North American Timber Outlook

Transcription

1 North American Timber Outlook Conditions Required for a Widespread Revival North American Conference October 2017 Peter Barynin Principal Economist, Timber Copyright 2017 RISI, Inc. Proprietary Information

2 Agenda Sawtimber Recent developments US South Outlook US West Outlook Pulpwood Base case forecast Region highlights Copyright 2017 RISI, Inc. Proprietary Information 2

3 Softwood Sawlogs The Supply Overhang Copyright 2017 RISI, Inc. Proprietary Information 3

4 How Low Can Southern Prices Go? $800 $700 Regional Sawtimber Prices QTR2 West Coast, Douglas fir Dollars per MBF $600 $500 $400 $300 West Coast, Whitewood Southern Pine (Delivered) $200 $100 Southern Pine (Stumpage) $ Note: Southern prices estimated using 7.5 per MBF, Scribner. Copyright 2017 RISI, Inc. Proprietary Information 4

5 Relationship Between Log and Lumber Prices Has Changed US Dollars per MBF, Quarterly Data corrected from print version $1,000 West Coast Douglas fir $500 $800 $400 $600 $300 $400 $200 $200 Delivered Log (L) Lumber* (R) $ * Douglas fir 2x4, green, lagged two quarters ** SYP Westside 2x4, kiln dried, lagged two quarters $100 $0 Copyright 2017 RISI, Inc. Proprietary Information 5

6 Relationship Between Log and Lumber Prices Has Changed US Dollars per MBF, Quarterly Data corrected from print version $1,000 West Coast Douglas fir $500 $500 South SYP $600 $800 $400 $400 $500 $600 $300 $300 $400 $400 $200 $200 $300 $200 Delivered Log (L) Lumber* (R) $ $100 $0 $100 Delivered Log (L) Lumber** (R) $ $200 $100 * Douglas fir 2x4, green, lagged two quarters ** SYP Westside 2x4, kiln dried, lagged two quarters Copyright 2017 RISI, Inc. Proprietary Information 6

7 Age Class Dynamics is Changing the Supply Potential 8.0 SYP Managed Forests, Five Year Age Classes Million Acres, Copyright 2017 RISI, Inc. Proprietary Information 7

8 Age Class Dynamics is Changing the Supply Potential 8.0 SYP Managed Forests, Five Year Age Classes Million Acres, Matures in next five years! Becoming overmature Copyright 2017 RISI, Inc. Proprietary Information 8

9 Softwood Sawlog Prices Expected to Move Up Sustained US and global economic growth Forward momentum for housing starts Higher prices for lumber and plywood Mountain pine beetle in Canada Chinese wood fiber deficit Copyright 2017 RISI, Inc. Proprietary Information 9

10 US Softwood Sawtimber Demand: A Slow Recovery Billion Board Feet 25 US South 14 US West (Inland and Coast) Copyright 2017 RISI, Inc. Proprietary Information 10

11 Sawlogs Will See Some Revival $70 $60 Southern Pine Stumpage US Dollars per Ton Nominal Inflation Adjusted (2016$) $900 $800 Douglas fir Delivered Logs US Dollars per MBF $700 $50 $600 $40 $500 $30 $400 $ $ Copyright 2017 RISI, Inc. Proprietary Information 11

12 Harvest Ready Timber Keeps Ahead of Demand US SOUTH PINE SUPPLY (Cumulative for ) Roundwood from Pine Plantations* Acreage Stand Age Years 3.0 Acreage Maturing within Five Years Million Acres Roundwood Yield at Final Harvest 97 Tons per Acre Total 880 Million Tons Roundwood from Other Sources Thinnings 225 Natural Stands Million Tons Roundwood from All Sources 1430 Million Tons Roundwood from All Sources per Year 286 Million Tons Note: Data includes all wood fiber sourced from forests * RISI estimate of area available for commercial production Averages 73% utilization 0 Annual Supply Annual Demand Copyright 2017 RISI, Inc. Proprietary Information 12

13 US South: Softwood Sawlog Production and Supply Potential Billion Board Feet Production Supply Potential Copyright 2017 RISI, Inc. Proprietary Information 13

