The timber recovery is happening

March 24, 2010

New lumber forecast predicts slow, steady recovery for sawmills
By Western Wood Products Association

PORTLAND, Ore. – Lumber mills are starting to emerge from the worst downturn in the history of the industry and recovery will be slow yet steady, according to a new forecast released by Western Wood Products Association. The lumber trade association’s forecast calls for modest gains in housing, lumber consumption and U.S. production this year after setting modern lows during 2009. While markets are expected to improve in the coming years, lumber demand and housing construction will remain far lower that what the industry saw in the mid-2000s.

Demand for lumber in the U.S. is expected to increase 6.1 percent in 2010 to 32.9 billion board feet, ending consecutive 20-percent-plus declines recorded the previous two years. WWPA anticipates lumber demand to rise to 36.1 billion board feet in 2011, up 9.7 percent.

More housing construction will help boost lumber demand. Housing starts plummeted to 554,000 units in 2009, the lowest annual total since 1945. For 2010, total housing starts are forecast to increase 11.9 percent to 618,000 and then climb again in 2011 to 719,000 units.

WWPA Economic Services Director David Jackson said there are too many obstacles for a more robust recovery in housing.     “Our country hasn’t really resolved the key problems that led to this downturn,” said Jackson.

Western mills may finally see some relief in the markets, with production in the region expected to rise 7.1 percent to 11 billion board feet this year. Output from Western sawmills should rise again in 2011 to 11.8 billion board feet.

The latest downturn further reduced the number of lumber mills operating in the West. The region has fewer than 170 sawmills producing lumber today, compared to 287 mills operating a decade earlier. During the peak year in 1987, when production totaled 23.9 billion board feet, there were 702 mills in the West.

Lumber production in the Southern U.S. is forecast to increase at a slower rate in 2010, but still remain above Western volumes. Mills in the South should produce 11.7 billion board feet of lumber this year, about the same volume as 2009. Next year, production volumes in the South should rise to 12.5 billion board feet.

The volume of lumber imported to the U.S. dropped precipitously in 2008 and 2009, falling by nearly half.     Lumber imports, mostly from Canada, are forecast to increase 10.7 percent to 9.8 billion board feet.

Assuming the U.S. dollar will weaken, giving foreign lumber producers some exchange rate advantages, import totals could grow to 12.6 billion board feet by 2011. Despite such an increase, the volume of foreign lumber entering the U.S. will be far below the record 24.7 billion board feet imported in 2005.

Western Wood Products Association represents lumber manufacturers in the 12 Western states. Based in Portland, WWPA compiles lumber industry statistics and delivers quality standards, technical and product support services to the industry.

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WWF hopes to find $60 billion growing on trees

The carbon credits scheme would make WWF and its partners much richer, but with no lowering of overall CO2 emissions, writes Christopher Booker.

By Christopher Booker
Published: 4:53PM GMT 20 Mar 2010

Tumucumaque in northern Brazil has been designated a 'carbon sink'

If the world’s largest, richest environmental campaigning group, the WWF – formerly the World Wildlife Fund – announced that it was playing a leading role in a scheme to preserve an area of the Amazon rainforest twice the size of Switzerland, many people might applaud, thinking this was just the kind of cause the WWF was set up to promote. Amazonia has long been near the top of the list of the world’s environmental cconcerns, not just because it includes easily the largest and most bio-diverse area of rainforest on the planet, but because its billions of trees contain the world’s largest land-based store of CO2 – so any serious threat to the forest can be portrayed as a major contributor to global warming.

If it then emerged, however, that a hidden agenda of the scheme to preserve this chunk of the forest was to allow the WWF and its partners to share the selling of carbon credits worth $60 billion, to enable firms in the industrial world to carry on emitting CO2 just as before, more than a few eyebrows might be raised. The idea is that credits representing the CO2 locked into this particular area of jungle – so remote that it is not under any threat – should be sold on the international market, allowing thousands of companies in the developed world to buy their way out of having to restrict their carbon emissions. The net effect would simply be to make the WWF and its partners much richer while making no contribution to lowering overall CO2 emissions.

WWF, which already earns £400 million yearly, much of it contributed by governments and taxpayers, has long been at the centre of efforts to talk up the threat to the Amazon rainforest – as shown recently by the furore over a much-publicised passage in the 2007 report of the UN’s Intergovernmental Panel on Climate Change. The IPCC’s claim that 40 per cent of the forest is threatened by global warming, it turned out, was not based on any scientific evidence, but simply on WWF propaganda, which had wholly distorted the findings of an earlier study on the threat posed to the forest, not by climate change but by logging.

