Southern demand for pine grade timber raw materials rebounded 6.1% during the 1st quarter of 2010, according to the Wood Demand Report, after reaching five-year lows the previous quarter.  Data providers reported that “markets have turned around” while others confirmed restarting production during the past few quarters.   Several mill managers expressed concern that, while markets improved, they feared that mills may overproduce in the near-term, thereby suppressing potential price recovery for end products such as lumber and plywood.

Pine pulpwood demand increased 1.1% South-wide during the quarter at both pulp and OSB mills.  In addition, the 1st quarter produced the highest reported consumption of in-woods chips for both pine and hardwood since 2006.  Consumption of both products has increased gradually over the past few years.

Looking ahead, we expect increasing consumption to continue.  Pulpwood demand in the US South is projected to recover in two years and reach pre-decline highs by 2013, according to the ForiskForecast.  Demand by pulp and paper users will be modest, and OSB producers will “consume more as the housing market recovers,” according to Dr. Tim Sydor, Forisk’s Forest Economist.  The primary growth in pulpwood demand will be from wood bioenergy customers.  We project wood bioenergy producers in the South will consume a pulpwood equivalent on par with OSB producers by 2015.