EUPRPDC Forest Industry Market Assessment

EUPRPDC Forest Industry Market Assessment

Task 1 OverviewOriginal - 05/28/2019

Overview of Task 1● Review relevant documents and data for

wood production in the EUP area of Michigan

● Review CLT industry trends and market presence in the US

● Review other opportunities in wood technology that present potential for EUP business opportunities

● Review tree species-specific production in the EUP and how it might pertain to specific sectors or technology

Source: Weyerhaeuser

Source: Capital Press

Documents and Data

Data Sources:

● County Business Patterns (2016)● USDA● US Forest Service● ReferenceUSA● Structural Building Components Association (SBCA)● North American Industry Classification (NAICS)● Price Waterhouse Cooper (PwC)

Documents and Studies:

● Michigan DNR● Council for Western States Foresters● Michigan State University ● Wood Products Economic Impact Study for the

EUP (April 1997)● Lake Superior State Forest● County Level Forest Reports● Market-related articles

Key Themes from Document Review❏ Mass Timber is a “Quiet Revolution”❏ International building code modifications

will lead to broader adoption of products, and has already been implemented in several states

❏ Standards for softwoods used in Mass Timber are flexible (pursuant to US and Canadian Boards - ANSI/APA PRG 320)

❏ Sourcing timber products within 250 miles of a project is a huge advantage to sustainability and regional economies

❏ Global CLT market projected to exceed $2 billion by 2025

❏ Michigan is uniquely positioned to Midwest markets and raw materials

Engineered Wood and Mass Timber Products

● Glue Laminated Timber (glulam)● Parallel Strand Lumber (PSL)● Laminated Veneer Lumber (LVL)● Laminated Strand Lumber (LSL)● Oriented Strand Board (OSB)● Cross Laminated Timber (CLT)● Nail Laminated Timber (NLT)● Dowel Laminated Timber● Trusses● I-Joists

Michigan Forestry and Logging Trends

Michigan Forestry and Logging TrendsHighlights from (2017) economic impact reports:

Statewide forest products industries report calculates the industries’ contributions in 2015 as:

❏ $3.2 billion in direct value added, total value added of $8.0 billion.

❏ $12.0 billion in direct output or sales, total output of $21.2 billion.

❏ Over 39,000 direct jobs, and over 99,000 total jobs supported.

❏ $2.5 billion in direct labor income, $5.5 billion in total.

In the Upper Peninsula, over one-third of manufacturing jobs were in these industries.

• Forest products industries were the leading manufacturing employer in the Eastern Upper Peninsula.

● Southern Lower Peninsula (SLP) -$2.4 billion or 74%.● Western Upper Peninsula (WUP) -$423 million or 13%.● Northern Lower Peninsula (NLP) -$353 million or 11%.● Eastern Upper Peninsula (EUP) -$83 million or 3%.

CLT Global Industry Trends❏ Over the past few years, several current and completed construction

projects have created a movement around mass timber products, in particular CLT.

❏ Mass timber’s reputation is a sustainable, durable, and eco-friendly building material and boosted markets for CLT and other mass timber products around the world. The global CLT production in 2015 exceeded 620,000 cubic meters, and it is expected to double by 2020 (Gatterer, 2017).

❏ The global CLT market is projected to be valued at $2.07 billion by 2025. ❏ North America’s demand for CLT was valued at $119 million in 2016, will

likely remain the second largest market in the world. ❏ Consumers are expected to prefer wood-based construction over

concrete in the future, driving further market growth. ❏ Examples of commercial and residential applications are increasing, with

the first certified CLT produced in the United States. ❏ Favorable building code modifications will lead to larger commercial

structures incorporating Mass Timber into designs

Major CompaniesInternational

● Stora Enso

● KLH

● Binderholz

● Mayr Melnhof

● Hasslacher

● XLam Limited

● Sterling Lumber

● Shilliger Holz AG

● B & K Structures

● Eugen Decker Holzindustrie KG

● Structurlam

● SmartLam

● Meiken Lamwood Corp.

