north american timber outlook: the supply overhang...global softwood sawlog prices are the lowest in...

North American Timber Outlook: The Supply Overhang

Peter BaryninPrincipal Economist, Timber

October 2016

© Copyright 2016 RISI, Inc. | Proprietary Information

Presentation Outline

• Sawtimber

1. Price Forecast Highlights

2. Supply Risk Assessment

• Pulpwood

1. Price Forecast Highlights

2. Supply Risk Assessment

© Copyright 2016 RISI, Inc. | Proprietary Information2

US Timber Outlook Through 2018

• Sawtimber and pulpwood prices are expected to increase

Sustained economic growth

Further recovery in US housing

Strong growth in mill output

Improving profitability for lumber and plywood

Canadian mountain pine beetle

© Copyright 2016 RISI, Inc. | Proprietary Information 3

4

Gains in PNW Prices Prove Difficult to Maintain

$100

$200

$300

$400

$500

$600

$700

$800

$900

2010 2011 2012 2013 2014 2015 2016

US

Do

lla

rs p

er

MB

F,

Qu

art

erl

y

Delivered Sawtimber Prices Compared

West Coast

Whitewood

Southern Pine (Delivered)

Southern Pine (Stumpage)

* Assumes 7.5 tons per MBF Scribner for southern prices*.


Future Increases in Sawlog Prices Will Be Restrained• Timber inventory is not a constraint to North

American production Expanding growing stock inventories

Weak Canadian dollar will unleash Eastern Canada

• US South Harvest demand will not fully recover

Harvesting capacity concerns are fading

No super surge in log exports from the South expected

• US West Sawtimber diverted back into domestic markets

US West now a high-cost region for softwood lumber

Declining share of US markets© Copyright 2016 RISI, Inc. | Proprietary Information 5

$20

$30

$40

$50

$60

$70

2000 2003 2006 2009 2012 2015 2018

Southern Pine Stumpage US Dollars per Ton

Nominal

Inflation-Adjusted (2015$)

$300

$400

$500

$600

$700

$800

$900

2000 2003 2006 2009 2012 2015 2018

Douglas-fir Delivered LogsUS Dollars per MBF

Sawtimber Will See Some Revival


0

2

4

6

8

10

12

14

2002 2004 2006 2008 2010 2012 2014 2016 2018

US West (Inland and Coast)

0

5

10

15

20

25

2002 2004 2006 2008 2010 2012 2014 2016 2018

US South

Softwood Sawtimber Demand is Unlikely to Fully Recover Billion Board Feet


US Sawtimber Supply/Demand Snapshot South and West Combined, BBF Int’l ¼-inch

350

400

450

500

550

2006 2018

Operable Inventory


0

10

20

30

40

2006 2018

Harvest Demand

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

00-05 06-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45 46-50

SYP Managed Forests Five-Year Age ClassesMillion Acres, 2016

Matures in next five years!

Becoming overmature

Age-Class Dynamics Will Change the Supply Potential


Harvest Ready Timber Keeps Ahead of Demand


0

50

100

150

200

250

300

350

AnnualSupply

AnnualDemand

2016-2020 Averages

73% utilization

US SOUTH PINE SUPPLY (Cumulative for 2016-2020)

Roundwood from Pine Plantations (1)

Acreage Stand Age 26-30 Years 3.0

Acreage Maturing within 5 years 6.1 9.10 Million Acres

Roundwood Yield at Final Harvest 97 Tons per Acre

Total 880 Million Tons

Roundwood from Other Sources

Thinnings 225

Natural Stands 325 550 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

(1) RISI estimate of area available for commercial production

Potential for Global Sawlog Production to IncreaseSoftwood Sawlog Production, Million Cubic Meters per Year

0

20

40

60

80

100

120

140

160

1995 2000 2005 2010 2015

Western Europe

29

0

50

100

150

200

250

300

350

400

1995 2000 2005 2010 2015

North America

0

10

20

30

40

50

60

70

80

90

1995 2000 2005 2010 2015

Russia

18

Source: RISI Global Wood Fiber Database.

