Global Forest Products Market Update - 4th Quarter 2015

Transcription

1 Wood Resource Global Forest Products Market Update - 4th Quarter 215 February 29, 216 Seattle, USA Dear reader, The log market in the Baltic Sea is one of the most active log markets in the world with softwood log trade accounting for more than 2% of global trade. In this issue s Special Report we report on the recent trends in the trade of pulplogs and sawlogs in Northern Europe. The costs for sawlogs and pulpwood fell again throughout the world in the 4Q/15 because of weakening demand for most forest products. The global sawlog price index has declined almost 17% in a year, while the pulpwood price indices have fallen between 7-1% from the 4Q/14. Global wood raw-material indices (WRI) for the 4Q/215 are as follows: Change Q/Q Y/Y Global Sawlog Price Index (GSPI) US$ 68.45/m3-2.6 % % European Sawlog Price Index (ESPI) US$ 91./m3-3.1 % % Softwood Wood Fiber Price Index (SFPI) US$ 88.46/odmt -1.4 % -7.5 % Hardwood Wood Fiber Price Index (HFPI) US$ 84.27/odmt -2.2 % -1. % Overseas traded softwood chips (PIX-SCG) Overseas traded hardwood chips (PIX-HCG) US$164.54/odmt (Nov) (-5.4% y/y) US$175.92/odmt (Nov) (-.9% y/y) Happy Reading. Sincerely, Håkan Ekström, Editor-in-Chief Mark your calendars: The fourth annual Mapping the Course conference, covering timberland, forest resources, forest products processing and woody biomass issues in Western North America in 217 will be held in Vancouver, Washington, Jan 19 th 217 ( 216 Wood Resources International 4Q/215 1

2 Table of Contents - WRQ 4Q/215 The global forest industry this quarter... 3 World pulpwood price review by region... 4 Global delivered pulpwood prices... 6 Global wood fiber price indices (SFPI and HFPI)... 7 Relative fiber costs for major pulp grades... 8 Special Report: Trade of logs in the Baltic Sea region... 1 Global pulp market update Global lumber market update...12 Global biomass market update Global sawlog market update and price indices...16 Sawlog and Pulpwood Markets - USA...19 US South... 2 US Northwest Sawlog and Pulpwood Markets - Canada Canada West Canada East Sawlog and Pulpwood Markets - Europe and Russia Finland Norway Sweden...28 France Austria...3 Germany Spain Estonia, Latvia, Poland and the Czech Republic...33 Northwest Russia Sawlog and Pulpwood Markets - Latin America...35 Brazil...36 Chile...37 Sawlog and Pulpwood Markets - Asia and Oceania Australia New Zealand... 4 China Indonesia Japan, Domestic and Imported Sawlog Prices Japan, Conifer Pulpwood Prices and Imports Japan, Non-Conifer Pulpwood Prices and Imports Pacific Rim Wood Chip Trade and Japan chip import prices...47 Major pulp and conifer sawnwood producing countries Pulpwood Fiber Consumption and Principal Species Recent Articles in the WRQ and List of Conference Presentations Sources, Subscription Information, Disclaimer and Copyright Laws Q/ Wood Resources International

3 The Global Forest Industry this Quarter Global timber markets The Global Sawlog Price Index (GSPI) continued its two year decline in the 4Q/15 when the Index fell another 4.8% quarter-overquarter to US$68.45/m3. In just two years, the GSPI has fallen 21.6% due to a combination of the strengthening US dollar and diminishing demand for lumber in Asia, the MENA countries and in Europe. US$/m Global Sawlog Price Index (GSPI) Q/215 Source: Wood Resource 1q/95 1q/96 1q/97 1q/98 1q/99 1q/ 1q/1 1q/2 1q/3 1q/4 1q/5 1q/6 1q/7 1q/8 1q/9 1q/1 1q/11 1q/12 1q/13 1q/14 1q/15 Sawlog prices in Europe have generally fallen faster than in other parts of the world, with the Central European prices decreasing by almost one-third over the past two years. In the 4Q/15, the European Sawlog Price Index (ESPI) dropped to US$91./m3, the lowest level since the 1Q/9. Global pulpwood prices Hardwood fiber prices continued to fall in most of the major pulp-producing countries in the world in the 4Q/15. The biggest declines were seen in Brazil, Chile, Russia, France, Germany and Indonesia. In most regions, the price adjustments were in both in the local currencies and in US dollar terms. The hardwood price index (HFPI) fell 2.2% from the 3Q/15 to US$84.27/odmt. With the exception of the US South and New Zealand, softwood fiber prices were also down throughout the world in the 4Q/15. The declines US$/odmt Global Wood Fiber Price Indices Q/215 Source: Wood Resource Softwood Hardwood 1q 88 1q 9 1q 1q 2 1q 4 1q 6 1q 8 1q 1 ranged between two to ten percent from the previous quarter. The softwood price index (SFPI), was US$88.46/odmt, a reduction of 1.4% from the previous quarter. Global pulp markets Global market pulp production was 3.3% higher in 215 than in 214. Production was up in most regions with the exception of Western Europe. The biggest increases in pulp export in 215 were in shipments from Brazil, Canada, the Netherlands and Russia. NBSK pulp prices have fallen during much of 215 but started to find a bottom late in the year. Prices for hardwood pulp (HBKP) started to weaken during the 4Q/15 and prices in Europe were only $15-2/ton lower than those for NBSK. Global lumber markets A majority of the 2 largest softwood lumber-consuming countries in the world increased their importation of lumber in 215, resulting in global trade reaching its highest level in ten years. The US imported 1% more lumber year-over-year and a number of countries in Europe also raised their consumption of imported lumber last year. Lumber demand in Japan, the Middle East and Northern Africa was weaker, resulting in a decline in importation of lumber. The US lumber market was a bright spot as compared to most other regions of the world in 215. Lumber consumption was up almost 5% and import volumes were 1% higher. The strong domestic market and a weakening Asian market also resulted in less lumber being exported. Lumber prices in Sweden have fallen 3% from their five-year high in March 214. Although importation of softwood lumber to China fell by two percent in 215 from the previous year, Russian volumes were up by almost 2 percent year-over-year. Russia is now the largest supplier of lumber to China. Demand for wood in Japan has fallen the past two years partly as the result of an eight percent decline in housing starts. Global biomass markets North American overseas pellet exports increased for the second consecutive quarter in the 3Q/15, rising 15% from the previous quarter to reach a new record high of just over 1.6 million tons. Although pellet production in Sweden has been fairly stable the past four years, importation has fallen by more than 5% from 211 to 215. In the local currency, pellet prices fell during the fall of 215 and were four percent lower in the 4Q/15 than in the 4Q/ Wood Resources International 4Q/215 3

