PNW .pdf · 2016. 4. 30. · PNW Wood Markets: A Closer Look at our Domestic and Export Timber Economies Timber Measurements Society Central Meeting April 7, 2016 Coeur d’ Alene,

PNW Wood Markets: A Closer Look at our Domestic and

Export Timber Economies

Timber Measurements SocietyCentral MeetingApril 7, 2016

Coeur d’ Alene, Idaho

©2015 Forest2Market®, Inc. 2

Today’s Topics

• US housing and the forest industry• The future for building with wood• “Softwood Lumber Agreement”• US regional production trends• The Log Export business• Canadian lumber production• Conclusion and some predictions


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Curitiba, Brazil office

Charlotte, NC Corporate

Eugene, OR andCoeur d’ Alene, ID

Building with wood in the US


US housing drives NA production


Source: US Census & Forest2Market

0

500

1,000

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2,500

A shallow recession looms due to global economyReal wage growth is stagnant – part time jobsHome prices and rents increasingHome equity loans from subprime era lingerConservative outlook

0

500

1,000

1,500

2,000

2,500

Total starts Single family Linear (Total starts) Poly. (Single family)

Changing demographics of housing


1993 87% single

Source: US Census

2015 61% single

New horizons building with wood

Framework, a twelve story retail, office and housing project using cross‐laminated timber (CLT) and other engineered wood products to be constructed in Portland, Oregon


BC Forest Industry


0.75

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1.05

1.15

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1.35

1.45

1.55

1.65

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MMBF lumber shipments C$toUS$

B.C. softwood lumber imports to US

©2015 Forest2Market®, Inc. 11Source: WWPA & Bank of Canada

SLA enacted

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BC prod BC imports East Canada prod East Canada imports

Canadian lumber production has peaked


BC prod falling

Eastern Canada US imports

Source: WWPA

Billion board feet

Slow Chinese demand = increased US domestic supply


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Volu

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China lumber imports by selected country

Russia USA CanadaSource: China Customs

Softwood lumber agreement• Adopted in 2006; resulting from a disagreement over whether

Canadian stumpage pricing process constituted an unfair subsidy that disadvantaged the US lumber industry

• SLA expired in October 2015 • What has changed? Mountain pine beetle infestation in BC,

Canadian producers supply China’s demand for wood products, Canadian industry now owns a large stake in US lumber production

• Strong US $ makes Canadian lumber imports attractive• As demand from China falls, US producers have been concerned

about a “wall of wood” from across the border• Canadian producers see new trade restrictions as an unnecessary

intrusion on free trade, an effort to prop up values of US private forests and fear further duties could be retro‐active

• Negotiations began with PM Trudeau’s White House visit last month


US industry outlook


Source of US Softwood Lumber


0

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West South Other Imports

Source: WWPA

Billion board feet

Key Economic IndicatorsTable 4. Performance Overview of Selected Industries in February 2016 (Source: ISM)

Manufacturing Services

Categories Index Wood Products Paper Products Index Real Estate Construction Ag. & Forestry

New Orders

Production

Employment

Slow Supplier Deliveries

Inventories

Customers' Inventories

Prices

Backlog of Orders

Exports

Imports

Growing at a faster rate Increase

Growing at a slower rate No change

No change Decrease

Contracting/Slowing at a slower rate

Contracting/Slowing at a faster rate

©2013 Forest2Market®, Inc. 17ISM: Institute of Supply Management

US Pacific Northwest


US log exports to Asia drop 25% in 2015


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Northwest Log Exports to Asia - Breakbulk Volume

Japan Korea ChinaSource: US Dept of Commerce, courtesy of Jones Stevedoring

Hemlock logs to China


• Chinas economy continues to decelerate while seeking stability

• GDP is slowing, credit risk is stabilizing

• US Logs outpriced due to USD, devalued Yuan, softened building effort due to structural oversupply

• Property is still viewed as a favorable investment

$0

$100

$200

$300

$400

$500

$600

$700

$800

Hemlock C‐sort logs $/MBF

Delivered cost ‐ Source: Forest2Market

Douglas Fir Exports to Japan• DF retains its

market share due to its value as a coveted building material

• Strong Yen spurs spending before upcoming tax increase

• Japanese housing starts just under 1MM

• Tenuous times amidst market turbulence


Domestic Production


Pacific Northwest industry margin


$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

D‐Fir GRN/SRF STD & BTR Doug fir log cost Linear ( Doug fir log cost)

Source: Forest2Market and WWPA

The northwest is timber supply constrained and volatile

Oregon – Washington harvest and log value


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2008 2009 2010 2011 2012 2013 2014 2015

OR/WA harvest Log exports Douglas fir average $/MBF

Billion board feet and $ / MBF

Sources: Jones Stevedoring, Forest2Market, State Stats

US Southern Pine


Southern Pine industry margin


$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

$450.00

Southern Pine lumber composite Southern pine log cost Linear (Southern pine log cost)

Source: Forest2Market

Log supply is abundant, growing and accessible

Southern Forestry and Agriculture


Canadian investment in Southern pine sawmills


$0

$100

$200

$300

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$500

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$800

Jan‐08

Apr‐08

Jul‐0

8Oct‐08

Jan‐09

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9Oct‐09

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Jul‐1

0Oct‐10

Jan‐11

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Jul‐1

1Oct‐11

Jan‐12

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Jul‐1

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Jul‐1

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Jul‐1

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Jan‐15

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Jul‐1

5Oct‐15

Jan‐16

DF to SYP Log Pricing

DF Westside Domestic SYP MBF Linear (DF Westside Domestic)

Source: Forest2Market

Canadian forest industry moves south

• The Southern US pine region has abundant, low cost timber from productive, well managed private forests

• Canfor, West Fraser and Interfor; leading Canadian forest products companies hedge their bets, moving out of Beetle kill, into more lucrative business environment

• 35 SYP sawmills in Texas, Arkansas, Louisiana, Mississippi, Alabama, Georgia, South Carolina, North Carolina and Florida are now owned by these three companies

• 4.5 billion board feet of production capacity. Mostly framing lumber. Studs remain a NW and Northern product due to strength characteristics.

• Roughly half of 2015’s housing starts were in the South.


Concluding thoughts• Slow but steady recovery for the US housing market• Low interest rates, cheap fuel and sluggish economy – watch pallets• Potential for multi‐level building with wood• Watch for mill closures and consolidation to continue as PNW log

supply is constrained• British Columbia production and imports are declining• Major growth for Southern US pine industry underway• Strong US $ influence on wood imports & exports• Less demand for NA wood products for China = less competition for

domestic wood supply• Squaring off with competitive Southern hemisphere industry:

productive plantations, modern pulp and panel mills; China demand and strong US $ ?

• PNW harvest levels will be flat in near‐term. Housing and exports


Forest2Market: The highest quality wood raw material analysis available

Greg FrohnManager, PNW Market Sales

(360) 477 [email protected]

Forest2Market®15720 Brixham Hill Avenue, Suite 550Charlotte, NC 28277

www.forest2market.com


Thank You!


Documents

PNW .pdf · 2016. 4. 30. · PNW Wood Markets: A Closer Look at our Domestic and Export Timber Economies Timber Measurements Society Central Meeting April 7, 2016 Coeur d’ Alene,