This curious saga goes back to 1997, when the UN’s Kyoto treaty set up what is known as the Clean Development Mechanism (CDM). This allowed businesses in the developing world that could claim to have reduced their greenhouse gas emissions to make billions of pounds by selling their resulting carbon credits to those firms in the developed world which, under the treaty, would be obliged to cut their emissions. In 2001 the parties to Kyoto agreed in principle that trees in the southern hemisphere could be counted as “carbon sinks” for the benefit of CO2 emitting firms in the northern hemisphere. In 2002, after lengthy negotiations with WWF and other NGOs, the Brazilian government set up its Amazon Region Protected Areas (Arpa) project, supported by nearly $80 million of funding. Of this, $18 million was given to the WWF by the US’s Gordon & Betty Moore Foundation, $18 million to its Brazilian NGO partner by the Brazilian government, plus $30 million from the World Bank.

The aim was that the NGOs, led by the WWF, should administer chunks of the Brazilian rainforest to ensure either that they were left alone or managed “sustainably”. Added to them, as the largest area of all, was 31,000 square miles on Brazil’s all but inaccessible northern frontier; half designated as the Tumucumaque National Park, the world’s largest nature reserve, the other half to be left largely untouched but allowing for sustainable development. This is remote from any part of the Amazonian forest likely to be damaged by loggers, mining or agriculture.

So far all this might have seemed admirably idealistic. Despite the international agreement that forests could be counted as carbon sinks, there was as yet no system in place whereby the CO2 thus “saved” could be turned into a saleable commodity. In 2007, however, the WWF and its allies in the World Bank launched the Global Forest Alliance, with start-up funding of $250 million from the Bank, to work for what they called “avoided deforestation”. A conference in Bali, under the auspices of the UN Framework Convention on Climate Change (UNFCCC), which administers the CDM, agreed to a scheme called REDD (reducing emissions for deforestation in developing countries). Hailed as “the big new idea to save the planet from runaway climate change”, this set up a global fund to save vast areas of rainforest from the deforestation which accounts for nearly a fifth of all man-made CO2 emissions.

But still there was no mechanism for turning all this “saved” CO2 into a money-making commodity. The WWF now, however, found a key ally in the Woods Hole Research Center, based in Massachusetts. Not to be confused with the nearby Woods Hole Oceanographic Institute, a bona fide scientific body, this is in fact a global warming advocacy group, headed by a board which includes fund managers responsible for billions of dollars of private investments.

In 2008, funded by $7 million from the Moore Foundation and working in partnership with the WWF on the Tumucumaque project, Woods Hole came up with the formula required: a way of valuing all that carbon stored in Brazil’s protected rainforests, so that it could be traded under the CDM. The CO2 to be “saved” by the Arpa programme, it calculated, amounted to 5.1 billion tons. Based on the UNFCCC’s valuation of CO2 at $12.50 per ton, this valued the trees in Brazil’s protected areas at over $60 billion. Endorsed by the World Bank, this projection was presented to the UNFCCC.

But two more obstacles had still to be overcome. The first was that the scheme needed to be adopted as part of REDD by the UNFCCC’s 2009 Copenhagen conference, which was supposed to agree a new global treaty to follow Kyoto. This would allow all that “saved” Brazilian CO2 to be turned into hard cash under the CDM scheme.
The other was that the US should adopt a “cap and trade” scheme, imposing severe curbs on the CO2 emitted by US industry. This would boost the international carbon market, sending the price soaring as US firms flocked to buy the credits that would allow them to continue emitting the CO2 they needed to survive.

As we know, the story hasn’t turned out as planned. Amid the shambles at Copenhagen in December, all that could be saved of the REDD proposals was an agreement in principle, with the hope of reaching detailed agreement in Mexico later this year. Also lost in the scramble to save something from the wreckage was the small print that guaranteed the rights of indigenous peoples in rainforests, whose way of life – to the concern of groups such as Survival International and the Forest Peoples Programme – has already been severely damaged by REDD-inspired schemes elsewhere, such as in Kenya and Papua New Guinea.

Just as alarming to the WWF and its allies, who were hoping to make billions from Brazilian forests, has been the failure of the US Senate to approve the cap and trade bill championed by President Obama. Since the EU has excluded the rainforests from its own cap and trade scheme, bringing the US into the net is vital for the WWF’s hopes of finding “money growing on trees”. The price of carbon on the Chicago Climate Exchange has just plummeted to its lowest-ever level, 10 cents a ton.