4 World Pulpwood Price Review US dollars and local currencies Product Fourth Quarter 215 Domestic Price Price in US dollars Per m3 Per odmt Per m3 Per odmt Avg Range Avg Range Avg Range Avg Range US South Rwd, conifer Rwd, non-con Chips, conifer Chips, non-con US Northwest Rwd, conifer (a) Rwd, non-con Chips, conifer Chips, non-con Canada, East Rwd, conifer Rwd, non-con Chips, conifer Chips, non-con (b) (b) (b) (b) (b) (b) (b) (b) Canada, West Rwd, conifer (a) Rwd, non-con (b) (b) (b) (b) (b) (b) (b) (b) Chips, conifer Chips, non-con (b) (b) (b) (b) (b) (b) (b) (b) Norway Rwd, conifer Rwd, non-con (b) (b) (b) (b) (b) (b) (b) (b) Chips, conifer (b) (b) (b) (b) (b) (b) (b) (b) Chips, non-con (b) (b) (b) (b) (b) (b) (b) (b) Sweden Rwd, conifer Rwd, non-con Chips, conifer Chips, non-con (b) (b) (b) (b) (b) (b) (b) (b) Finland Rwd, conifer Rwd, non-con Chips, conifer (c) (c) (c) (c) (c) (c) (c) (c) Chips, non-con (b) (b) (b) (b) (b) (b) (b) (b) France Rwd, conifer Rwd, non-con Chips, conifer Chips, non-con (b) (b) (b) (b) (b) (b) (b) (b) Germany Rwd, conifer Rwd, non-con Chips, conifer Q/ Wood Resources International

5 World Pulpwood Price Review Fourth Quarter 215 Product Domestic Price Price in US dollars Per m3 Per odmt Per m3 Per odmt Avg Range Avg Range Avg Range Avg Range Spain Rwd, conifer Rwd, non-con Chips, conifer (b) (b) (b) (b) (b) (b) (b) (b) Chips, non-con (b) (b) (b) (b) (b) (b) (b) (b) Russia, NW Rwd, conifer Rwd, non-con Brazil Rwd, conifer (f) Rwd, non-con (f) Chips, conifer Chips, non-con (b) (b) (b) (b) (b) (b) (b) (b) Chile Rwd, conifer Rwd, non-con Chips, conifer (c) (c) (c) (c) (c) (c) (c) (c) Chips, non-con (b) (b) (b) (b) (b) (b) (b) (b) New Zealand Rwd, conifer Rwd, non-con (b) (b) (b) (b) (b) (b) (b) (b) Chips, conifer Chips, non-con (b) (b) (b) (b) (b) (b) (b) (b) Australia Rwd, conifer Rwd, non-con Chips, conifer Chips, non-con Japan Chips (dom), con Chips (dom), non-c Chips (imp), con (d) Chips (imp), non-c (d) Indonesia Rwd, conifer (b) (b) (b) (b) (b) (b) (b) (b) Rwd, non-con (e) Chips, conifer (b) (b) (b) (b) (b) (b) (b) (b) Chips, non-con (b) (b) (b) (b) (b) (b) (b) (b) Notes. Prices in above table represent wood fiber traded in the open market and do not include internal transfer pricing. All prices are for wood chps and roundwood delivered to domestic wood fiber consumers. Odmt-oven dry metric ton (a) Primarily utility grade roundwood. (d) CIF port in Japan. (b) Insufficient volume to obtain open market prices. (e) Domestic prices in 1 Rupiah. Limited open market trade. (c) Transfer priced on local market (f) Open market volume for Eucalyptus est 15-2%, pine 35-45% 216 Wood Resources International 4Q/215 5

6 Global Pulpwood Prices 15 Conifer Wood Fiber Prices - 4Q/ Chips Roundwood 1 US$/odmt Russia, NW Brazil Chile Australia Canada, West New Zealand US, South US, Northwest Spain Norway Germany Sweden Canada, East Finland France 15 Non-Conifer Wood Fiber Prices - 4Q/ Chips Roundwood 1 US$/odmt Russia, NW Brazil Chile Indonesia US, Northwest Canada, East Australia US, South France Sweden Spain Finland Germany 6 4Q/ Wood Resources International

