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October 2021
Compiled by Michael Popke
While demand for wood ties has been steady the past couple years, sawmill production has lagged. In 2020, the pandemic forced some sawmills to operate at 50% or less of their production capacity.
And many sawmills — which provide raw materials to several industries beyond the wood-tie industry — are still struggling to keep up this year.
“In July, tie production was well below expectation as sawmills took advantage of high pallet and flooring lumber demand and pricing,” Railway Tie Association (RTA) officials said in the organization’s July purchases report. “Purchases were well below expectation as well.” (For more from the RTA and the state of the wood-tie industry, see sidebar.)
What have the conditions meant for wood-tie suppliers and treaters this year? What’s next year likely to look like? Progressive Railroading reached out to a sampling of suppliers and treaters. Their emailed responses follow.
With wood-tie demand on the rise, Koppers Inc. is expanding its treating plant in North Little Rock, Arkansas, said John Giallonardo, vice president of sales and marketing for the company’s Railroad Products and Services division. Tentatively slated for completion in 2023, the project will significantly improve operating capabilities and efficiencies while also increasing treating capacity, he said.
Giallonardo expects tie demand to be strong in 2022, as well. He also anticipates raw material product shortages to continue to be a challenge.
Because wood ties are a small piece of the overall hardwood market, options for tie suppliers to secure the full volume of raw materials they need are limited, Giallonardo said.
“Pricing pressure from various competing products, coupled with high rainfall amounts in key tie-producing areas, have contributed to decreased crosstie production,” he said. “Generating a sufficient supply of raw material to meet customer demand will continue to be a significant challenge for the entire industry until production conditions improve.”
Bill Behan also expects demand for switch ties to be strong through 2021 and into 2022. But complications due to the pandemic will linger, said Behan, president of Gross & Janes Co.
“First, the supply labor chain has been disrupted and has not been re-established, not even close. Many sawmill operations are running reduced hours, week-to-week, because of unreliable labor,” he said. “Second, the steep [price] increase in other hardwood products has outpaced the rise in crosstie value.”
As such, sawmills are choosing to change sawing strategies and produce other products to chase higher returns, Behan adds. Plus, the steep rise in softwood prices — such as the southern yellow pine Gross & Janes uses — caused some hardwood sawmills to abandon traditional products to participate in a once-in-a-lifetime rise.
The complications aren’t keeping the company from doing what it does best, Behan said.
Q: How has the coronavirus pandemic impacted wood-tie production the past two years?
Gibson: The pandemic's impacts on woodtie production are still in place. From labor shortages from the virus' spread and contact tracing, to parts and machinery shortages, which has stunted overall production, the effects have been felt throughout the wood-tie marketplace. Insufficient overall hardwood industry output has caused several commodities to be under-served for most of 2021. Hardwood (and softwood) commodity pressures are often confounding to those not directly involved with procurement of wood ties. Sawmills must weigh sawing solutions for all products based on market pricing in order to survive.
In 2021, for example, flooring lumber, low-grade lumber for pallet stock, and some specialty shipping container products, all which are merchandised from the same log the wood tie is cut from, have been in high demand. Because of this, lower grades of hardwood lumber, the most direct competitor to ties, has seen unprecedented pricing increases all year. The current pricing disparity between lumber and ties is just too great for sawmills to even consider more tie production. And, even in the unlikely event that price dynamics reverse, we still won't be able to catch up quickly. Labor shortages do not allow for second shifts so it will be a slow turnaround. Price spikes in softwood markets have also seen traditional hardwood mills transition to sawing pine during this time to capitalize on that opportunity as well. Unfortunately, the same market trends exist both east and west of the Mississippi. The effects of Hurricane Ida will only exacerbate the situation in the short term.
Q: What are 2021's key issues and trends?
Gibson: Some key trends with wood-tie production are low-grade lumber pricing and the industry's inability to supply the overwhelming demand for certain products due to parts and labor insufficiencies. Railroads are working off available inventory and keeping strong insertion schedules so far, but as the deficit in available wood ties continues the downward trend, railroads will have to curtail projects accordingly.
Q: What does 2022 look like for wood tie producers?