The WWF’s dream has been thwarted – but the revelation that it could even be party to such a scheme may have considerable influence on the way this richest of all environmental campaigning groups is viewed by the world at large.


http://www.telegraph.co.uk/comment/columnists/christopherbooker/7488629/WWF-hopes-to-find-60-billion-growing-on-trees.html
 

What's in the bill?

http://online.wsj.com/article/SB10001424052748704117304575137370275522704.html
 

US Forest Service admits putting surveillance cameras on public lands

Charleston man surprised when he found one while camping with daughter

BY TONY BARTELME
postandcourier.com
Published Monday, March 15, 2010

Read more: http://www.islandpacket.com/2010/03/15/1173660/us-forest-service-admits-putting.html#ixzz0iLSHmeSV

Last month, Herman Jacob took his daughter and her friend camping in the Francis Marion National Forest. While poking around for some firewood, Jacob noticed a wire. He pulled on it and followed it to a video camera and antenna.

The camera didn't have any markings identifying its owner, so Jacob took it home and called law enforcement agencies to find out if it was theirs, all the while wondering why someone would station a video camera in an isolated clearing in the woods.

He eventually received a call from Mark Heitzman of the U.S. Forest Service.

In a stiff voice, Heitzman ordered Jacob to turn it back over to his agency, explaining that it had been set up to monitor "illicit activities." Jacob returned the camera but felt uneasy.

Why, he wondered, would the Forest Service have secret cameras in a relatively remote camping area? What do they do with photos of bystanders?

How many hidden cameras are they using, and for what purposes? Is this surveillance in the forest an effective law enforcement tool? And what are our expectations of privacy when we camp on public land?

Officials with the Forest Service were hardly forthcoming with answers to these and other questions about their surveillance cameras. When contacted about the incident, Heitzman said "no comment," and referred other questions to Forest Service's public affairs, who he said, "won't know anything about it."

Heather Frebe, public affairs officer with the Forest Service in Atlanta, said the camera was part of a law enforcement investigation, but she declined to provide details.

Asked how cameras are used in general, how many are routinely deployed throughout the Forest and about the agency's policies, Frebe also declined to discuss specifics. She said that surveillance cameras have been used for "numerous years" to "provide for public safety and to protect the natural resources of the forest. Without elaborating, she said images of people who are not targets of an investigation are "not kept."

In addition, when asked whether surveillance cameras had led to any arrests, she did not provide an example, saying in an e-mail statement: "Our officers use a variety of techniques to apprehend individuals who break laws on the national forest."

Video surveillance is nothing new, and the courts have addressed the issue numerous times in recent decades. The Fourth Amendment guards against unreasonable searches and seizures, and over time the courts have created a body of law that defines what's reasonable, though this has become more challenging as surveillance cameras became smaller and more advanced.

In general, the courts have held that people typically have no reasonable level of privacy in public places, such as banks, streets, open fields in plain view and on public lands, such as National Parks and National Forests. In various cases, judges ruled that a video camera is effectively an extension of a law enforcement officer's eyes and ears. In other words, if an officer can eyeball a campground in person, it's OK to station a video camera in his or her place.

Jacob said he understands that law enforcement officials have a job to do but questioned whether stationing hidden cameras outweighed his and his children's privacy rights. He said the camp site they went to -- off a section of the Palmetto Trail on U.S. 52 north of Moncks Corner -- was primitive and marked only by a metal rod and a small wooden stand for brochures. He didn't recall seeing any signs saying that the area was under surveillance.

After he found the camera, he plugged the model number, PV-700, into his Blackberry, and his first hit on Google was a Web site offering a "law enforcement grade" motion-activated video camera for about $500. He called law enforcement agencies in the area, looking for its owner, and later got a call from Heitzman, an agent with the National Forest Service.

Read more: http://www.islandpacket.com/2010/03/15/1173660/us-forest-service-admits-putting.html#ixzz0iLSAWSZN
 

TREESEARCH

Check this out...

http://www.treesearch.fs.fed.us/

"Your onestop site for  Research & Development Publications online"
  

Burning wood as renewable power draws scrutiny in Oregon and nationwide

By Scott Learn, The Oregonian
March 11, 2010, 8:08PM

EUGENE -- By the end of this year, Seneca Sustainable Energy plans to fire up a power plant that will convert about 700 tons a day of logging leftovers and waste from its nearby sawmill into enough electricity to power 13,000 homes.