7 Global Wood Fiber Price Indices Hardwood fiber prices continued to fall in most of the major pulp-producing countries in the world in the 4Q/ 15. The biggest declines were seen in Brazil, Chile, Russia, France, Germany and Indonesia. In most regions, the price adjustments were in both in the local currencies and in US dollar terms. The hardwood price index (HFPI) fell 2.2% from the 3Q/15 to US$84.27/odmt. This was 1% lower than in the 4Q/14. With the exception of the US South and New Zealand, softwood fiber prices were also down throughout the world in the 4Q/15. The declines ranged between two to ten percent from the previous quarter. The softwood price index (SFPI), was US$88.46/odmt, a reduction of 1.4% from the previous quarter and 7.5% lower than the same quarter in 214. Note. The Global Wood Fiber Price Index is a weighted average of delivered wood fiber prices for the pulp industry in all regions tracked by the publication Wood Resource. These regions together account for 85-9% of the world s wood-based pulp production capacity. The price is based on current quarter average prices, and country/regional wood fiber consumption data. The global average price for softwood and hardwood is calculated in nominal US$ per ovendried metric ton of wood fiber. Softwood Fiber Price Index Softwood Fiber Price Index (SFPI) (SFPI) US$/odmt Source: Wood Resource 1q 88 1q 9 1q 1q 2 1q 4 1q 6 1q 8 1q 1 1Q/ Q Q Q Q/ Q Q Q Q/ Q Q Q Hardwood Fiber Price Index (HFPI) Hardwood Fiber Price Index (HFPI) US$/odmt q 88 1q 9 Source: Wood Resource 1q 1q 2 1q 4 1q 6 1q 8 1q 1 1Q/ Q Q Q Q/ Q Q Q Q/ Q Q Q Wood Resources International 4Q/215 7

8 Relative Fiber Costs for Major Pulp Grades Prices for most market pulp grades fell during the 4Q/15. The weighted wood fiber costs for the manufacturing of Northern Bleached Softwood Kraft (NBSK) fell less than the pulp prices, which resulted in an increase of the wood cost percentage to 28.8 percent of the pulp price from 28.5% in the 3Q/15. The fiber cost share of the Southern Bleached Softwood Kraft Pulp (SBSK) price increased from 21.6 percent in the 3Q/15 to 22.7 percent in the 4Q/15 because of lower SBSK pulp prices and higher wood fiber costs in a few pulp-producing regions. The wood cost as the percentage of the Eucalyptus Bleached Kraft Pulp (EuBK) price fell to 17.1 percent in the 4Q/15, down from 23.7 percent in the same quarter of 214. This rapid decline has been the result of fairly strong markets for EuBK pulp the past year and a sharp drop in wood fiber costs for many pulp producers. Notes. Wood fiber costs remain the single largest cost component in the manufacture of wood pulp. The following graphs depict the relationship between market pulp prices (in US$ cif Europe), and average wood fiber costs. For each grade, an average wood fiber cost was calculated using an average kraft pulp yield factor, current quarterly wood fiber prices, and the average volume of wood consumed by each WRQ region manufacturing that particular grade of pulp (e.g. SBSK is produced by Spain, the U.S. South, Brazil, Chile, New Zealand, and Australia). The resultant average wood fiber price is charted as a percentage of the average market pulp price as reported by FOEX Indexes and the publication Pulpwatch (Hawkins Wright). 12 Relative Wood Fiber Cost for NBSK Pulp US$/Tonne of Pulp Percentage 2 1 1q 9 1q 1q 2 1q/4 1q/6 1q/8 1q/1 1q/12 1q/14 Weighted Fiber Cost NBSK cif Europe Fiber Cost % (Right Axis) 8 4Q/ Wood Resources International

9 12 Relative Wood Fiber Cost for SBSK Pulp US$/Tonne of Pulp Percentage 2 1 1q 9 1q 1q 2 Weighted Fiber Cost SBSK cif Europe Fiber Cost % (Right Axis) 1q 4 1q 6 1q 8 1q 1 1 Relative Wood Fiber Cost for EucBK Pulp US$/Tonne of Pulp Percentage 2 1 1q 9 1q 1q 2 1q 4 Weighted Fiber Cost EucBK cif Europe Fiber Cost % (Right Axis) 1q 6 1q 8 1q Wood Resources International 4Q/215 9

10 Special Report: Log Trade in the Baltic Sea Region in 215 Trade of logs in Baltic Sea region fell 1% in 215 because of substantially lower demand for softwood pulplogs in Finland and Sweden The forest industry in the Baltic Sea region has for many decades imported large volumes of wood rawmaterial from their neighboring countries as a complement to their typically less-costly local wood sources. For example, pulp mills in Finland and Sweden imported approximately 18% and 15%, respectively, of their wood fiber needs in 214. The log market in the Baltic Sea is one of the most active markets in the world with softwood log trade accounting for over 2 percent of global trade, and shipments of hardwood logs reaching almost 29 percent of world trade of temperate hardwoods in 215 (most are birch pulplogs exported from Northwest Russia to Finland). Finland and Sweden are the two top importing countries, but forest companies in Germany and Poland have also imported substantial log volumes over the past five years. In 214, total log trade to the Nordic countries reached a six-year high of 14.3 million m3 after five years of consecutive increases. In 215, total shipments fell over 1% mainly because of lower demand for softwood pulplogs, according to WRI estimates (see chart). Trade of softwood sawlogs on the other hand, reached its highest level since 27 last year when 1.6 million m3 was imported, most of it going to sawmills in southern Sweden. The major log trade flows in Northern Europe the past few years have been: Norway to Sweden (softwood) Latvia to Sweden (softwood and hardwood) Russia to Finland (softwood and hardwood) Estonia to Sweden (hardwood) The Baltic States have overtaken Russia as the major suppliers of softwood logs to the Nordic countries Ten years ago, Russia exported about 7.5 million m3 of softwood logs to the Nordic countries but after the introduction of the country s log export duties, shipments plunged, and over the past three years, volumes have rung in at just over one million m3 annually. With the fall of Russian log exports, log exporters in the Baltic States stepped in and the region became the major log supplier of logs to sawmills and pulp mills in the Nordic countries. However, over the past four years, shipments of softwood logs over the Baltic Sea have been in steady decline, falling from 2.9 million m3 in 211 to only 1.3 million m3 in 215 with the reduced import volumes to both Sweden and Finland. It is interesting to note that during the same period, exports of hardwood logs from the Baltic States have fallen almost 3%, while Russia has become a more aggressive player as the weak Ruble has made Russian logs more competitive. 14 Log Trade in the Baltic Sea Region Softwood Log Trade Between the Baltic States and the Nordic Countries Millioin m Pulpwood, Softwood Pulpwood, Hardwood Sawlog, Softwood e 1 4Q/ Wood Resources International Million m e Finland Sweden Total