North America CLT:

Structurlam Mass Timber Corporation

D.R. Johnson Wood Innovations

SmartLam, LLC

Nordic Structures

IB X-Lam USA, LLC

Freres Lumber Co., Inc.

Vaagen Timbers, LLC

United States SLT:

Roseburg Forest Products Company

LP

Tolko Industries Ltd.

Global LVL Inc.

Murphy Company

Brisco Manufacturing Ltd.

Forex Amos

West Fraser LVL

Freres Lumber Co., Inc.

Pacific Woodtech Corporation

Boise Cascade Company

Sound Wood Products, Inc.

Business Locations and Sales● Recent International Code Council (ICC)

changes approved a set of proposals that will allow tall wood buildings as part of the 2021 International Building Code (IBC). These changes will include three new construction types, Type IV-A, IV-B and IV-C, expanding the use of mass timber – most notably, these provisions will allow timber structures up to 18 stories and 270 feet.

● Mass Timber includes: nail laminated timber (NLT), dowel laminated timber (DLT), cross laminated timber (CLT) and mass plywood panel (MPP)

● NAICS Code 321213 - Engineered Wood Member (except Truss) Manufacturing is a final level code of the “Manufacturing” Sector.

● Representative Examples: ● Finger joint lumber manufacturing● I-joists, wood, fabricating● Laminated veneer lumber (LVL)

manufacturing● Parallel strand lumber manufacturing● Timbers, structural, glue laminated or

pre-engineered wood, manufacturing

Establishments in Mass Timber-Related SectorsNumber of Establishments Sales Volume - 2017

Wood Products Sales Volume Rank State Billions ($) Rank State Billions ($)

1 OR $1.51 14 IN $0.35

2 GA $ 1.38 15 PA $ 0.34

3 MS $ 0.87 16 NJ $ 0.33

4 CA $ 0.72 17 AR $ 0.32

5 TX $ 0.71 18 NY $ 0.29

6 WA $ 0.59 19 KY $ 0.25

7 FL $ 0.57 20 OH $ 0.22

8 VA $ 0.57 21 AZ $ 0.21

9 LA $ 0.52 22 WV $ 0.19

10 AL $ 0.50 23 TN $ 0.18

11 WI $ 0.49 24 MI $ 0.18

12 NC $ 0.46 25 MN $ 0.17

13 SC $ 0.41

Mass Timber Business PropositionAdvantages:

❏ EUP Advantage - CLT is not produced in many locations. ❏ production of CLT panels requires significant

amount of raw materials compared to regular stud walls

❏ Efficient construction, fewer workers, less traffic ❏ CO2 sequestration ❏ Use of small diameter and lower grade lumber ❏ Cost-competitive ❏ Lightweight and Smaller foundations ❏ General wood benefits: acoustics, insulation,

aesthetics ❏ Competing with steel and concrete❏ Wide applicability

Opportunities - Capacity and Forest Inventory

● CLT is an innovative secondary wood product and a remarkable alternative to traditional building materials.

● The CLT concept is similar to plywood except for the absence of veneer layers.

● CLT contains only two materials: lumber and adhesive.

● Currently, CLT in the United States is made from softwoods. Some initiatives are currently exploring the use of hardwoods.

Opportunities - Midwest Commercial Building Market ❏ 2019-20 may be “Gold Rush” years for the Opportunity

Zone program, created by the 2017 Tax Cuts and Jobs Act to leverage private capital to improve 8,700 distressed areas across the US

❏ Big-box stores don’t fit very well in today’s real estate landscape. As e-commerce accounts for a greater share of total retail sales, traditional retailers have closed many underperforming stores in markets across the country

❏ The shrinking retail store size is giving rise to the super-sized warehouse, increasingly used by e-commerce retailers to fulfill orders placed online—often the same or following day.

