The Forest Industry: Harvest, Housing and Foreign Trade

Transcription

1

2 The Forest Industry: Harvest, Housing and Foreign Trade Timber Measurements Society, Central Meeting April 10, 2013 Silver Reef Resort Ferndale, Washington 2013 Forest2Market, Inc. 2

3 Forest2Market Data Experience Expertise Recognized and respected neutral third party Only transaction level data is used to measure market price Benchmarks for logs, lumber and wood chips TIMO, REIT and private timberland owners Large and small sawmills and panel manufacturers Pulp and paper and wood bio mass industries Resource studies, market research, forecasts and analysis Headquartered in Charlotte, NC; offices in Eugene, OR and Appleton WI 3

4 Today s Agenda Homebuilding outlook Timber harvest history Western lumber production British Columbia forest products Asian log and lumber exports Pulp and Paper industry How does the future look? 2013 Forest2Market, Inc. 4

5 How Did We Get Here? Job Growth and Housing Starts (000s) Normal Nuts 160 Job Increases/Decreases (x1000) 1, Housing Starts 1,000 Jobs Gained/Lost (000s) Single Family Starts (000s)* Model 2013 Forest2Market, Inc. 5

6 The Housing Backlog: How Long Will it Last? Job Growth and Housing Starts (000s) 160 Job Increases/Decreases (x1000) 1, Overbuilt 3.1 million homes Surplus = < 1 million homes Housing Starts 1,000 Jobs Gained/Lost (000s) Single Family Starts (000s)* 2013 Forest2Market, Inc. 6

7 Don t Expect a Return to 2005 Levels Soon 25,000 2,500 20,000 2,000 US West Lumber Products (MBF) 15,000 10,000 1,500 1,000 Total Housing Starts 5, ,000 starts in MBF Projected Total housing starts Projected Source: F2M and WWPA 2013 Forest2Market, Inc. 7

8 Timber Harvests Up From Recession Levels Northwest States Harvest History Washington Oregon Idaho California Source: ODF, WA DNR, IDL and CA BOE 2013 Forest2Market, Inc. 8

9 Northwest Mills Dependant on Housing Look for over 1,000,000 starts in 2014 Interest rates are still low Housing backlog of foreclosures clearing in many areas Pent up demand for first time buyers Western lumber production recovering at 5 10% annually Lumber prices at 2005 levels, hem fir dimension and studs are very strong Veneer and panels, $ 60 CD veneer and $ 460 sheathing, best prices since Intense competition for not only export, but between ply and sawmills for logs 2013 Forest2Market, Inc. 9

10 Northwest Sawmill Log Supply 2013 Forest2Market, Inc. 10

11 $ $ $ $ $ $ $ Source: Forest2Market and WWPA Green Douglas fir 2013 Forest2Market, Inc. 11 1/2008 3/2008 5/2008 7/2008 9/ /2008 1/2009 3/2009 5/2009 7/2009 9/ /2009 1/2010 3/2010 5/2010 7/2010 9/ /2010 1/2011 3/2011 5/2011 7/2011 9/ /2011 1/2012 3/2012 5/2012 7/2012 9/ /2012 1/2013 Doug fir Logs and Lumber per MBF Green California market D Fir GRN/SRF STD & BTR Doug fir log cost

12 West Coast KD Hem fir $ Hem fir Logs and Lumber per MBF $ $ $ China export $ $ $ $ Westside hem fir prod decline $ $ /2013 1/2008 3/2008 5/2008 7/2008 9/ /2008 1/2009 3/2009 5/2009 7/2009 9/ /2009 1/2010 3/2010 5/2010 7/2010 9/ /2010 1/2011 3/2011 5/2011 7/2011 9/ /2011 1/2012 3/2012 5/2012 7/2012 9/ /2012 Hem Fir DRY/SRF #2 & BTR Hem fir log cost Source: Forest2Market and WWPA 2013 Forest2Market, Inc. 12

13 $ $ $ $ $ $ $ $ Southern Pine 12/2012 1/ Forest2Market, Inc / / /2009 1/2010 2/2010 3/2010 4/2010 5/2010 6/2010 7/2010 8/2010 9/ / / /2010 1/2011 2/2011 3/2011 4/2011 5/2011 6/2011 7/2011 8/2011 9/ / / /2011 1/2012 2/2012 3/2012 4/2012 5/2012 6/2012 7/2012 8/2012 9/ / /2012 Source : Forest2Market Southern Pine Logs and Lumber per MBF Plenty of sawmill logs Loss of sawmill production and kiln capacity Southern Pine Composite Pine log Cost

14 Coastal Northwest is the High Log Cost Region Regional sawmill log prices (DF, Hem fir and Pine) compared on MBF $650 $600 Normal Recession China Bubble Recovery $550 $500 $450 $400 $350 $300 $250 Jan 08 Mar 08 May 08 Jul 08 Sep 08 Nov 08 Jan 09 Mar 09 May 09 Jul 09 Sep 09 Nov 09 Jan 10 Mar 10 May 10 Jul 10 Sep 10 Nov 10 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Domestic Westside Inland (Westside Scale) Southern Pine Sawtimber (Converted to MBF) 2013 Forest2Market, Inc. 14

