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NewWood Banks on Market Readiness for Wood-Plastic Composites
6 years, 5 months ago Posted in: Industry News 0

Markets in Transition: NewWood Banks on Market Readiness for Wood-Plastic Composites

Logistics and packaging consultant, Rick LeBlanc focuses on the market potential for wood-plastic composites by examining the story of NewWood Manufacturing.

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2/1/2011 – Is the marketplace ready to embrace wood-plastic composite products for applications such as pallets, fruit bins and reusable concrete forms? That is the prediction of NewWood Manufacturing and a number of sophisticated investors that have combined to make available over $40 million to buy the plant and bring it into production.

NewWood raised headlines late last year with the announcement that it would reopen the mothballed, Boise Cascade composite siding manufacturing facility located in Elma, Wash. This plant included state of the art manufacturing equipment, to manufacture a range of composite products. With housing starts cooling in recent years, Boise Cascade never got the 275,000 sq. ft. plant completed in 2006.

So what gives now? Well it seems that about three and a half years ago, John Bowser, now President and CEO of NewWood, came to the Elma facility looking to purchase a press for his high pressure laminate business. John is an entrepreneur and executive with substantial experience in the manufacture of high-pressure laminate products. The machinery wasn’t something that was easily moved, and John suggested that it might make more sense to sell the entire operation versus specific equipment. When asked if he would help them to sell it, he saw the opportunity that others did not. The rest is history.

In putting the deal together, NewWood utilized a unique financing approach that combined New Markets Tax Credits (NMTCs) in conjunction with a USDA-guaranteed loan.

According to one release, NewWood received $25 million in NMTC capacity from CEI Capital Management of Portland, as well as another $17.7 million from community development entities (CDEs) EcoTrust and Enterprise Cascadia.

New Markets Tax Credits (NMTCs) are the result of a national program that promotes investment in struggling communities by creating the opportunity for taxpayers to receive a federal income tax credit through making investments in community development entities such as Ecotrust CDE, which played a role in the NewWood transaction. The NMTC program was recently extended for another two years by Congress.

Many readers will be familiar with previous Pallet Enterprise coverage of USDA loan program support for investment in business improvements that create jobs in depressed rural areas.

Also important in winning the financing was support of key Washington politicians, including Governor Chris Gregoire and U.S. Senator Patty Murray.

This gets us back to the original key question: is the market ready for composites? Plastic-wood fiber composites have a number of positive attributes. They are usually pitched as being less dense, less expensive and more stiff than solid plastic, while still providing more durability than wood, with no worry of ISPM 15 requirements. On the flip side, a composite is typically less stiff and more expensive and heavier than wood, albeit more durable. Goodrich Capital suggested that the timing is right for the introduction of such “green products.” In the case of NewWood, full production would divert 170 million pounds annually of scrap plastic and wood fiber.

In the past, wood-plastic composite offerings in the pallet market have struggled due to issues such as weight, price and difficulty driving fasteners, so part of me is a little apprehensive. In addition, unless they can actually divert waste stream material, their input costs will be at the mercy of wood fiber and scrap plastic markets, which may be something else to consider. But that was then and this is now. Many plastic products manufacturers compete highly successfully in the pallet and container market, and now more than ever, customers are looking for products that recycle waste stream materials into new products, which is exactly what wood-plastic composites provide.

Researchers at Washington State University Composite Materials and Engineering Center (CMEC) and the WSU Extension have determined that there are over 100 product markets that the NewWood composite could address. And this is a good thing. Ultimately, success may ride on establishing a number of niche markets, rather than one big play such as composite decking or siding, or like the “pallet market” which in itself is often the source of marketing error when incoming businesses fail to understand that it is really a patchwork of applications with somewhat divergent requirements and issues rather than a “one size fits all” product.

Pallets and bins appear to be high on the list of potential products for NewWood, according to press reports. The people behind NewWood hope to combine the best attributes of wood and plastic without the environmental cost of cutting down trees or extracting more fossil fuels. Will this dream ever come true? Well, that story has yet to be written.

SOURCE: Pallet Enterprise –  Author: Rick LeBlanc

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