With 23 million acres of timberland in Alabama, it’s not surprising that the forest products industry is the state’s second largest manufacturing industry. With the forest industry expanding in Alabama, we wanted to gain further insight into this trend from an expert. Last month, I sat down with Ken Muehlenfeld, Director of the Forest Products Development Center at AIDT for a discussion about where Alabama’s forest industry is headed.
Muehlenfeld has worked in the forest industry for 45 years. After receiving a forestry degree from the University of Missouri and a graduate degree in business from Georgia Tech, he worked for 16 years in private industrial forestry, 23 years in academia with Auburn University, and 6 years in state government at the Alabama Department of Commerce. With Muehlenfeld’s wide range of experience and expertise, we were curious to hear his perspective on the current and future state of the forest products industry in Alabama.
Stephens: What opportunities does Alabama have in the forest products industry compared to other states? What does Alabama have to offer that other states do not have?
Muehlenfeld: Alabama has the benefit of a very strong timber resource base, where available growth greatly exceeds current harvests. That means there is a significant volume of wood resources that can be made available on a sustainable basis. Alabama’s annual volume of surplus growth is the second largest among the Southern states.
Other attributes that Alabama offers include a good geographic location relative to U.S. population centers located within the fast-growing U.S. South, where over 50% of U.S. housing starts are occurring. We have an excellent transportation network of highway, rail, and navigable waterways. Additionally, the Port of Mobile allows us to export about 10% of the state’s forest products output.
Stephens: You’ve been doing this for quite some time. In your experience, what are companies in the industry looking for that might attract them to our state, outside of our natural resources and geography?
Muehlenfeld: Alabama has a great workforce and a tradition of understanding and appreciating the forest industry. These are important attributes that are less prevalent in many other states, and are highly valued by prospective investors who need to have a comfort level that their manufacturing operations will be welcomed additions in their respective communities.
Alabama offers a very pro-business environment. We welcome industry with substantial support and assistance, low taxes, right-to-work laws, minimal regulation, and constructive environmental permitting procedures.
I think that Alabama’s economic development community is second to none. We have great people involved in economic development and great partnerships at all levels, including multiple public/private partnerships. Alabama Power is a key player in that regard and a great attribute for the State of Alabama.
Stephens: Thank you for that. We certainly try to help our industrial customers and our state in any we can. Let’s talk numbers for a bit. In 2016, Alabama recorded forest products industry projects at $1.2 billion in new investment with more than 1,000 anticipated jobs. Where do we stand currently? How is the industry impacting our state?
Muehlenfeld: 2017 was another good year for forest products investment with $1.28 billion in new and expanding projects announced. There are 1,464 new jobs directly created with these investments. Over the last three years we have had 3,386 jobs and announced $3.38 billion in forest products investments. Regarding the economic impact to our state, I estimate that the value of shipments from forest products in 2017 was $16.31 billion.
Stephens: How does this impact other sectors?
Muehlenfeld: The indirect impacts of the forest industry are often underappreciated. The employment multipliers for forest products are quite good, generally 2.5 – 3.5, depending on the specific operation. The annual payroll from forest products employment is estimated to be $2.24 billion, and the value added from manufacturing is estimated at $8.79 billion. Additionally, most wood-consuming manufacturing operations will purchase all their raw material near their plant, usually within 75 miles, depending on the size of the operation. That can be a very large economic impact that generally stays within the region, benefiting landowners, loggers, and trucking companies.
Stephens: You were quoted in an article last year from Made in Alabama as saying the forest industry is on a prolonged upswing after a very severe industry recession. How is Alabama playing a role in this upswing today? What specific segments are contributing to the upswing?
Muehlenfeld: Ten years ago, the great recession the nation experienced was more like the great depression for the forestry industry. But, like most industries, it’s cyclical and we’re now on the other side of that cycle with investments starting to boom. While most of the nation is playing catch-up, the South benefited because we have the lowest cost structure in North America and the strongest resource position.
Alabama is great at growing trees and has been at the forefront of the forest industry’s economic expansion. We have seen strong investment in many sectors, including pulp and paper, wood products, and secondary wood manufacturing. The investments in pulp and paper have largely been in upgrades and product mix changes at existing operations, and these investments enhance the competitiveness and secure the longevity of these operations.
Within the wood products sector, Southern pine lumber manufacturing has been the product line with the most activity. Investment has been very strong, both for new greenfield operations and expansion of existing operations. I estimate that we will have added close to one billion board feet of new capacity when all the new announced facilities come on line. (Board feet is the common measure of timber in North America.) That’s about a 30% increase in the state’s capacity within a very short time. We’ve also seen investment in wood panels, engineered wood products, secondary paperboard, and secondary wood products to a lesser degree. Almost all segments of the industry have been participating in the expansion.
Stephens: Looking to the near future, what can we expect from the forestry industry as it pertains to innovation and production, both locally and globally?
Muehlenfeld: The industry’s expansion is likely to continue over the next few years. We are likely to see a bit more expansion in the lumber industry, but I think there will be some rotation into other product sectors in the coming years, particularly in the areas of both structural and non-structural panels. The area of mass timber is one with significant long-term potential, and we were fortunate to announce mass timber’s first manufacturing operation in the Eastern U.S. last year with International Beams coming to Dothan. This area has potential to complement our existing industry.
The area of bioenergy, biochemicals, and bio-based materials also has significant long-term potential as the world tries to move towards more renewable resources.
Stephens: You’ve seen and done a lot in your 45 years in the business. Any last thoughts you’d like to leave with us?
Muehlenfeld: We have further to run in this upswing cycle. I don’t see the industry slowing down anytime soon, and Alabama will continue to be a big part of that growth. We’ve had good luck in attracting investments to our area. While we need to hang on to what we have, we also need to continue to remain competitive worldwide. I think Alabama has the resources and the people to do just that.