❏ While part of the commercial real estate lexicon for years, wellness has grown into a $4.2 trillion global business that is expanding at nearly twice the rate of the global economy. After all, people who practice yoga, eat organic foods, and seek out things like sulfate-free, paraben-free, formaldehyde-free shampoo certainly don’t want to work in unhealthy offices

Designated Opportunity Zones

Opportunities● EUP Proximity to Major Markets ● Growth in Markets within reasonable distribution

service area

Themes:

● Modest migration from major population centers to Midwest (drivers include cost of living/doing business, and quality of life)

● Attractive cost of business in Ohio and Indiana● Growth rates in tier 2 and 3 cities outpaces national

average

Source: PwC. Average score of local market participants’ opinions on strength of local economy, investor demand, capital availability, development and redevelopment opportunities, public/private investments, and local development community.

Midwest Regional Outlook, 2019

Next Steps● Review site characteristics and opportunities in the EUP● Review transportation and supply chain connectivity for related sectors in the EUP● Project growth potential in CLT (and possibly other) sectors in the EUP● Identify strengths and weaknesses of EUP CLT opportunities● Produce visual aids and infographics to display opportunities and connectivity

EUPRPDC Forest Industry Market Assessment

Task 2 OverviewOriginal - 08/19/2019

Updates Since Last Call● MEDA observations?● MEDC progress?● Other updates?

Overview of Task 2● Review site characteristics ● Review transportation and supply chain

connectivity● CLT growth potential in the EUP● Strengths and weaknesses of EUP CLT

opportunities ● Visual aids/Infographics

Source: Weyerhaeuser

Source: Capital Press

Site CharacteristicsD.R. Johnson Wood Innovations: Riddle, Oregon

● 25+ acre footprint

● Multiple Buildings: 40k to 55k square feet

● Produces Glulam and CLT products

Structurlam: Okanagan Falls, BC, Canada

● 9.5 acre footprint ● Main Building: 80k square feet● Produces Glulam and CLT products

Site CharacteristicsSmartLam, LLC: Columbia Falls, MT

● 40,000 square-foot manufacturing facility with a production capacity of 28,000 cubic meters of CLT

International Beams: Dothan, AL

● 30 acre footprint● 215k square-foot manufacturing facility● Produces Glulam and CLT products

Sawmill Accessibility/Transportation Connectivity

● PotlatchDeltic (Gwinn, MI)○ 100 miles

● Biewer (McBain, MI)○ 205 miles

● Biewer Lumber (Lake City, MI)○ 190 miles

● Biewer Lumber (Prentice, WI)○ 300 miles

Sawmill Accessibility - Rail

Source: Michigan DOT

Strengths of EUP SitesNorth-Central EUP (Newberry): Opportunity Zone, Brownfield sites, Class I

Rail-Served, Broadband access, Cost of living

(17% lower than US average), 6.45%

unemployment, Industrial park/shovel ready

sites, Low cost utilities

Northeastern EUP (I-75 Corridor): Connectivity to I-75/supply chain, Class I

Rail-Served, Proximity to Biewer Sawmills,

larger population/employment base

Southern UP:

Saint Ignace opportunity zone, Class I

Rail-ServedProximity to Biewer sawmills,

workforce availability in Mackinac, Cost of

living, US-2 access to Wisconsin supply chain

● Developable Land● Transportation Accessibility● Broadband Access● Cost of Living● Workforce/Population● State and Local Incentives● Foreign Trade Zone 16● Ease of permitting?

Why Michigan?

● 6% Corporate Income Tax● 4.25% Personal tax ● 6% Sales tax (no local sales tax)

Infographics - Themes

Major CompaniesInternational

● Stora Enso

● KLH

● Binderholz

● Mayr Melnhof

● Hasslacher

● XLam Limited

● Sterling Lumber

● Shilliger Holz AG

● B & K Structures

● Eugen Decker Holzindustrie KG

● Structurlam

● SmartLam

● Meiken Lamwood Corp.

North America CLT:

Structurlam Mass Timber Corporation

D.R. Johnson Wood Innovations

SmartLam, LLC

Nordic Structures

IB X-Lam USA, LLC

Freres Lumber Co., Inc.

Vaagen Timbers, LLC

United States SLT:

Roseburg Forest Products Company

LP

Tolko Industries Ltd.

