshore markets. Exchange rates in the 1990s will be affected by strong forces as in the past, and the net effect is impossible to predict.

The projections of North American trade and consumption of timber products that have been presented still show the region to be relatively self-sufficient in timber supplies. Some expansion of offshore trade is indicated, but markets are dominated by domestic demand. It is this strong domestic market, and not offshore trade, that will determine the course of North American demand and supply in the 1990s and through 2005. North America has the supply capability to support increased harvests. If there is growth in trade to offshore markets, domestic supply will still equal demand in North America.

Technological development, wood substitutes, and the exploitation of currently inaccessible resources are all strong and plausible responses to the increased demand for timber products.


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