15 Canada: supplier, competitor and trading partner 2013 Forest2Market, Inc. 15

16 The Housing Crash Left Canadian Lumber Homeless BC lumber exports to US Lumber to US MBF Source: BC Stats 2013 Forest2Market, Inc. 16

17 British Columbia Lumber Exports BC lumber exports to Asia ,500 3, will be up again 2,500 Lumber to Asia MBF 2,000 1,500 1, Year Japan MBF China MBF Source: BC Stats 2013 Forest2Market, Inc. 17

18 What is the Future of Canadian Lumber? BC mill operators were hit very hard by US housing slump Long term Asian export strategy for lumber to meet growth in Asian lumber export demand Canadian mills still look to the US as an important customer During the mid 2000 s Canadian mills had a currency exchange advantage, now $ are at par Mountain pine beetle will decrease regional harvest Existing terms of the softwood lumber agreement will expire in 2015 US markets are the preferred customer for Canadian lumber 2013 Forest2Market, Inc. 18

19 Asian Demand for Northwest Forest Products 2013 Forest2Market, Inc. 19

20 Major Chinese Log Suppliers China log imports by selected country volume cubic meters US, NZ & BC logs up over 100% in January 2013 from Russia New Zealand USA Canada Source: China Customs 2013 Forest2Market, Inc. 20

21 US Log Exports to Asia History of Pacific Northwest Log Exports to Asia Breakbulk shipments Volume MBF Scribner Source: Jones Stevedoring, US Dept of Commerce Japan Korea China 2013 Forest2Market, Inc. 21

22 Northwest Log Export Prices $ $ $ $ $ $ $ $ $ $ $ Jan 08 Mar 08 May 08 Jul 08 Sep 08 Nov 08 Jan 09 Mar 09 May 09 Jul 09 Sep 09 Nov 09 Jan 10 Mar 10 May 10 Jul 10 Sep 10 Nov 10 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 China bump Very low hem fir prices Hem Fir Export Doug Fir Export 12"+ J sort Source: Forest2Market benchmarks 2013 Forest2Market, Inc. 22 Asian rebound

23 Chinese Lumber Imports China lumber imports by selected country Volume cubic meters Russia USA Canada Source: China Customs 2013 Forest2Market, Inc. 23

24 Chinese Demand for Northwest logs and lumber China s 5 year plan still supports growth in housing and infrastructure GDP target growth 7% Urbanization low cost housing units Improve living conditions for average citizens Russian log production is still in decline Remote forests and climate Obsolete equipment and poor infrastructure Chinese lumber and log inventories under control BC committed as a major supplier of lumber US Northwest log prices and competition on the rise Buyers will be cautious not to repeat mistakes of Forest2Market, Inc. 24

25 Northwest Pulp and Paper 2013 Forest2Market, Inc. 25

26 Northwest Chip Prices Decline Pacific Northwest Conifer Chips Total Fiber $ $1, $ $1, Wood chips $ per BDT $ $ $ $90.00 $80.00 $ $ $ $ Pulp $ per ton $70.00 $ PNW conifer fiber BDT FOEX NBSK Source: F2M PNW Benchmarks 2013 Forest2Market, Inc. 26

27 Southern Region has Low Cost Wood Chips $ Softwood Wood Chip Cost Comparison on BDT $ $ $ $ $90.00 $80.00 $70.00 $60.00 $50.00 South Northwest 2013 Forest2Market, Inc. 27

28 Northwest Wood Chips During the recession NW pulp mills have relied on up to 50% whole log chips, up from the traditional 15% Chip consumption down slightly in 2012 Asian chip export demand is slack Improved harvests increase availability of pulpwood, consumption is still 40% whole log Increased sawmill residuals will displace more costly whole log chips CNS Lower chip prices negatively impact sawmill profits Continued abundance of chips in 2013 will fulfill increased demand 2013 Forest2Market, Inc. 28

29 Concluding Comments Recovery in US housing demand, one million starts on the horizon Improved prices and increase production for lumber and panels China will be long term market for west coast logs and lumber Better demand for log exports to China and Japan in 2013 Higher log prices for timber sellers, especially in the coastal region Westside timber harvests will increase in 2013, many private owners have harvested less than growth over recent years Inland US production will reach practical capacity without more National Forest timber Log prices will moderate somewhat from 1 st quarter Loggers and truckers will be in short supply Increased production and mill residuals will hold wood chip prices down Pacific coastal region of the US: will log prices continue to be disproportionately higher? State forests are reliable and effective source of public stumpage Federal forest harvests will contribute little to the recovery; no resolution to national forest policy Canadian lumber will flow to US in allowable quantities US housing demand will take Chinese log exports head on Be wary of dark clouds: deficit and government spending, interest rates, European uncertainties, chronic under employment? Can China continue to meet it s projected level of growth; a new leader: the same direction? 2013 and 2014 will be much improved for our industry, but don t expect any quick return to the gravy times of the past 2013 Forest2Market, Inc. 29

30 Forest2Market: The highest quality wood raw material analysis available Gordon Culbertson PNW Region Manager (541) Forest2Market 1200 Executive Parkway, Suite 255 Eugene, Oregon Forest2Market, Inc. 30

31 Thank you 2013 Forest2Market, Inc. 31