11 Pulp Market Update 4Q/15 Production of market pulp was higher During the first eleven months of 215, global market pulp production was 3.3% higher than the same period in 214, according to Pulpwatch. Production was up in most pulp-producing regions with the exception of Western Europe. The biggest increases in export shipments in 215 were in shipment from Brazil, Canada, the Netherlands and Russia, while Chile, Indonesia, Germany and Spain exported slightly less in 215 as compared to the previous year. NBSK pulp price are expected to start increasing late in the spring Softwood pulp prices have fallen during much of 215 but started to find a bottom late in the year when maintenance shutdowns and some production interruptions in North America and Europe slowed down supply while demand was stable. NBSK prices were reported to be just under US$8/ton in January and several pulp companies in both Europe and North America have started to discuss price increases during the spring. However, there is still a large spread between contract prices and the much lower spot prices, so there will be some resistance to agreeing on higher contract prices over the next few months. According to the forecasting firm BMI, NBSK prices are likely to experience upwardtrending prices later in 216 and they are forecasted to reach US$9/ton by the end of the year. Hardwood pulp prices have continued to fall in early 216 Prices for hardwood pulp (HBKP) started to weaken during the 4Q/15 and continued their decline in early 216 with buyers in China pressuring for lower prices. In late 215, hardwood pulp prices in Europe were only $15-2/ton lower than that for NBSK, which was quite unusual. The ten-year average premium for NBSK has been approximately 9 dollars per ton. Production of market pulp Jan-Nov (million tons) Chg (%) North America West Europe L.Am, NZ & Afr Rest of the world Total, world NBSK prices in Europe, the US and China ($/ton) 4Q/14 3Q/15 4Q/15 Jan W. Europe US China BHKP prices in Europe, the US and China ($/ton) 4Q/14 3Q/15 4Q/15 Jan W. Europe US, South China US dollars/ton Benchmark prices for market pulp in Europe Sources: FOEX and industry sources Softwood Pulp (NBSK) As of January 216: NBSK: $795/ton BHKP: $78/ton Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Hardwood Pulp (BHKP) Note. Prices and production data are from the market newsletter Pulpwatch, courtesy of Hawkins Wright in the UK ( price forecasts courtesy of Calejo ( 216 Wood Resources International 4Q/215 11

12 Lumber Market Update 4Q/15 A majority of the 2 largest softwood lumber-consuming countries in the world increased their importation of lumber last year, resulting in global trade reaching its highest level in ten years in 215. The US imported 1% more lumber year-over-year and a number of countries in Europe also raised their consumption of imported lumber last year. Lumber demand in Japan, the Middle East and Northern Africa was weaker in 215, resulting in a decline in importation of lumber. Lumber market North America The US lumber market was a bright spot as compared to most other regions of the world in 215. As a result of a healthy housing market, lumber consumption was up almost five percent as compared to 214 and import volumes in 215 were 1 percent higher than in the previous year. The strong domestic market and a weakening Asian market also resulted in less lumber being exported in 215. Export shipments were down 9.7%, while imports were up 1% from 214. Lumber exports from Canada reached an eight-year high in 215 when sawmills took advantage of the fairly strong US lumber market, which combined with the weak currency, allowed them to ship 9.2% more lumber to the US than in 214. Shipments to China, on the other hand, fell over 13% to the lowest level since 21. US $/m3 (FOB) US $/m Jan-4 Jul-4 Jan-5 Lumber Prices in the US Source: Random Lengths Jul-5 Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Lumber Prices in Canada Southern yellow pine Random Length Index Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Lumber market Northern Europe Lumber prices in the Nordic counties have trended downward since early 214, in US dollar terms, as the US dollar has strengthened against the Euro and the krona. From the five-year high in March 214, prices in Sweden have fallen almost 3%. During 215, Swedish sawmills increased export volumes by almost five percent as compared to the previous year, reaching the highest annual shipment since 26. Of the ten largest consumers of Swedish lumber, Germany, the Netherlands and China increased their import shipments from Sweden the most. Although the US is still not a top destination for Swedish lumber, the country almost doubled its import volume of mainly spruce to 26, m3 in Q/ Wood Resources International US $/m Jan-4 Jul-4 Jan-5 Jan-5 Jul-5 Source: Madison Lumber Reporter Jul-5 Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 SPF, West (FOB) SPF, East (del US) Douglas-fir Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Lumber Prices in the Nordic Countries Finland Sweden Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