Global LVL Inc.

Murphy Company

Brisco Manufacturing Ltd.

Forex Amos

West Fraser LVL

Freres Lumber Co., Inc.

Pacific Woodtech Corporation

Boise Cascade Company

Sound Wood Products, Inc.

Opportunities● EUP Proximity to Major Markets ● Growth in Markets within reasonable distribution

service area

Themes:

● Modest migration from major population centers to Midwest (drivers include cost of living/doing business, and quality of life)

● Attractive cost of business in Ohio and Indiana● Growth rates in tier 2 and 3 cities outpaces national

average

Source: PwC. Average score of local market participants’ opinions on strength of local economy, investor demand, capital availability, development and redevelopment opportunities, public/private investments, and local development community.

Midwest Regional Outlook, 2019

Metro Area Population Base Projected 5-Year Growth Rate (U.S. Average 0.7%)

Distance to EUP (approximate)

Tier 1 Columbus, OH 879,170 – 14ᵗʰ largest U.S. city 0.8% 525 Miles(8 hours)

Tier 2 Detroit, MI Population: 673,104 – 23rd largest U.S. city

0.0% 350 Miles (5 hours)

Grand Rapids, MI Population: 198,829 – 119ᵗʰ largest U.S. city

n/a 300 Miles(4.25 hours)

Indianapolis, IN Population: 863,002 – 16ᵗʰ largest U.S. city 1.0% 550 Miles(8 hours)

Kansas City, MO Population: 488,943 – 37ᵗʰ largest U.S. city 0.8% 840 Miles(13 hours)

Madison, WI Population: 255,214 – 82nd largest U.S. city

0.8% 360 Miles(6 hours)

Louisville, KY Population: 621,349 – 29ᵗʰ largest U.S. city 0.6% 660 Miles(10 hours)

Minneapolis, MN Population: 422,331 – 46ᵗʰ largest U.S. city 0.8% 480 Miles(8 hours)

Other Major Markets Milwaukee, WI 1.58 million 0.1% 340 miles (5.5 hours)

Chicago, IL 9.54 million 0.2% 430 miles(7.5 hours)

Extra Slides1) Updates since last call (Canadian Lumber, Rail network, additional data and literature)

2) Lumber supply, production, catchment area

See attached Canadian information3) Narrow product list and targets

● Glue Laminated Timber (glulam)● Parallel Strand Lumber (PSL)● Laminated Veneer Lumber (LVL)● Laminated Strand Lumber (LSL)● Cross Laminated Timber (CLT)● Nail Laminated Timber (NLT)● Dowel Laminated Timber● Trusses● I-joists

4) Follow-up with companies5) Other topics/questions

Extra Slides1) Updates since last call (Canadian Lumber, Rail network, additional data and literature)

2) Lumber supply, production, catchment area

See attached Canadian information3) Narrow product list and targets

● Glue Laminated Timber (glulam)● Parallel Strand Lumber (PSL)● Laminated Veneer Lumber (LVL)● Laminated Strand Lumber (LSL)● Cross Laminated Timber (CLT)● Nail Laminated Timber (NLT)● Dowel Laminated Timber● Trusses● I-joists

4) Follow-up with companies5) Other topics/questions

Prosperity Initiiative

Opportunity Zones

Opportunities

CLT Standards ANSI/APA PRG 320Any softwood lumber species or species combinationrecognized by American Lumber Standards Committee(ALSC) under PS 20 or Canadian Lumber StandardsAccreditation Board (CLSAB) under CSA CSA4141 with aminimum published specific gravity of 0.35, as published inthe National Design Specification for Wood Construction(NDS) in the U.S. and CSA O86 in Canada, shall bepermitted for use in CLT manufacturing provided thatother requirements specified in this section are satisfied. The same lumber species or species combination shall beused in a single layer of CLT. Adjacent layers of CLT shallbe permitted to be made of different species or speciescombinations.”