0

5

10

15

20

25

30

1995 2000 2005 2010 2015

New Zealand

72


12© Copyright 2016 RISI, Inc. | Proprietary Information

Global Softwood Sawlog Prices are the Lowest in 30 Years

$50

$55

$60

$65

$70

$75

$80

$85

$90

$95

2001 2004 2007 2010 2013 2016

US

Do

llars

pe

r C

ub

ic M

ete

r

Nominal

Real (2015$)

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.

US South Sawtimber Supply Curve with Forecast


$20

$25

$30

$35

$40

$45

$50

$55

$60

$65

90 100 110 120 130 140 150 160 170

Re

al S

tum

pa

ge

Pri

ce

(2

01

5$

/To

n)

Stumpage Removals (Million GST)

2008 to 2015

2000 to 2007

Resistance

Forecast (2016-2018)

Support

Pulpwood Prices:

Renewed Harvest Demand

and New Supply Dynamics


US South Pulpwood Prices Are Ratcheting Up

$6

$7

$8

$9

$10

$11

$12

2000 2002 2004 2006 2008 2010 2012 2014 2016e

US

Do

llars

pe

r To

n

Softwood Stumpage

Three-year average


Note: 2016 average of first and second quarter

US South Hardwood Stumpage Has Broken From Trend

$120

$140

$160

$180

$200

$220

$240

$260

$280

$300

$4

$5

$6

$7

$8

$9

$10

$11

$12

$13

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Saw

tim

be

r, U

S D

olla

rs p

er

MB

F

Pu

lpw

oo

d, U

S D

olla

rs p

er

Ton


1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

1986 1991 1996 2001 2006 2011 2016

Ratio: Delivered Sawtimber over Pulpwood

US South Log Price Spreads: A Return to the 1980s

17© Copyright 2016 RISI, Inc. All rights reserved.

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 2015 RISI, Inc. | Proprietary Information5 18© Copyright 2016 RISI, Inc. | Proprietary Information

US South Pulpwood PricesDollars per Ton


$6

$7

$8

$9

$10

$11

$12

2006 2008 2010 2012 2014 2016 2018

Stumpage

Hardwood

Softwood

$15

$16

$17

$18

$19

$20

$21

2006 2008 2010 2012 2014 2016 2018

Harvest and Delivery Costs

Softwood

0

20

40

60

80

100

120

140

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Mill

ion

To

ns

Bioenergy

OSB

Pulp

US South Pine Pulpwood Production


Age-Class Area Dynamics Subtract from Thinnings

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45 46-50

SYP Managed Forests Five-Year Age ClassesMillion Acres, 2016

Now nearly thinned out?


0

10

20

30

40

50

60

1991-1995 1996-2000 2001-2005 2006-2010 2011-2015 2016-2020

Mill

ion

m³

pe

r Ye

ar

US South Plantation Pulpwood Thinning Volumes


SYP Pulpwood Thinning Supplies Are Unlikely to Be Sustained


A 27% Decline in Hardwood Demand Was Not Enough to Stabilize Hardwood Inventories

4.5

5.0

5.5

6.0

1995 2000 2005 2010 2015

Bill

ion

Sh

ort

To

ns

US Operable Hardwood Growing Stock Inventory

$20

$25

$30

$35

$40

$45

$50

$55

2003 2006 2009 2012 2015 2018

Do

llars

pe

r To

n

Hardwood

$20

$25

$30

$35

$40

$45

$50

$55

2003 2006 2009 2012 2015 2018

Do

llars

pe

r To

n

Softwood

Softwood

North Central

Northeast

US Delivered Pulpwood by Region


$60

$80

$100

$120

$140

$160

2000 2003 2006 2009 2012 2015 2018

US

Do

llars

per

Bo

ne D

ry T

on

We Never Expected the West Coast Chip Rally to Be Maintained

26© Copyright 2016 RISI, Inc. All rights reserved.

US West Coast Chip Export Prices

27

• Wood costs are rising

• Timber inventory is not a constraint to North American softwood lumber production

• Pulpwood prices maintain gains achieved since 2011

• Downside risk to the timber price forecast


Timber Take Home Points

Southern Pulpwood Studywww.risi.com/uspulpwood

World Wood Fiber and Forest Product DatabaseFebruary 2016

North American Timber Forecastwww.risi.com/timber5year


Recently Released Timber Products

north american timber outlook: the supply overhang...global softwood sawlog prices are the lowest in...

Documents