The Impact of Pulp Mill Closures on Pine Plantation Investment Returns in the US South

Abstract Pulp and paper mill closures have had a significant impact on the forest sector in the southeastern US over the last decade. These mills consume large volumes of pulpwood, and a complete shutdown of their operations has potential to significantly reduce pulpwood prices. In this study, we investigated the effects of pine pulpwood stumpage prices on financial returns in four different timber markets in the southeastern US (northeast and northwest Florida, south Georgia and east South Carolina). Through simulations of two stand densities (300 and 600 trees per acre), three thinning treatments (no-thinning, one and two thinnings), we assessed the Land Expectation Value (LEV) under scenarios of 50% and 100% reductions of pulpwood prices. In addition, through an optimization model, we estimated the changes on the stumpage prices of pine chip-n-saw and sawtimber required to offset the losses with pulpwood market. Our results indicated that although lower pulpwood prices decrease timberland investment returns, some silvicultural strategies, like thinning trees less often and planting fewer trees per acre, will suffer lower financial losses. Also, although chip-n-saw and sawtimber prices might compensate for lower pulpwood demand, it is unlikely that we will observe higher stumpage prices of any product in the near future. Our results indicate that landowners should develop adaptive strategies to ensure the economic viability of timberland investments and face these market shifts.