14 SYP Stumpage Moves Out of Bounds US South Unadjusted Sawlog Supply Curve $65 Real Stumpage Price (2016/Ton) $60 $55 $50 $45 $40 $35 $ to to 2007 $25 $ Stumpage Removals (Million GST) Copyright 2017 RISI, Inc. Proprietary Information 14

15 SYP Stumpage Moves Out of Bounds US South Unadjusted Sawlog Supply Curve $65 Real Stumpage Price (2016/Ton) $60 $55 $50 $45 $40 $35 $ to to 2007 $25 $ Stumpage Removals (Million GST) Copyright 2017 RISI, Inc. Proprietary Information 15

16 SYP Stumpage Moves Out of Bounds US South Unadjusted Sawlog Supply Curve $65 Real Stumpage Price (2016/Ton) $60 $55 $50 $45 $40 $35 $ to 2016 Resistance 2000 to 2007 Support $25 $ Stumpage Removals (Million GST) Copyright 2017 RISI, Inc. Proprietary Information 16

17 SYP Stumpage Moves Out of Bounds US South Unadjusted Sawlog Supply Curve $65 Real Stumpage Price (2016/Ton) $60 $55 $50 $45 $40 $35 $ to 2016 Resistance 2000 to 2007 Support $25 $ Stumpage Removals (Million GST) Copyright 2017 RISI, Inc. Proprietary Information 17

18 Adjusted Sawlog Supply Curve US South, Quarterly, 1995 to 2016 with 2017 to 2019 Forecast $75 $70 Real Stumpage Price (2017 $/Ton) $65 $60 $55 $50 $45 $40 $35 $30 $25 $20 $15 70% 80% 90% 100% 110% 120% Harvest/Supply Potential Copyright 2017 RISI, Inc. Proprietary Information 18

19 Adjusted Sawlog Supply Curve US South, Quarterly, 1995 to 2016 with 2017 to 2019 Forecast $75 $70 Real Stumpage Price (2017 $/Ton) $65 $60 $55 $50 $45 $40 $35 $30 $25 $ to 2019 annual $15 70% 80% 90% 100% 110% 120% Harvest/Supply Potential Copyright 2017 RISI, Inc. Proprietary Information 19

20 West Coast Log and Lumber Exports Will Not Fully Recover Maintaining economic growth plus a revival of US housing markets is critical to the outlook Wood fiber diverted back to US mills British Columbia will gain market share in China Alternative offshore fiber sources Potential for US South to export logs to Asia if price spreads widen beyond expectations Copyright 2017 RISI, Inc. Proprietary Information 20

21 PNW Sawlog Price Forecast: Long term Real Prices Trend Lower Lower lumber profit margins in PNW than South South captures market share from PNW Global timber supply potential still underutilized No major supply or demand shocks anticipated Fairly flat North America lumber supply curve Copyright 2017 RISI, Inc. Proprietary Information 21

22 Global Solid Wood Product Demand* Million m³ per Year 1,100 1, By Type Non structural Panels Structured Panels Hardwood Lumber Softwood Lumber * Solid Wood Product = Lumber, Plywood, OSB and Non structured Panels Source: RISI World Sawlog Study Copyright 2017 RISI, Inc. Proprietary Information 22

23 1,100 1, Global Solid Wood Product Demand* Million m³ per Year 0 By Type Non structural Panels Structured Panels Hardwood Lumber Softwood Lumber ,100 1, By Region Asia & Middle East Russia and E. Europe Western Europe North America Southern Hemisphere * Solid Wood Product = Lumber, Plywood, OSB and Non structured Panels Source: RISI World Sawlog Study Copyright 2017 RISI, Inc. Proprietary Information

24 Global Softwood Sawlog Prices Are at Lowest Levels in 30 Years US Dollars per Cubic Meter $110 $100 $90 $80 $70 $60 Nominal Real (2016$) QTR2 $ Note: Global average price calculated as weighted average of all softwood sawlog production and delivered prices. Real prices calculated using the US producer price deflator. Copyright 2017 RISI, Inc. Proprietary Information 24