Metro Area Population Base Projected 5-Year Growth Rate (U.S. Average 0.7%)

Distance to EUP (approximate)

Tier 1 Columbus, OH 879,170 – 14ᵗʰ largest U.S. city 0.8% 525 Miles(8 hours)

Tier 2 Detroit, MI Population: 673,104 – 23rd largest U.S. city

0.0% 350 Miles (5 hours)

Grand Rapids, MI Population: 198,829 – 119ᵗʰ largest U.S. city

n/a 300 Miles(4.25 hours)

Indianapolis, IN Population: 863,002 – 16ᵗʰ largest U.S. city 1.0% 550 Miles(8 hours)

Kansas City, MO Population: 488,943 – 37ᵗʰ largest U.S. city 0.8% 840 Miles(13 hours)

Madison, WI Population: 255,214 – 82nd largest U.S. city

0.8% 360 Miles(6 hours)

Louisville, KY Population: 621,349 – 29ᵗʰ largest U.S. city 0.6% 660 Miles(10 hours)

Minneapolis, MN Population: 422,331 – 46ᵗʰ largest U.S. city 0.8% 480 Miles(8 hours)

Other Major Markets Milwaukee, WI 1.58 million 0.1% 340 miles (5.5 hours)

Chicago, IL 9.54 million 0.2% 430 miles(7.5 hours)

Bob

● Begin targeting EUP development areas based on access to mills, transportation infrastructure, and markets● Drill down into modal travel times, and high-level transport costs for mass timber products● Research opportunity zone program and status of EUP communities

Donna

● Follow-up with sawmill contacts to estimate annual production volumes○ Estimate average pricing to the extent possible

● Contact Georgia Pacific to determine adhesives used in CLT and primary sources

David

● Follow-up with industry contacts to gather sample site specifications for CLT (and related) plants: land area, utilities, infrastructure, etc.

● Research input materials for insulation panel, and determine if it's a good value-added opportunity for EUP region

Donna/Rebecca

● Research local community/EDO business incentives● Research forest product incentives

For any questions, comments, or clarifications please give me a call or email.

Hi All-

Agenda for today's call:

1. Follow-up from July 1 call:● Bob

○ EUP development areas based on access to mills, transportation infrastructure, and markets■ Further refined previous access to markets as well as access to supply, and have targeted areas

with potential for rail/highway access■ Further examined existing CN rail network and service

○ Modal travel times, and high-level transport costs for mass timber products○ Research opportunity zone program and status of EUP communities

■ 3 Zones in EUP: Newberry, Sault, Saint Ignace● Donna

○ Sawmill contacts/production volumes info○ Georgia Pacific and/or other adhesive information

● David○ Sample site specs: land area, utility requirements, infrastructure, "wish list"○ Insulation panel production viability for EUP

● Rebecca/Donna○ Local community/EDO business incentives with relevance for Mass Timber companies○ State/Local/National forest product incentives

2. Marketing materials

● Preferred materials? Look and feel? Examples such as Minnesota? ● Key themes: access to raw materials, access to markets, low cost of doing business, labor pool, land

availability and scalability of operations, seamless transportation connectivity

3. Schedule 4. Additional questions and/or topics

● Mass timber panel products such as:○ CLT panels○ Nail laminated or dowel-laminated timber panels○ Industrial grade CLT panels for use as crane mats and board road panels (for use in oil exploration, utility line work)○ Wooden bridge deck material (e.g., like Guardian Structures products)○ Wooden sound barriers – along highways, development projects.

● Other engineered wood products such as:○ Modular construction components, such as factory-prefabricated wall panels, modular building components (bathroom modules) like

those by Katerra.○ Engineered wood flooring - products like these often use a surface veneer of high quality hardwood laminated to cheaper

substrates, like plywood, medium density- or high density fiberboard (MDF & HDF), or cheaper hardwood or softwood plys. ○ Finger-jointed lumber, finger-jointed millwork (moldings, trim) or hardwood dowels.

● Insulation board made from hardwood mill residues (clean chips & sawdust). Also, is there potential for producing this product from market pulp? Purchased from local paper mills (Verso, PCA?)