13 Lumber Market Update 4Q/15 continued The Finnish sawmilling industry experienced a similar trend as that of Sweden with higher export volumes in 215. The biggest expansions in shipping volumes were to China, Japan and Israel Lumber Import Prices to China Lumber market China US $/m3 15 Total Although importation of softwood lumber to China fell by two percent in 215 from the previous year, Russian volumes were up by almost 2 percent year-overyear. Russia is now the largest supplier of lumber to China and had a market share of 52 percent last year. Just two years ago, Russia s share was 38 percent and Canada was the principal source of softwood lumber. 1 5 Jan-5 12 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Lumber Prices in Japan Jan-14 Canada Russia Jan-15 Lumber import prices fell throughout 215 with average values in December being 24 percent lower than in the same month in 214. Current import prices are at their lowest level in over ten years. Lumber market Japan Demand for wood in Japan has fallen the past two years partly as the result of an eight percent decline in housing starts. Domestic lumber production fell an estimated nine percent from 213 to 215, and lumber import volumes were down 2 percent from 213. The biggest reduction in shipments to Japan has been from North America and the Nordic countries. US$/m Jan-6 Jul-6 Sugi, Japan Pine, Russia Whitewood, Europe Douglas-fir, US Hemlock, Canada Source: Japan Lumber Journal Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Lumber Export Prices from Russia Lumber prices have been fairly stable in both US dollar and Yen terms over the past 12 months. The only exceptions have been European whitewood, which increased eight percent from January 215 to January 216, and Canadian hemlock which was up four percent over the same time period. US $/m Jan-9 Source: Customs data Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Total China Jan-14 Jul-14 Jan-15 Jul-15 Lumber market Russia Russia continues to be the world s second largest softwood lumber exporter behind Canada, accounting for about 22 percent of globally traded lumber in 215. Shipments were up to practically all markets with the exception of the CIS countries, which imported 19 percent less in 215. Sources: Japan Lumber Journal (Japan), Madison Lumber Reporter (SPF and Douglas-fir in North America), Random Lengths (pine in Southern US), Metla (Finland) and SCB (Sweden). BMI price forecast ( Additional sources are customs statistics and the WRI s database. Notes. All prices are in actual m3 for kiln-dried lumber, except for Sugi and Russian pine pre-29 in Japan, which are for green lumber 216 Wood Resources International 4Q/215 13

14 Lumber Market Update 4Q/15 continued Major Lumber Exporting Countries (volume in million m3) Major Lumber Importing Countries (volume in million m3) Exporter Destination Change y-o-y /15 Canada % US China Japan Other Total Importer Source Change y-o-y /15 US % Canada Chile Sweden New Zealand Other Total /15 Russia % China Egypt Japan CIS Other Total /15 China % Russia Canada US Chile Other Total /15 Sweden % UK Egypt Germany Norway Other Total /15 Japan % Canada Finland Sweden Russia Other Total e 14/15 Finland % Egypt Japan UK France Other Total /15 United Kingdom % Sweden Finland Latvia Ireland Other Total Major Exporters of Softwood Lumber Major Importers of Softwood Lumber Million m Canada Russia Sweden Finland Million m US China Japan UK Q/ Wood Resources International

15 North American overseas pellet exports rose to reach a new record high in the 3Q/15 North American overseas pellet exports increased for the second consecutive quarter in the 3Q/15, rising 15 percent from the previous quarter to reach a new record high of just over 1.6 million tons, according to our sister publication NAWFR. The US South continues to be in expansion mode with additional capacity being added during the fall of 215. Newly operating pellet plants in the US Gulf Coast region made their presence felt in the 3Q with their first shipments to Europe. Primarily due to these new facilities, exports from the Gulf ports rose by 54 percent from the previous quarter to reach over 55, tons. Thousand tons Pellet Exports from North America to Europe 1Q/7 3Q/15 Fiber security and pellet demand in Asia are the major factors dictating future pace in pellet capacity investments in British Columbia The quarterly shipments of pellets from Canada remained practically unchanged during 215. While shipments to Europe fell in the 3Q/15, representing a six percent reduction from the previous quarter, a large rebound in shipments to Asia more than made up for the reduced European shipments. Exports from BC to Japan and South Korea climbed in the 3Q/15, almost doubling the 2Q/15 volumes. Two issues facing the BC pellet producers have to do with markets and fiber policy: 1. Will an Asian market develop and how robust will it be? With the U.S. South pellet industry continuing to expand production capacity, the BC pellet industry Biomass Market Update 4Q/15 US Canada N. America 1Q7 1Q8 1Q9 1Q1 1Q11 1Q12 1Q13 1Q14 1Q15 Source: North American Wood Fiber Review Wood Resource has a comparative disadvantage in transportation costs when shipping pellets to Europe, while the Pacific Rim market is geographically a more natural market. 2. Will a new forest policy in BC develop that includes pellet companies as tenure holders. Currently, wood fiber for bioenergy remains, by and large, in the hands of companies whose primary business is lumber and pulp manufacturing, not pellet production. Increased fiber access and long-term security for the pellet manufacturing sector in BC is a prerequisite for further expansion of the sector in the coming years. Lower demand for wood pellets reduced European pellet prices during the winter months This last winter was another year with lower demand for wood pellets than expected in northern Europe. Pellet consumption in Sweden remained unchanged in 215 as compared to 214, but was approximately 11% less than in 213. Although the domestic production has been fairly stable the past four years, importation has fallen by more than 5% from 211 to 215. In the local currency, pellet prices fell during the fall of 215 and were four percent lower in the 4Q/15 than in the 4Q/14. In Austria and Germany, demand for pellets was fairly slow with prices during this winter being lower than the past three winters. Euro/ton (residental, bulk) Wood Pellet Prices in Europe 23-1Q/216 1Q/3 1Q/4 1Q/5 1Q/6 1Q/7 1Q/8 1Q/9 1Q/1 1Q/11 1Q/12 1Q/13 1Q/14 1Q/15 1Q/16 Austria Germany Sweden For more detailed price and market information for the biomass market in the US and Canada, including the most recent pellet trade data, please refer to our sister publication, the North American Wood Fiber Review. Sources: ProPellets (Austria), DEPV (Germany), Energimyndigheten (Sweden) and ÄFAB (Sweden). Additional sources are industry contacts and the WRI s database. 216 Wood Resources International 4Q/215 15