The plant features West Coast-leading pollution controls endorsed by the Environmental Protection Agency. It's projected to release far less pollution than the usual practice of burning slash piles in the woods.

But it will also release more carbon dioxide and lung-damaging particulates than a comparable coal-fired power plant, according to a report for the Eugene Water & Electric Board, which is buying the power.

It will release more carbon, sulfur dioxide and smog-causing nitrogen oxides than a similar-sized natural gas plant. And it's expected to receive millions in Oregon tax credits and qualify to meet the state's renewable power goals, just like non-polluting solar and wind.

Burning wood, or in 2010 terms "wood biomass," is civilization's oldest form of generating energy.

In its modern incarnation, which includes multi-million-dollar pollution controls, it's seen as one of Oregon's best sources for generating reliable, home-grown electricity that doesn't come from fossil fuels.

Supporters, including state and federal leaders, say wood energy is effectively carbon neutral because the carbon emitted in burning it will be balanced by new trees that pull carbon from the atmosphere.

It will help boost the economic benefit from thinning fire-prone forests, they say, creating badly needed rural jobs and cutting the risks of out-of-control forest fires, insect infestations and disease.

But community and environmental activists are raising questions about the wisdom of treating wood energy as green power.

Burning wood is a high pollution way to generate electricity, they say. And encouraging it could cause a spike in greenhouse gas emissions that won't be fully absorbed for decades.

Opponents have emerged in 18 states, including Oregon.

The biggest battle to date is in Massachusetts. Concerns prompted the state to suspend classifying biomass plants as green power pending an environmental study. Activists also qualified an anti-biomass measure for the November ballot.

The Massachusetts Medical Society, publisher of the New England Journal of Medicine, is among the opponents. It says wood energy plants "pose an unacceptable risk to the public's health."

William Sammons, a Massachusetts activist, is lobbying Congress to end federal tax credits and incentives for biomass plants. He figures federal biomass subsidies will hit $20 billion a year if they aren't curtailed, and biomass plants will expand to account for more than 10 percent of U.S. carbon emissions by 2020.

Under current rules that categorize biomass as carbon neutral, he said, none of the carbon emissions from those plants would be included as carbon emissions in the U.S. tally.

Ten years from now, Sammons said, "we'll measure carbon in the air and find out we haven't had a reduction at all."

Despite the concerns, wood energy is gaining momentum.

In Salem, the Legislature recently passed a bill allowing older wood energy plants to qualify as renewable power along with new plants. Dozens of wood energy plants have qualified for Oregon's Business Energy Tax Credit, including Seneca, which is on track for a maximum $10 million subsidy over eight years.

The Oregon Department of Energy is developing another credit that would give a $10 a ton credit for supplying forest fuel to biomass plants. ADAGE, a consortium of North Carolina power company Duke Energy and French conglomerate Areva, is trying to site plants throughout the Northwest, and just teamed with equipment maker John Deere to announce a new plant in Washington.

This week, Sen. Ron Wyden, D-Ore., touted the benefits of biomass in a hearing on his compromise bill for eastern Oregon forests, which directs the U.S. Forest Service to encourage the use of forest thinnings for biomass energy.

"It's going to be good for the forest," Wyden said, "it's going to be good for the economy."

Wood energy, like corn ethanol before it, appeals on environmental and business grounds, making for a powerful political combination.

Two unlikely allies on the Seneca plant: Ted Kulongoski, Oregon's Democratic governor, and Seneca founder and owner Aaron Jones, a big contributor to property rights measures and other conservative causes.

In total, about 6.3 million tons of woody biomass were used in Oregon in 2007 to fuel about 40 biomass plants. Most of that came from the residue from saw, paper and veneer mills.

Thinning public and private forests in Oregon and Northern California over 10 years could yield 6 to 12 million tons of wood for energy production, the Forest Service says.

That's enough to produce between about 500 to 1000 megawatts of power -- an amount comparable to Portland General Electric's Boardman coal-fired plant at the bottom end and Bonneville Dam's turbines at the top end.

Slash piles, a mix of tree tops and small limbs, are typically burned on logging sites without pollution control, biomass supporters note. And forest fires in overgrown forests send tens of thousands of tons of carbon into the air.

"It's not working against the health of the forests, it's working for it," said Norm Johnson, a professor and old growth forest expert at Oregon State University. Thinning would improve the health of most of the state's dry forests, he said.

But others question the benefits. The subsidies could spur more logging and thinning than pure ecological concerns merit, some environmental groups warn. And building roads and using heavy equipment for thinning can damage soil and foul streams.

