Why forest products companies may need to hold timberland

Abstract

There has been a strong call for monetizing industrial timberland. Various arguments have been made in support of this, but none considered timberland holding in the context of overall manufacturing operations of the forest products industry. After exploring some fundamental industry features, we constructed a model to assess the effect of holding timberland on various operating decisions: entry, exit, mothballing, and reactivation. Our numerical example of linerboard production shows that by altering the mix of fee land and open market fiber sources, holding timberland can enhance the ability of companies to make decisions that can result in financial success in the long term. Therefore, we argue that while opportunities exist for monetizing some industrial timberland, companies should focus on how to manage their forest resources as an integral part of their manufacturing businesses.