16 Sawlog Market Update 4Q/15 Weaker lumber markets and a strengthening US dollar have pushed the Global Sawlog Price Index down almost 22% in two years The Global Sawlog Price Index (GSPI) continued its two year decline in the 4Q/15 when the Index fell another 4.8% quarter-over-quarter to US$68.45/m3 (see graph). In just two years, the GSPI has fallen 21.6% due to a combination of the strengthening US dollar and diminishing demand for lumber in Asia, the MENA countries and in Europe. US$/m q/95 1q/96 Global Sawlog Price Index (GSPI) Q/215 Source: Wood Resource 1q/97 1q/98 1q/99 1q/ 1q/1 1q/2 1q/3 1q/4 1q/5 1q/6 1q/7 1q/8 1q/9 1q/1 1q/11 1q/12 1q/13 1q/14 1q/15 There have been some spectacular price reductions in US dollar terms in a number of countries over the past two years (4Q/13-4Q/15) including; Russia (-48%), Brazil (-32%), Norway (-31%), Austria (-3%), Germany (-28%) and British Columbia (-26%). The only region experiencing higher sawlog prices in late 215 than in 213 was the US South, where prices have slowly trended upward for much of the past three years because of increased production levels at the region s sawmills. European sawlog prices have declined by a third in two years in US dollar terms Sawlog prices in Europe have generally fallen faster than in other parts of the world, with the Central European prices decreasing by almost one-third in the past two years. In the 4Q/15, the European Sawlog Price Index (ESPI) reached US$91./m3, the lowest level since the 1Q/9. Much of decline in prices can be attributed to the weakening of the currencies in Europe against the US dollar. In the local currencies, changes in sawlog price have been more modest and they have even gone up in a few countries including Russia, Brazil, Sweden and Poland. Reduced demand for logs in Asia resulted in a decline of globally traded logs by ten percent in 215 Global trade of softwood sawlogs fell ten percent from 214 to 215 with Asian countries importing substantially less because of a decline in the demand for lumber. WRI estimates that global log trade fell from approximately 84 million m3 in both 213 and 214 to just over 75 million m3 in 215. Although import volumes to the three major destinations in Asia, China, South Korea and Japan, fell substantially in 215, they still imported almost half of globally traded softwood logs in 215. US$/m q/95 1q/96 European Sawlog Price Index (ESPI) Q/215 Source: Wood Resource 1q/97 1q/98 1q/99 1q/ 1q/1 1q/2 1q/3 1q/4 1q/5 1q/6 1q/7 1q/8 1q/9 1q/1 1q/11 1q/12 1q/13 1q/14 1q/15 Note. The ESPI Price Index is a volume-weighted price index comprising of average sawlog prices in nine of the largest log-consuming countries in Europe. The Index tracks prices from the 1Q/95 to the current quarter and will be published each quarter in the WRQ. 16 4Q/ Wood Resources International

17 Global Sawlog Price Index (GSPI) (1q/1995=1, Based on US dollars) Wood Resource It is important to note that sawlog prices presented in the graphs and tables in this publication should be used as indicators when comparing price trends in different regions rather than for absolute price comparisons. Sawlog qualities and properties of conifer species vary in different parts of the world and therefore they are not always directly comparable. Also bear in mind that log grades and volume/weight measurements do differ between regions. Factors used to convert to cubic meter under bark are estimates made by WRI and regional contacts. 1q/1995=1 (Based on price in US$) 1q/1995 = 1 (Based on price in US$) 1q/1995 = 1 (Based on price in US$) q/95 1q/96 1q/97 1q/95 1q/96 Global Sawlog Price Index (GSPI) Q/215 North America Source: Wood Resource 1q/98 1q/99 1q/ 1q/1 1q/2 1q/3 1q/4 1q/5 1q/6 1q/7 1q/8 1q/9 1q/1 1q/11 1q/12 1q/13 1q/14 1q/15 US South - Pine US NW - Hemlock BC Coast - Hemlock BC Interior - SPF Quebec Global Sawlog Price Index (GSPI) Q/215 Europe Source: Wood Resource 1q/97 1q/98 1q/99 1q/ 1q/1 1q/2 1q/3 1q/4 1q/5 1q/6 1q/7 1q/8 1q/9 1q/1 1q/11 1q/12 1q/13 1q/14 1q/15 Finland - pine Sweden - pine Germany - spruce Austria - spruce Czech R - spruce Global Sawlog Price Index (GSPI) Q/215 Latin America, Asia & Oceania Source: Wood Resource 1q/95 1q/96 1q/97 1q/98 1q/99 1q/ 1q/1 1q/2 1q/3 1q/4 1q/5 1q/6 1q/7 1q/8 1q/9 1q/1 1q/11 1q/12 1q/13 1q/14 1q/15 New Zealand - pine Brazil - pine Chile - pine Japan - Sugi Japan - Douglas-fir (US) 216 Wood Resources International 4Q/215 North America (1q/1995=1) US S US W BC C BC I Que Europe (1q/1995=1) Fin Swe Aus Ger Cze Latin America & Asia (1q/1995=1) Bra Chl NZ Jpn S Jpn Df

