North American Timber Outlook · Title: Microsoft PowerPoint - afx Barynin_NA_Conference 2018 web...

© Copyright 2018 RISI, Inc. | Proprietary Information

North American Timber Outlook

Peter BaryninPrincipal Economist, Timber

RISI North American ConferenceOctober 2018

2

• Current prices

• Characterizing the timber depression

• Price forecasts

Presentation Outline


PNW Prices Rally, While Southern Pine Disappoints

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$100

$200

$300

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$900

2012 2013 2014 2015 2016 2017 2018

Dollars per M

BF

West Coast, Douglas‐fir

West Coast, Whitewood

Southern Pine (Delivered)

Southern Pine (Stumpage)

Note: Southern prices estimated assuming 7.5 m³ per MBF, Scribner.

3© Copyright 2018 RISI, Inc. | Proprietary Information

The Lowest in 50 Years!

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$0

$10

$20

$30

$40

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$70

1950 1960 1970 1980 1990 2000 2010 2018

US Dollars per Ton

Southern Pine Stumpage

Nominal

Real (2017$)*

*Inflation‐adjusted base on US producer price indexNote: Estimate for 2018 is based on the first two quarters of the year.


Global Log Prices Are Also Low

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2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

US Dollars per Cub

ic M

eter

Delivered Softwood Sawlogs Real Delivered Pulpwood Logs Real


Note: Estimate for 2018 is based on the first two quarters of the year.


The world is producing more wood fiber than ever before

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0.4

0.6

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1.0

1.2

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1993 1998 2003 2008 2013 2018

Sawlog LogsPulpwood Logs

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Global Roundwood ProductionBillion Cubic Meters, All Species


Timber Markets are Out of Equilibrium


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“The unprecedented depression in US timber markets—never

this low and never this long—will have unique consequences for

the timber asset class.”

– Peter Barynin, Principal Timber Economist, RISI


Unusual Times

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2003 2006 2009 2012 2015 2018

US West (Inland and Coast)

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2003 2006 2009 2012 2015 2018

US South

US Softwood Sawtimber Demand: A Slow RecoveryBillion Board Feet


Timber Markets Are out of Equilibrium

• Symptoms Timber price spreads widen

Disconnect between product prices and wood costs

New trade patterns

Investment focus changes in the entire supply chain


International Pine Sawlog Prices Compared

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$40

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05 06 07 08 09 10 11 12 13 14 15 16 17 18

New Zealand Export Logs

Finland

US South

* FOB, Export Dock


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1990 1995 2000 2005 2010 2015

South SYP

Delivered Log (L)

Lumber** (R)

Relationship Between Log and Lumber Prices Has ChangedUS Dollars per MBF, Quarterly


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1990 1995 2000 2005 2010 2015

West Coast Douglas‐fir

Delivered Log (L)

Lumber* (R)

Note: Estimate for 2018 is based on the first two quarters of the year. * Douglas‐fir 2x4, green, lagged two quarters** SYP Westside 2x4, kiln dried, lagged two quarters


US South Regional Softwood Stumpage Relative to Southern Average

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0.6

0.8

1.0

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1.6

1990 1995 2000 2005 2010 2015

Sawlog Price Ratios

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0.4

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1.0

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1990 1995 2000 2005 2010 2015

Pulpwood Log Price Ratios

Atlantic North Atlantic South

Coastal Gulf Inland Gulf

Appalachia


US South Pulpwood Heat Map

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Softwood Sawlog Prices See Demand Support

• Sustained US and global economic growth

• Forward momentum for housing starts

• Restricted Canadian trade

• Mountain pine beetle in Canada

• Chinese wood fiber deficit


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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 Classes, 2017Million Acres

Matures in next five years!

Becoming overmature

Age‐Class Dynamics Is Changing the Supply Potential


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2005 2008 2011 2014 2017 2020

Douglas‐fir Delivered LogsUS Dollars per MBF

Strong Demand Required to Achieve This Forecast

© Copyright 2018 RISI, Inc. | Proprietary Information 17© Copyright 2018 RISI, Inc. | Proprietary Information

$15

$20

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$40

$45

2005 2008 2011 2014 2017 2020

Southern Pine Stumpage US Dollars per Ton

Pulpwood PricesRecord Harvest Demand Presses on Supply


Pulpwood Prices Feel the Pressure of Escalating Demand

• Harvests will surpass record levels Factors in expanding chip production Pulp output will expand over the next two years OSB supported by housing starts 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


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2005 2008 2011 2014 2017 2020

Dollars per Ton

Softwood

South

US Delivered Pulpwood by Region


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$55

2005 2008 2011 2014 2017 2020

Dollars per Ton

Softwood

South

North Central

Northeast

US Delivered Pulpwood by Region


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$160

2005 2008 2011 2014 2017 2020

US Dollars per Bon

e Dry Ton

US West Coast Chip Export Prices

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

Million m³p

er Yea

r

US South Plantation Pulpwood Thinning Volumes

SYP Pulpwood Thinning Supplies Are Unlikely to Be Sustained


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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 Classes, 2017Million Acres

Age‐Class Dynamics Is Changing the Supply Potential


• Pulpwood and sawtimber prices higher than in the past

• Outlook is conditional on positive GDP growth and higher demand for new housing

• Understanding supply age‐class dynamics is increasingly important• Price and demand forecast risk: Downside

• Economic risk• Slower growth in single‐family housing demand• SLA is a wild card• Wildfires and hurricanes are just noise

Timber Take‐Home Points


World Pulpwood Study 2017www.risi.com/worldpulpwood

World Softwood Sawlog Study 2018www.risi.com/sawlog

New Timber Products


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