The US administration’s goal is clear: reduce imports and boost domestic manufacturing of wood products. Eliminating lumber imports would require an additional ~14Bbf of US domestic lumber production, representing a 40% increase on current production. We believe an additional ~2–3Bbf could be fairly quickly produced with the current asset base. In our view, the limitation isn’t the timber—it’s available in spades in the US South and is present, although restricted, in the Pacific Northwest (PNW). The target seems to be to return the PNW to prior levels of lumber production. In the late 1980s, western lumber production peaked at 24Bbf. Production fell rapidly after the 1994 Northwest Forest Plan came into effect, with production cycling around 14Bbf over the past few years. Can ~10Bbf of lumber production return to the PNW? In our view, it wouldn’t happen quickly, if at all.

The big challenge in the PNW is that key infrastructure is missing: logging infrastructure, sawmill infrastructure and human resources. Logging infrastructure would require increasing logging employment, and that has been on a downward slope for decades as young people find other, similarly paid work more attractive. Third-party contractors could provide logging (and permitting) support, but they would face the same problems of scaling up. Harvest restrictions since 1994 have resulted in large-diameter timber now so the logs are no longer an appropriate size for local mills. Also, roads need to be built. Companies will keep facing the question of where the risk/return equation is most attractive—the PNW or the US South. The South has been the clear preference over the past decade, and we suspect it will continue to be in the coming decade.”

Unlike in the PNW, we believe federal lands in the South have remained active suppliers of timber, along with other willing timber suppliers (including REITs and private landowners). In line with the March 1 Executive Order, the US Forest Service has been directed to increase agency-wide timber sales offerings by 25% over the next four to five years. Given flat timber pricing across the South, it’s not clear this volume is needed (or welcomed!).

If the U.S. were to replace all (or the majority) of lumber imports, we would expect to see new supply coming from the South. We outline the incremental investment that would be required and resultant timber demand in a back-of-the-envelope fashion. Replacing imports would take a decade, at least, and cost more than $10B for sawmills alone (potentially much higher with escalating costs for steel, machinery, etc.).

We also highlight challenges, albeit different ones from the PNW. Investment is a big one. In an uncertain global macroeconomic environment, we do not expect to see major capital investment announcements (the capital cycle is mostly winding down across our investment universe). Channel checks with our companies confirm no one is contemplating new investment at this point. Another big challenge is end-market demand from housing activity. If construction materials and labour costs rise meaningfully on tariff and immigration policies, affordability will decline and the near- term rationale for capital investment will be eroded—even if tariffs have forced housing prices higher (i.e., the stagflation scenario).

Timberland owners do not have a history of direct investment in greenfield wood products manufacturing; the TIR Mission sawmill (announced in 2020, with ribbon- cutting in 2024) is a lonely exception. Perhaps this could change, but operational expertise is essential to running a modern mill (Canadian sawmillers transferred technical expertise from established operations as they grew in the South), and staffing would be a challenge for any operator.