Gibson: It will be a year of good things to come for RTA and the tie markets. First, we are very excited to have Dr. Nate Irby join RTA as its new executive director. Dr. Irby has a depth of knowledge in this industry and will be on-boarded by the start of our annual conference in St. Louis, Nov. 1-4, 2021. Under his leadership we expect great things in expansion of online content and greater focus on underserved members of the sawmill and railroad communities. As far as the market for ties, we need to experience a mild upcoming winter for wood-tie production to normalize by the end of 2022. Business will be good for tie producers for quite some time, but only if machinery and parts issues and labor shortages don't truncate their ability to operate. Railroads are encouraged to work closely with suppliers to minimize any disruptions in the marketplace.
“Bright spots for Gross & Janes continue to be our strong commitment to switch-tie production and kiln-dried southern yellow pine used for bridges and specialty products,” he said.
George Caric called 2021 a “solid” year when it comes to demand and production. But like his counterparts, the president of wood-tie supplier Stella-Jones Corp. spelled out the industry’s near-term challenges.
“Like all industries, we are facing challenges with labor, trucking and overall inflation of component costs for treated timber product,” said Caric, adding that those issues are likely to carry over in 2022. “Our industry’s challenge is going to be making sure we have the raw material to replenish our air-dried inventories.”
On the plus side, Caric believes there will be plenty of state-funded railroad projects coming, as well as new projects evolving as part of the $1 trillion infrastructure bill Congress passed in September. Along with increased demand for wood ties in general, he also noted a specific uptick in demand for treated bridge ties.
Stella-Jones currently operates two plants that treat wood with QNAP copper naphthenate and plans to add the process to another of its plants in 2022.
Wood preservation is becoming increasingly vital to the longevity of wood ties, said Ken Laughlin, divisional vice president for Nisus Corp.’s wood preservation division.
“The dual treatment of green bridge ties with the company’s Cellu-Treat liquid borate and the BTX Bridge Tie Extender system has proven to be extremely effective at solving the historical problem of not being able to air-dry bridge ties and having to pressure-treat green bridge ties due to time constraints,” he said, adding that more than 1,000 bridges have been treated with the company’s QNAP copper naphthenate and or Cellu-Treat borate using the BTX system.
The ability to extend tie life and obtain a stronger tie has been a big factor in railroads’ decisions to dip-treat green ties, Laughlin believes.
“We expect to have over 6 million QNAP copper naphthenate ties in track by the end of the year,” he said.
As a result of increased demand, two Nisus treatment plants in Dubois, Pennsylvania, and Russellville, Arkansas, are switching cylinders to QNAP copper naphthenate. And two plants in West Virginia will be adding Cellu-Treat liquid borate dip-treating later this year.
Although the pandemic hasn’t disrupted the company’s process of manufacturing wood preservatives in North America, it triggered transportation delays, which forced Nisus to purchase additional tankers for its fleet, Laughlin said.
In February, Lonza entered into an agreement to sell its specialty ingredients business, Lonza Specialty Ingredients (LSI), to Bain Capital and Cinven. LSI’s holdings include preservative supplier Arch Wood Protection.
“We continue to support and promote the use of Chemonite® ACZA wood preservative for ties,” said Tim Carey, product line manager for the soon-to-be-renamed LSI/Arch Wood Protection. ACZA is a waterborne preservative that “fixes” to the wood — it does not leave the ties when it is pressure-treated into the wood.
At a test site in southwest Florida, where the average life of creosote-treated wood ties is seven years, the ACZA-treated ties show no signs of failure after eight years, Carey said.
“It’s not an issue with creosote-preserved ties, but with the track location, which is a swampy area that has extreme exposure to moisture that does not maintain ballast,” he said. “Our ACZA ties are in a ‘Y’ curve in the swamp. So, they get lateral pressures, as well as decay and pounding. This extreme exposure clearly shows that ACZA ties can handle intense track areas.”
Like other wood-tie market observers, Carey and his Arch Wood colleagues hope the industry “will learn to thrive in an atmosphere that appears to be the new normal,” as he put it. “Ideally, we would like to see a return to a more manageable and predictable supply chain.”
Michael Popke is a Madison, Wisconsin-based freelance writer. Email comments or questions to prograil@tradepress.com.
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