25 Pulpwood Prices Record Harvest Demand Presses on Supply Copyright 2017 RISI, Inc. Proprietary Information 25

26 US South Pulpwood Price Increases Stall $12 $11 Softwood Stumpage Three Year Average Dollars per Ton $10 $9 $8 $7 $ Note: 2017 estimate is the average of first and second quarter. Copyright 2017 RISI, Inc. Proprietary Information 26

27 Pulpwood Prices Feel the Pressure of Escalating Demand Harvests will surpass record levels Factors in expanding chip production OSB output recovers within next two years Wood pellet capacity start ups Supplies expand, but at a slow rate Boost from come along wood Declining areas available for thinning Contracting hardwood resource Copyright 2017 RISI, Inc. Proprietary Information 27

28 US South Pulpwood Prices Dollars per Ton Stumpage Harvest and Delivery Costs $12 $22 $11 Hardwood Softwood $21 Softwood $10 $20 $9 $19 $8 $18 $7 $17 $ $ Copyright 2017 RISI, Inc. Proprietary Information 28

29 US South Pine Pulpwood Production Million Tons Bioenergy OSB Pulp Copyright 2017 RISI, Inc. Proprietary Information 29

30 A 27% Decline in Hardwood Demand Was Not Enough to Stabilize Hardwood Inventories 6.0 US Operable Hardwood Growing Stock Inventory Billion Short Tons Copyright 2017 RISI, Inc. Proprietary Information 30

31 Age Class Area Dynamics Subtract from Thinnings SYP Managed Forests Five-Year Age Classes Million Acres, 2016 Now nearly thinned out? Copyright 2017 RISI, Inc. Proprietary Information 31

32 SYP Pulpwood Thinning Supplies Are Unlikely to Be Sustained 60 US South Plantation Pulpwood Thinning Volumes 50 Million m³ per Year Copyright 2017 RISI, Inc. Proprietary Information 32

33 US South Pulpwood Heat Map Copyright 2015 RISI, Inc. Proprietary Information 5 Copyright 2017 RISI, Inc. Proprietary Information 33

34 US South Pulpwood Heat Map Copyright 2015 RISI, Inc. Proprietary Information 5 Copyright 2016 RISI, Inc. Proprietary Information 34

35 US South Regional Softwood Stumpage Relative to Southern Average Pulpwood Log Price Ratios Atlantic North Atlantic South Coastal Gulf Inland Gulf Appalachia Sawlog Price Ratios Note: Ratios are calculated as the regional price relative to the southern average. Copyright 2017 RISI, Inc. Proprietary Information 35

36 US South Regional Softwood Stumpage Relative to Southern Average Pulpwood Log Price Ratios Atlantic North Atlantic South Coastal Gulf Inland Gulf Appalachia Sawlog Price Ratios Note: Ratios are calculated as the regional price relative to the southern average. Copyright 2017 RISI, Inc. Proprietary Information 36

37 US Delivered Pulpwood by Region $55 $50 Softwood Softwood North Central Northeast $55 $50 Hardwood $45 $45 Dollars per Ton $40 $35 Dollars per Ton $40 $35 $30 $30 $25 $25 $ $ Copyright 2017 RISI, Inc. Proprietary Information 37

38 We Never Expected the West Coast Chip Rally to Be Maintained US Dollars per Bone Dry Ton $160 $140 $120 $100 $80 US West Coast Chip Export Prices Current Forecast Last Year's Forecast $ Copyright 2017 RISI, Inc. Proprietary Information 38

39 Timber Take Home Points Wood costs are expected to be rising Outlook is conditional on positive GDP growth and higher demand for new housing Pulpwood prices maintaining gains achieved since 2011 Price and demand forecast risk: Downside Economic risk Slower growth in single family housing demand SLA is a wild card Wild fires and hurricanes are just noise Copyright 2017 RISI, Inc. Proprietary Information 39

40 Recently Released Timber Products Southern Pulpwood Study January 2017 World Pulpwood Study: Adapting to Emerging Competition and Slowing Growth in Paper Demand June 2017 Copyright 2017 RISI, Inc. Proprietary Information 40