18 1q/1995=1 (Based on price in local currency) 1q/1995 = 1 (Based on price in local currency) 1q/1995 = 1 (Based on price in local currency) Wood Resource 1q/95 1q/96 1q/97 1q/95 1q/96 Global Sawlog Price Index (GSPI) Q/215 North America Source: Wood Resource 1q/98 1q/99 1q/ 1q/1 1q/2 1q/3 1q/4 1q/5 1q/6 1q/7 1q/8 1q/9 1q/1 1q/11 1q/12 1q/13 1q/14 1q/15 US South - Pine US NW - Hemlock BC Coast - Hemlock BC Interior - SPF Quebec Global Sawlog Price Index (GSPI) Q/215 Europe Source: Wood Resource 1q/95 1q/96 1q/97 1q/98 1q/99 1q/ 1q/1 1q/2 1q/3 1q/4 1q/5 1q/6 1q/7 1q/8 1q/9 1q/1 1q/11 1q/12 1q/13 1q/14 1q/15 Finland - pine Sweden - pine Germany - Spruce Austria - spruce Czech R - spruce Global Sawlog Price Index (GSPI) Q/215 Latin America, Asia & Oceania 1q/97 1q/98 1q/99 Global Sawlog Price Index (GSPI) (1q/1995=1, Based on local currency) Source: Wood Resource New Zealand - pine Japan - Sugi 1q/ 1q/1 1q/2 1q/3 1q/4 1q/5 1q/6 Chile - pine Japan - Douglas-fir (US) 1q/7 1q/8 1q/9 1q/1 1q/11 1q/12 1q/13 1q/14 1q/15 North America (1q/1995=1) US S US W BC C BC I Que Europe (1q/1995=1) Fin Swe Aus Ger Cze Latin America & Asia (1q/1995=1) Bra Chl NZ Jpn S Jpn Df Notes. Three main criteria were used to choose geographical regions and conifer log grades for presentation in the WRQ: 1) Conifer lumber production in the region is among the twenty-five top producing regions in the world. 2) Conifer log grade/grades are commonly processed in the region. 3) Log species and grades are mainly average logs being processed into construction and better grades lumber in the region. The intention is to not include pruned logs or logs typically used to produce low-grade products such as pallets and packaging components. 18 4Q/ Wood Resources International

19 Sawlog and Pulpwood Markets 4Q/15 - USA Wood Resource Sawlogs prices falling in the US northwest because of lower lumber prices and declining log exports There has been reduced price pressure on sawlog prices in Coastal US Northwest because of the weakening export market for logs in 214 and 215. In just two years, export volumes have fallen 33% to reach six million m3 in 215 (see table). The reduced demand for US logs has not been limited to China but to Japan and South Korea as well. A combination of less demand for wood raw-material by sawmills in Asia and a strong US dollar has resulted in US log shipments falling to their lowest levels in five years. US softwood log exports to the Pacific Rim in (million m3) Chg13/15(%) China Japan South Korea Total With declining log export volumes and also lower export prices, domestic sawlog prices followed the downward trend during much of 215. The average prices for Douglas-fir and hemlock sawlogs fell between percent from the 4Q/14 to the 4Q/15, but they were still about ten percent above their 1-year average. The log price decline was not as big as lumber producers in the region need in order to be able to run their mills profitably, in particular as lumber prices fell Price Index (July 215 = 1) Douglas fir Sawlog and Lumber Prices in the US NW July 15 Aug Sep Oct Nov Dec Jan 16 Lumber Logs much faster than log prices during the second half of 215 (see chart). The U.S. Northwest pulp and paper sector not only weathered a severe wildfire season, but saw significant inventories of pulp logs on hand as the 4Q/15 drew to a close. Reduced export shipments of both logs and chips in the 4Q/15 was a significant reason that inventories of wood raw-material at sawmills, pulp mills and other fiber-consuming facilities were deemed adequate to cover the typical holiday week shutdowns, reports our sister publication North American Wood Fiber Review. With high wood fiber supply and slightly reduced overall fiber demand by the region s pulp mills, prices for both chips and pulp logs fell to US$17/odmt and US$89/odmt, respectively, in the autumn. Wood fiber prices moving slowly upward in the South during 215 because of higher demand Despite concerns over a wetter than normal winter, wood flows across the South Central states were sufficient to meet fiber demand during the 4Q/15. Pulp mill fiber inventories were generally adequate as a result. However, the impact of storms late in the year and heavy rainfall particularly in the western portion of the South Central region was likely to bring new challenges to forest access and harvesting operations in the early 1Q/16. Both softwood and hardwood chip prices have slowly trended upward throughout the South during 215, with average prices in the 4Q/15 being US$77/odmt and US$76/odmt, respectively. New wood fiber demand from pellet manufacturers and pulpmills upgrading intake systems to handle additional residual chip volumes could make these higher prices the new price norm. Note. For more detailed market information for the US, including biomass markets, please refer to our sister publication, the North American Wood Fiber Review. 216 Wood Resources International 4Q/215 19

20 US South - Sawlog and Pulpwood Prices 9 Conifer Sawlog Prices - US South Pine Sawlog Prices (US$/m3) US$/m3ub q/1995 1q/1997 1q/1999 1q/21 1q/23 1q/25 1q/27 1q/29 1q/211 1q/213 1q/215 1q/ q 65 3q 63 4q 65 1q/ q 64 3q 65 4q 65 1 Conifer Wood Fiber Prices in the U.S. South Conifer Pulpwood Prices (US$/odmt) US$/odmt - Delivered q 88 1q 9 1q 1q 2 1q 4 1q 6 Roundwood Chips 1q 8 1q 1 1q14 Chips Rdwd 1q/ q q q q/ q q q Non-Conifer Wood Fiber Prices in the U.S. South Non-Conifer Pulpwood Prices (US$/odmt) US$/odmt - Delivered q 88 1q 9 1q 1q 2 1q 4 Roundwood Chips 1q 6 1q 8 1q 1 1q14 Chips Rdwd 1q/ q q q q/ q q q Wood costs of total cash costs - pulp industry US South Wood costs of total cash costs - pulp (%) (Source: Fisher International) Percent of total cost (%) q/ q q q q/ q q Q/5 1Q/6 1Q/7 1Q/8 1Q/9 1Q/1 1Q/11 1Q/12 1Q/13 1Q/14 1Q/15 2 4Q/ Wood Resources International

