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Processing ups value of timber resources.

Business development experts argue that building a value-added forest products industry is vital to Southeast's economic health.

Jim Kohler, executive director of the Southeast Conference, doesn't mince words when discussing the importance of developing a broader, more diversified timber industry through value-added forest products in Southeast. "We don't have a choice," says Kohler of the monumental task of expanding the value-added industry. "Either this works or nothing works."

Kohler's comments aren't directed exclusively at the forest products industry, but at all the region's industries. It's crucial, says Kohler, that the timber and fishing industries, for example, begin planning now for a time when current methods of operation will no longer sustain the region's economy. Recent and projected declines in both the fishing and timber industries, as well as reductions in government spending, will force industry players to find other ways of increasing the return on their investments.

"We won't be able to sustain our villages and other communities unless all industries get involved in value-added," says Kohler. He adds that without a shift to value-added endeavors, economics throughout Southeast will shrink by the end of this decade.

Sprinkled around like so much sawdust, the phrase "value-added timber industry" is used to describe everything from the minimal processing required by state law before lumber can be shipped from Alaska to the crafting of custom-made, one-of-a-kind furniture by such furniture makers as Ketchikan's Beth Antonsen and Haines' John Carlson. Also producing value-added wood products in Southeast are producers of shingles, cedar shakes and, in the case of Ketchikan's Seley Corp., processed lumber used in Germany for windows, paneling and door frames.

A recent study conducted for the Southeast Conference by business development experts and forest products specialists examined the feasibility of value-added timber manufacturing in Southeast. In the 1991 report detailing the group's findings, the introduction states, "A shrinking timber base, rising log costs, higher production costs, declining quality of commercial timber stands, more competition from abroad, plus changes in market structure and market demand, have increased the pressure on the entire timber industry in Southeast Alaska to reduce its operating costs and increase its return on every board foot of timber harvested." Whew.

The report's authors conclude that the solution is to "explore and encourage value-added timber manufacturing." Broadening the existing value-added industry would provide jobs and would allow Alaskans to take advantage of increasing demands abroad, especially in Japan, for finished building materials.

The study found, however, that many of the value-added options considered were not, at least at the time of the report, economically viable. "Briefly stated, the current problem is that although timber is available in the region, its cost is prohibitively expensive for many of these products," the analysis notes. Products considered by the researchers included solid wood panels, finger-jointed molding, laminated veneer and others.

C.L. Cheshire, coordinator of the economic development center at the University of Alaska Southeast in Ketchikan and one of the reports' authors, says now is the time to actively explore value-added timber possibilities. "It's appropriate to look ahead at other products, even though the resources and prices might not be there yet," Cheshire says.

Also, it's important that the entire industry work together. "Is somebody's waste material somebody else's raw material?" poses Cheshire. He points out that there are opportunities to use low-grade woods in applications other than making pulp.

Pulp mills have long been the linchpin of the entire timber industry. When stands of trees are cut, the resulting harvest includes timber of varying qualities. While virgin Sitka spruce are of a very high quality and are eagerly sought after by everyone from piano makers to Japanese home builders, other, lesser grade trees are only suitable for pulp.

Pulp's uses range from a smoothing agent in ice cream to providing the strength needed in rayon-belted tires. By providing a market for lesser grades of wood, pulp mills enable loggers to sell both higher- and lower-quality timber. "Pulp mills are the backbone of any value-added industry," says Eric Downey, research associate with the Alaska Center for International Business.

Cheshire, Downey and others are quick to point out, however, that any value-added forest products industry will succeed only if adequate timber supplies are available -- and that's a big if. "Market demand is not the problem," says Downey. "Supply is."

Concurs Doug Tingley, plant manager of Seley Corp., a small sawmill and chip plant in Ketchikan, "Supply's the key."

Frank Seymour, forest products marketing specialist for the Alaska Department of Commerce and Economic Development, has spent the better part of two years working to help craft a Tongass land management plan that will address, among other things, the subject of supply. The plan, released in draft form in August 1991, is crucial to the vitality of every industry in Southeast, says Seymour. When completed, perhaps by late 1993, the multivolume plan will establish land-use patterns for 94 percent of Southeast's land base for the next 15 years.

It will discuss everything from survival of the marten to the plan's effect on international markets. And it will spell out just how much timber will be available for harvest and where. Seymour cautions that until these critical supply questions are answered, any changes need to be made slowly in the value-added timber industry.

Plant manager Tingley estimates that the small, family-owned Seley mill processes a million board feet of timber a month. The product sales are divided roughly in half between domestic markets and the German firm Ostermann and Schieve. harvested from federal land, the timber is logged, barked and cut into metered lumber in Ketchikan.

The lumber then is sent to Washington state, where it's processed, dried, surfaced and molded before being shipped to Germany. Seley wood chips also are sent to Washington to be made into paper products and a popcorn-shaped absorbent that eventually makes its way back to Alaska to sop up spills, including those containing oil.

Tingley notes demand for the plant's products has increased since the facility opened two years ago. Problems in the Pacific Northwest timber industry caused by the spotted-owl debate have contributed to the rise in demand. Only occasionally does Seley sell to Pacific Rim countries.

Japan traditionally has been a major purchaser of Southeast forest products, and more recently, a market for Southeast timber has developed in China, Taiwan and Korea, according to Downey. "The Japanese really do love our wood products. They have an affinity for our white woods in particular, and they have a strong preference for old-growth timber," he explains.

Although demand for wood imports decreased in the early 1990s as a tremendous Japanese housing boom tapered off, increasing labor costs in Japan, coupled with the rising costs there of land and raw materials, bode well for Southeast suppliers, says Downey. Southeast supplies 5 percent of Japan's log and lumber needs.

The Southeast Conference's Kohler says he's identified a major manufacturer of log homes in Finland that has penetrated the Japanese market and that is actively looking for a joint venture manufacturing partner in the Pacific Northwest. An Alaskan business could join forces with the company, he notes. Kohler also believes a local market exists for wood pellets used in home heating.

The state's Seymour believes processing high-grade lumber into products including veneers and furniture parts may hold real promise for those interested in Southeast's value-added forest products industry. An expanded -- and well-coordinated -- value-added industry "could add considerably" to the broadening of Southeast's economy, says Seymour.
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Title Annotation:Southeast Alaska
Author:Hill, Robin Mackey
Publication:Alaska Business Monthly
Date:Jun 1, 1992
Previous Article:Southeast.
Next Article:Highway haulers' loads shift; trucking firms report that general merchandise freight is playing an increasingly important role in their business.

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