Tracking capital expenditures in the forest products industry gives insight into which sectors expect to be profitable in the future: higher investment levels imply greater expectations of profit. We track investments by wood products firms through multiple data sources.
Figure 1. Capital expenditures for structures and equipment at wood products and paper manufacturing facilities, 2006-2015. Source: Annual Capital Expenditures Survey, U.S. Census
For example, the U.S. Census tracks annual capital expenditures for structures and equipment at wood products (lumber, plywood, panels, etc.) and paper facilities. The U.S. Census shows that capital investments have continued to grow steadily since the Great Recession’s nadir in 2009 (Figure 1). Annual investments by manufacturers of wood products climbed from less than $2 billion in 2009 to nearly $5 billion in 2015. Investments by paper manufacturers grew from less than $5 billion in 2009 to $7 billion in 2015. Wood products manufacturers, heavily dependent on the housing market, fell harder than paper manufacturers. Sold wood products firms began to close the gap in recent years, however, during a period of strong lumber prices and demand.
Public announcements provide another way to track capital investments. Although this method can overlook smaller or some private investments, it is useful in that it allows a more focused tracking of companies, geographies, and sectors. Tracking public announcements from 2013-2018 reveals a dramatic change in expectations over time (Figure 2). Bioenergy projects, including pellets, combined heat and power, electricity, and liquid fuels, comprised the majority of investment announcements in 2013 but declined precipitously in recent years. Pulp and paper investments remained strong, with a spike in 2016 corresponding to International Paper’s $1.5 billion acquisition of Weyerhaeuser’s pulp business. OSB and panel investments look particularly strong in 2018, with $630 million in announced investments so far.
Figure 2. Announced capital investments by forest industry sector in the U.S. by start date. Source: Forisk Consulting