When tracking wood demand and timber markets, we look not only to the past and to the future for guidance, but also to the side – peripherally – to gauge performance across markets and sectors. Heather Clark, our Customer Relations specialist and a former member of the UGA Red Coats Marching band, shared a useful analogy. In a marching band, peripheral awareness is called “dressing the line,” and it serves to maintain formation and, ultimately, performance. What can we learn from looking through the corners of our eyes at trends across wood markets over the past few months?
Wood Demand: Pine sawtimber demand declined ~1% across the South, primarily driven by curtailments at plywood mills. While demand declined less than expected, pine sawtimber prices, according to Timber Mart-South, declined 5.1%, more than expected. Dry weather and selling by timberland owners eager for cash flows may have pushed prices to new lows. Pine pulpwood demand increased 1.7% in the South and demand for hardwood pulpwood held steady in Q3 2011; stumpage prices for both products declined. We continue to monitor softwood lumber and pulp prices, and the proposed lower design values for SYP lumber.
Wood Bioenergy Markets: Industrial pellets for export to European utilities lead all bioenergy activities. For example, F.E. Wood & Sons plans to build a 300,000 ton/year pellet plant in West Baldwin, ME. German Pellets plans to build a 500,000 metric ton/year pellet plant in Woodville, TX. Westervelt Renewable Energy held a groundbreaking ceremony at its 250,000 metric ton pellet plant site in Aliceville, AL in October.
Forest Finance: As demand for pulpwood increases in select local markets, forestland owners have called to ask “when should I clearcut for pulpwood versus manage for sawtimber?” We published research commissioned by NAFO that addresses this issue at a regional level (click here). In February, I will detail the step-by-step financial analysis required to answer this question for specific timberland ownerships and markets as part of our Applied Forest Finance course on February 9, 2012 in Atlanta. For more information, click here.