Timber's turbulent year.

• Author: Swagel, Will
• Position: Alaska - Includes related article on the spruce bark beetle - Industry Overview - Cover Story

In a residential district outside Tokyo - one of the most highly priced housing markets in the world - a young Japanese couple are building themselves a new house. The couple would love to have an old post-and-beam structure like their parents, but straight-grained Alaskan timber has grown so expensive that a lot of new choices have to be made. Old-growth hemlock had been the traditional choice, but they reluctantly agree to let their builder use medium-density fiberboard laminated beams.

In the U.S., South Africa and Indonesia, pulp mills increase their production capacity to meet an unprecedented high in the price paid for their product in 1995. By 1996 all the pulp flooding the market has driven the price down to half of last year's price or less. Less value for pulp means less value for wood chips, which is the principal byproduct of sawing logs.

In Sitka, once considered a timber town, pro-environmental demonstrators with angry placards greet Congressman Don Young when he conducts hearings on his bill to turn the Tongass National Forest over to the state of Alaska. Told he is the enemy of the Tongass, Young asks why he is being faced with such hostility. Last year, the town split evenly on whether further logging should continue in the Sitka area. Even the mayor, a largely pro-development Republican, balks at widespread cutting near Sitka to feed the pulp mill in Ketchikan.

Anchorage's Resource Development Council ruefully reports in its newsletter how solid the opposition is to salvage logging on the Kenai Peninsula, after Congress opens up bug-killed timber to felling. But the bulk of the logging is occurring on private land, over which the public has little say.

"The long-term outlook for fiber is gangbusters," says Michael Parks, publisher of Marple's Business Newsletter, who adds that reduced timber supplies boost prices. "The richer we get, the less we want to cut trees down. It's just the 'Green Revolution.' The people that own good softwood fiber - it just puts them in the driver's seat."

The demand for fiber, and the opposition to logging, continued to drive the Alaska timber market in 1996. From Ketchikan to the Kenai Peninsula, timber companies sought new opportunities and faced new opposition. Timber-hungry Ketchikan Pulp Co. (KPC), for instance, secured fiber from two small sales on the Kenai Peninsula. At the same time, larger sales from the Tongass destined for the company were bitterly opposed.

By mid-1996, experts were predicting an upturn in the lumber market and a continuation of the poor market for pulp. Pulp that had gone through the roof at $1,400 a ton in mid-1995 was selling for $500 or less a year later. Since Alaska sawlogs are closely tied to pulp production, company foresters were not happy with sawlog prices either.

"When the pulp mills can't run, or choose to curtail their production, that ultimately impacts the sawmills," says Kathleen Morse, a timber economist on assignment to the state from the USDA Forest Service. "Sawmills will cut back on their lumber production because they can't get rid of the chips."

Says Kake Tribal Corporation's vice president for timber and construction, Pat Joensuu: "We haven't been selling pulp logs at all. We've been decking it, hoping the price will come up."

Ketchikan's...