Timber Operations
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Industry Overview
The $30 billion US timber industry includes about 300 companies that are involved mainly in timber management, and close to 12,000 firms involved in logging operations. Large companies include Weyerhaeuser and Louisiana-Pacific. The industry is highly fragmented. A large number of companies and individuals are passive owners of timberlands. Some large companies have vertically integrated operations that may combine land ownership, land management, logging, sawmills, and the production of wood or paper products.
Competitive Landscape
Timber is harvested to make paper or wood products (mainly lumber and plywood). Residential construction and repair/remodeling account for nearly 70 percent of all lumber used in the US. Demand for paper is driven partly by the general health of the economy, which influences demand for office papers, cardboard boxes, newspapers, magazines, and tissue papers. Large logging companies can have a cost advantage over smaller ones through the use of more efficient (and more expensive) machinery, but logging is a very local activity, often without significant economies of scale.
Products, Operations & Technology
The US contains about 750 million acres of forest land, including 500 million acres of timberlands. About 180 million acres are considered highly productive, of which half are located in the South and a quarter in the Pacific Northwest. Timberlands in the South contain softwoods like loblolly-shortleaf pines and longleaf-slash pines. Timberlands in the West contain mainly Douglas-fir, fir-spruce, and ponderosa pine. Hardwood timberlands are located mainly in the East and contain mainly oak-hickory or maple-beech-birch. The timber inventory on a piece of land is measured in terms of "cunits" - 100 cubic feet of solid wood.
The federal government, through the USDA Forest Service, is the largest owner of timberland in the US, holding about 30 percent of the total. Major wood products companies own about 10 percent, states and other government bodies own 10 percent, and private owners hold the rest, about 50 percent. Timber companies may own or lease timberland or hold licenses for logging rights on private or public lands. Recently, Weyerhaeuser, for example, owned 6 million acres of land and held long-term licenses on 33 million acres of land in Canada.
Timber operations can be divided into forestry operations and logging operations. Forestry involves the care of growing forests, including planting and tending trees (silviculture); controlling erosion; creating fire breaks; surveying; removing diseased or damaged trees; and marking trees for logging. Logging involves felling trees; removing branches and top; cutting into lengths ("bucking"); hauling the logs out of the forest; sorting logs by type; loading logs onto trucks; and trucking to sawmills or other destinations. Logging operations are usually handled by crews of four to eight. While felling, branch removal, and bucking are still done with chainsaws in smaller operations, many operators now use mechanized harvesters, that can fell, trim, and cut a tree in one operation. Logging a tract of forest may consist of the removal of selected trees or of all trees (clear-cutting). Clear-cutting is more common on tree farms, where all the trees in a tract are of the same age and size. To be able to remove logs from a forest, operators often must first build access roads. Timber operations may also enter into management contracts with independent logging companies that harvest the timber; management then sells the timber to brokers or at market.
Merchantable timber inventory is an estimate of standing timber available for harvesting. Timber managers consider site indexes, which measure a forest's quality according to timber height growth in a particular location. Timber companies that cultivate their own trees stagger maturation cycles, the age distribution of merchantable timber on their lands.