21 US Northwest - Sawlog and Pulpwood Prices 14 Conifer Sawlog Prices - US NW Conifer Sawlog Prices (US$/m3) US$/m3ub q/1995 1q/1997 1q/1999 1q/21 1q/23 1q/25 Douglas-fir Hemlock 1q/27 1q/29 1q/211 1q/213 1q/215 Douglas-fir Hemlock 1q/ q q q q/ q q q Conifer Wood Fiber Prices in the U.S. Northwest Conifer Pulpwood Prices (US$/odmt) US$/odmt - Delivered q 88 1q 9 1q Roundwood Chips 1q 2 1q 4 1q 6 1q 8 1q 1 Chips Rdwd 1q/ q q q q/ q q q Non-Conifer Wood Fiber Prices in the U.S. Northwest Non-Conifer Pulpwood Prices (US$/odmt) US$/odmt - Delivered q 88 1q 9 1q Roundwood Chips 1q 2 1q 4 1q 6 1q 8 1q 1 Chips Rdwd 1q/ q q q q/ q q q Percent of total cost (%) Wood costs of total cash costs - pulp industry Western US Wood costs of total cash costs - pulp (%) (Source: Fisher International) 1q/ q q q q/ q q Q/5 1Q/6 1Q/7 1Q/8 1Q/9 1Q/1 1Q/11 1Q/12 1Q/13 1Q/14 1Q/ Wood Resources International 4Q/215 21

22 Sawlog and Pulpwood Markets 4Q/15 - Canada Sawlog prices reached a seven-year low in BC in the 4Q/15 because of weaker log export markets Log exports from Western Canada improved in the 4Q/15 when almost 1.3 million m3 were shipped to Asia. Volumes were up 2% from the previous quarter but only marginally higher than in the 4Q/14. Shipments to China rebounded from their five year low in the 3Q/15 and increased the most quarter-over-quarter of the major markets in Asia. Log export prices to China continued to fall and averaged US$8/m3 in the 4Q/15 according to Customs Statistics. This was down as much as 11% from the 3Q/15 and 22% lower than in the same quarter in 214. The plunge in export prices during 215 had the biggest impact on coastal hemlock prices, which fell 25% to US$4/m3, the lowest level in seven years. Wood chip and pulplog prices eased for the second consecutive quarter in British Columbia in the 4Q/15 Wood chips prices also declined in the second half of 215, averaging US$79/odmt in the 4Q/15. This was down about five percent as the result of a strengthening US dollar, lower NBSK market pulp prices to which some contracts are linked, and lower spot market chip prices. NBSK pulp-producing mills in British Columbia currently have not only the lowest wood fiber costs in North America, but some of the lowest costs in the world. Wood fiber costs for pulp mills in Eastern Canada have become more competitive in 215 Softwood fiber prices in Eastern Canada have been in steady decline for over four years and in the 4Q/15 were at the lowest level in 12 years. By the end of 215, prices for softwood chips and pulplog traded in the open market averaged US$82/odmt and US$121/ odmt, respectively. The shrinking pulp industry in Ontario and Quebec has become more competitive with fiber costs matching many other regions of North America in 215. In the 3Q/15, the significant reduction in fiber consumption on the BC Coast resulted in rapidly falling pulp log prices and the decline continued in the 4Q. The decline in log exports to China during much of 215 was also a contributing factor to the lowering of domestic prices because marginal small-diameter sawlogs were left for the domestic log market. In just six months, pulp log prices fell 2% in US dollar terms and the region had the lowest pulp log prices in North America in the 4Q/15, according to the North American Wood Fiber Review. C$/US$ q 88 1q 9 Exchange Rate: Canadian $/US$ 1q 1q 2 1q 4 1q 6 1q 8 1q 1 Canadian $/US$ Pulp mills in BC have some of the lowest wood fiber costs in the world With ample supplies of residual chips from the local sawmills that were ramping up production in 215, demand for pulplogs eased in the Interior and pulplog inventories rose. This resulted in prices falling to their lowest levels in over two years. 1q/ q q q q/ q q q Note. For more detailed price and market information for Canada, please refer to our sister publication, the North American Wood Fiber Review. 22 4Q/ Wood Resources International

23 US$/m3ub q/1995 1q/1997 Canada West - Sawlog and Pulpwood Prices Conifer Sawlog Prices - BC Coast 1q/1999 1q/21 1q/23 1q/25 1q/27 1q/29 Douglas-fir Hemlock 1q/211 1q/213 1q/215 Conifer Sawlog Prices - Coast (US$/m3) Douglas-fir Hemlock 1q/ q q q q/ q q q 77 4 Wood Resource 7 Conifer Sawlog Prices - BC Interior Conifer Sawlog Prices - Interior (US$/m3) US$/m3ub q/1995 1q/1997 1q/1999 1q/21 1q/23 1q/25 1q/27 1q/29 1q/211 1q/213 1q/215 Spruce/pine/fir 1q/ q 6 3q 54 4q 53 1q/ q 54 3q 48r 4q 47 US$/odmt - Delivered Percent of total cost (%) q 88 1q 9 Conifer Wood Fiber Prices In Western Canada 1q 1q 2 1q 4 Roundwood Chips 1q 6 1q 8 1q 1 Wood costs of total cash costs - pulp industry Western Canada Conifer Pulpwood Prices (US$/odmt) Chips Rdwd 1q/ q q q q/ q q q Wood costs of total cash costs - pulp (%) (Source: Fisher International) 1q/ q q q q/ q 5.3 3q Q/5 1Q/6 1Q/7 1Q/8 1Q/9 1Q/1 1Q/11 1Q/12 1Q/13 1Q/14 1Q/ Wood Resources International 4Q/215 23