Mark Harmon, an OSU forestry professor, said some key assumptions behind forest biomass are too simple.

The massive amount of thinning required to prevent fires would pull far more carbon out of the forest than the fires would release, he said, though unnaturally overgrown eastern Oregon forests could be an exception.

And carbon released by burning wood for energy takes decades to replenish through plant growth.

Calling wood energy carbon neutral "is sort of true, but very misleading," Harmon said. "Forests eventually gain the carbon back, but it takes them a very long time to do it."

The biomass debate played out in Eugene last year, and Seneca won.

Critics said that the Seneca plant, close to poor neighborhoods with high asthma rates, would be one of Lane County's largest industrial polluters.

Lisa Arkin, executive director of the Oregon Toxics Alliance in Eugene, unsuccessfully pushed for tighter pollution controls. She and other activists favor more energy conservation, subsidies for non-polluting renewable power and selective logging that can reduce logging waste and the need for open burning.

"Let's protect the public," Arkin said. "Let's look at how we're logging, let's make sure we're not investing tax credits where it's not environmentally sound."

Dale Riddle, Seneca's general counsel, said the company was taken aback by the opposition.

Seneca doubled the amount it was required by law to spend on pollution controls, he said, from $5.5 million of the roughly $50 million project to $11 million, mostly to cut back on particulate pollution.

Once other sources, including cars, residential fires and road dust, are included, the plant will account for less than 1 percent of particulates released in Lane County, and a similarly small fraction of other pollutants, consultants said.

A small portion of the steam generated at the plant will fuel lumber kilns heated by natural gas now, Riddle said, and the plant will emit far less pollution than burning slash piles at logging sites on Seneca's 166,000 acres of private timberland.

Oregon forest laws allow burning the piles to cut future fire hazards.

"After we build this plant," Riddle said, "the air in Lane County will be cleaner than what it is now."

-- Scott Learn and Matthew Preusch

http://www.oregonlive.com/environment/index.ssf/2010/03/burning_wood_for_renewable_pow.html
 

International Paper Launches “Down to Earth” Website

MEMPHIS, Tenn. - March 3, 2010 -- International Paper today launched down2earthonline.com, a new company website featuring information from the well-received Down to Earth™ educational series of brochures. The series covers the most important environmental issues and trends in the paper and printing industries and uses facts gathered from reputable sources to address many myths and misperceptions surrounding paper and the environment. For convenience, there is a ‘Media Center’ tab with banner art and linking instructions to make it easy for customers and other key stakeholders to use the new website to help supplement their own environmental message.

Visitors to the site will learn, for example, that using paper actually helps to keep forests growing and how one of the biggest dangers to North American forestlands is urban development. Paper and digital communications are compared by: energy usage, renewability of materials and recycling -- showing that paper communications can often be the more responsible choice.

“Our customers and the public deserve to know the truth about paper products. They are bombarded with misleading and false information every day,” said Teri Shanahan, IP’s vice president, Commercial Printing. “Our goal is to provide facts so people can feel great about their environmentally-friendly choices, especially paper. The Down to Earth website was created as a companion to the printed series to make it easier to share this valuable information, and to give readers the facts to support when and why it’s worth printing.”

Environmental issues in the paper and printing industries are very complex, can be easily misunderstood and, consequently, often misrepresented. Myths and misperceptions have altered some public thinking and have led to campaigns for a paperless society. The Down to Earth educational series presents a balanced and fact-driven picture in a thought-provoking manner that shows how choosing paper products protects the environment, supports communities and keeps our forests growing.

The brochures in the “Down to Earth” series include:

  Certification: Where does your paper come from?
  Recycled vs. Virgin: Is recycled paper the best you can do?
  Carbon Footprint: How big is your carbon footprint?
  Pixels or Paper: Are pixels greener than paper?
  Labels & Logos: How do certification labels and logos benefit you?
  Responsible Forestry: How does using paper lead to more trees?
  Print on Paper: Is it worth printing?

For more information on International Paper’s sustainability efforts, please go to: ipsustainability.com.

International Paper (NYSE: IP) is a global paper and packaging company with manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. Its businesses include uncoated papers, industrial and consumer packaging and distribution. Headquartered in Memphis, Tenn., the company employs about 56,000 people in more than 20 countries and serves customers worldwide. 2009 net sales were more than $23 billion. For more information about International Paper, its products and stewardship
efforts, visit internationalpaper.com.

