On August 25th, 2022, Forisk hosted its sixth annual “Wood Flows & Cash Flows” conference, with attendees participating virtually from across 22 states, three Canadian provinces and three continents. The one-day event provided a comprehensive review of research relevant to public and private investments across the forest industry. This post includes key messages and forward-looking summaries:
The opening session by Dr. Brooks Mendell provided a review of forest industry economics and best practices for using and back-testing timber price forecasts. Forisk’s models rely on physical facts, demographics, forest supplies and mill capacities to establish scenarios and test implications. Looking forward, stay focused on aggregate demand and physical facts. The fundamentals today differ from those of 15 years ago.
Dr. Tyler Reeves delivered an update on timberland transaction trends and research from the Forisk Market Bulletin. While deal flow has picked up, Tyler highlighted how the concerns and opportunities expressed by investors differ regionally. A key insight related to the year-to-year variability of deals geographically, and the massive acreage volume for the U.S. South more recently. Looking forward, we are watching how investors monetize ESG. To what extent does carbon, for example, get baked into values?
Mr. Stephen Wright provided an updated on global wood pellet trade. He highlighted the volatility of the trade, due to Russia’s invasion of Ukraine, and the persistent growth in North American pellet capacity (even as half of announced wood pellet projects over the past ten years didn’t happen).
The Executive Panel on ”Wood Demand Revisited” discussed how, and if, our fundamental understanding of what drives the demand for wood and forest products have and are changing. Our panelists – Alex Hinson of RMS, Ashlee Cribb of PotlatchDeltic, and Eric Kingsley of INRS – confirmed how ESG is part of the decision-making process now and the continued challenges associated with industry supply chains. A huge thank you to our panelists!
Dr. Shawn Baker reinforced key themes from the Executive Panel while covering several topics related to forest operations. He reviewed trends in logging, hauling, and productivity, while detailing shifts in wood moved by species, with harvested hardwood volume down and pine log volume up, which affects logger production and capacity. Looking forward, we are watching the labor pool and fuel costs.
Dr. Nick Bolton shared research from the FRQ and the Forisk Wood Fiber Review on low value fiber markets. He reinforced the different stories of regional fiber baskets across North America. Buying chips in BC, Canada differs from procuring pulpwood in Portland, Maine. Looking forward, we are watching pulpmill conversions.
Ms. Amanda Lang discussed mill investment activity and a framework for ranking wood baskets timber markets for investment purposes. She addressed how capital and forest supplies continue to shift across North America and within forest industry sectors. In addition, she shared preliminary work from Forisk research into local timber market rankings. Looking forward, we’re watching the market-by-market balancing of wood demand and forest supplies.
Finally, Mr. Pat Jolley leveraged his research supporting Forisk’s Forest Industry Database to provide an update on mass timber in North America. He provided context on where we are with Mass Timber, and its history (note: this is not a new idea.) Looking forward, stay focused on lumber use as a % of total production. This tells us whether or not the uptake is there.
As always, the Forisk team worked to coordinate the sharing and delivery of research across topics to support broader themes. We believe this creates value for the participants. It helps the research “stick” by prioritizing its relevance, which facilitates its use in client investment decisions.
If you who missed the 2022 “Wood Flows & Cash Flows” Conference and have interest in the content… No problem! The event was recorded and is available for purchase. Please contact Heather Clark for details (hsclark@forisk.com, 770.725.8447).
Interested in learning a process for tracking and analyzing the price, demand, supply and competitive dynamics of local timber markets and wood baskets? Register here for Forisk’s 2022 “Timber Market Analysis” class, offered virtually via Live Zoom on November 16th and 17th. Early registration ends November 2nd!
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