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Media Contact: Rick Ouellette, 901-419-4274
 

Seeing the Hidden Services of Nature

Released: 3/2/2010 10:30 AM EST
Source: McGill University

Newswise -http://www.newswise.com/

Following an intense study of agricultural ecosystems near Montreal, a new tool that enables the simultaneous analysis and management of a wide range of ecological services has been developed by Ciara Raudsepp-Hearne of McGill University’s Department of Geography, Elena Bennett of the McGill School of Environment, and Garry Peterson of the Stockholm Resilience Centre at Stockholm University. Environmental management typically focuses on nature’s resources like food, wildlife and timber, but can miss hidden ecosystem services such as water purification, climate moderation and the regulation of nutrient cycling.

The researchers show that ecosystems that maximize agriculture offer fewer hidden ecosystems services than more diverse agricultural landscapes. Ciara Raudsepp-Hearne says “Landscapes managed to provide a lot of one service, such as pig production, can be costly because they have fewer of the hidden services, such as the regulation of nutrient pollution, which are also important to people.” They also show that in some areas high amounts of agricultural production can go hand in hand with the production of other ecosystem services. The researchers framework can be used to help identify “best-practice areas” and contribute to developing effective resource policies.

Bennett believes Quebec manages its environment fairly well, but that there are still trade-offs and costs to be recognized. She says “the big local message is that in terms of the landscape we have to be thinking about more than just one thing – we can’t just see corn, we have to see deer hunting, nutrients, and tourism, too.”
The area surrounding Montreal was selected because it is typical of near-urban agricultural landscapes in many parts of the world. “I hope these methods can be applied to many other landscapes around the world,” Peterson says, adding the tool will help decision makers trying to balance the goals of farmers, rural villagers and exurban commuters.

The findings were published in the Proceedings of the National Academy of Science on March 1, 2010.


http://www.newswise.com/articles/view/561879/?sc=swtn
 

Quake to Keep Pulp Prices High

By LESTER ALDRICH

Wall Street Journal

3/3/10

World pulp supplies have tightened substantially following the massive earthquake in Chile, putting upward pressure on a market that has seen prices rise nearly 30% over the past year.  Prior to the earthquake in Chile, world market pulp supplies already were tight. In the wake of the temblor, most wood and pulp mills in Chile, which accounts for about 8% of global pulp production capacity, have been shuttered owing to damage and power outages.

RISI, a market analysis firm, said at least 3.75 million metric tons of Chile's 4.8 million tons of annual capacity is closed due to aftereffects of the earthquake.

Mark Wilde, research analyst at Deutsche Bank, said the Chilean supply disruption, at a time of lean pulp stocks, "makes it more likely that the rally will continue." Meanwhile, "weather-related fiber issues in many parts of the Northern Hemisphere make it unlikely that other parts of the world can pick up the slack," he said.

Over the last 11 months, prices for most pulp grades have risen more than $200 a ton. Finland index provider FOEX this week said its U.S. list price index for northern bleached softwood kraft pulp, the benchmark grade, was $875.23 a metric ton, up $1.10 from a week earlier and $45.23 higher than on Jan. 1.

A continued rise in prices would add to the profits of world pulp producers, but could hurt paper makers that are struggling with demand that is marginal at best. Some paper producers could shut down machines in response to continually higher raw material costs.

Celulosa Arauco, part of Chilean fuel and forestry conglomerate Empresas Copec SA, said some of its units suffered "important" damage. Because of transportation and communications problems, it is unclear when operations will restart, the world's second-largest pulp producer said in a statement.

CMPC Celulosa SA, Chile's second-largest pulp producer after Arauco, said none of its plants appeared to have suffered severe damage. Still, the company, a unit of Brazil's Fibria Celulose SA, closed all facilities because of a lack of potable water and electricity, while declaring a 30-day force majeure. Under a force majeure, a typical clause in contracts, producers don't have to honor certain terms if operations are affected by extraordinary events such as natural disasters.

"The epicenter of this earthquake is located close to our pulp mills and as a result the whole supply chain has been heavily affected," CMPC Chief Executive Sergio Colvin and Sales Manager Guillermo Mullins said in a letter to customers dated March 1, a copy of which was obtained by Dow Jones. "Therefore it is very difficult to have clear picture as to when we could restart our operations."

Brian McClay, principal at TerraChoice Market Services, a paper and pulp consulting firm, said the Chilean production losses could have some paper makers either looking for alternative sources in an already very tight world market or they could stop making paper because they will run out of pulp.