Tuesday, December 17, 2024

Q4 Research Update: Pulp/paper and chip mills reduced wood-using capacity, while sawmills completed projects that offset losses from closures.

Pulp/paper and chip mills reduced wood-using capacity in Q4 2024, while sawmills completed projects that offset losses from closures in North America.

ATHENS, GEORGIA – December 17, 2024 – Over the past quarter, Forisk updated 259 mills out of over 2,300 mills in the North American Forest Industry Capacity Database (“Mill Capacity Database”). The updates included 24 closures, 4 new mill startups or restarts, and 5 mills completing expansions. “Mills reduced wood-using capacity by 3.3 million tons across North America from Q3 to Q4 2024, but that is only a 0.4% decline in overall operating mill consumption,” remarked Amanda Lang, COO & VP of Client Services for Forisk Consulting.


The biggest losses were in the pulp/paper sector and chip sectors. Canfor shut down a pulping line at the Northwood Pulp mill in British Columbia, and McKinley Paper in Port Angeles, WA closed. In eastern Canada, RYAM Temiscaming closed and White Birch Paper converted from using wood to buying recycled feedstock; this reduced wood use by almost a million tons in the region. In addition, 3 chip mills closed across North America since last quarter.


Other sectors increased wood use and capacity, including lumber. Several lumber mills closed since September: Weyerhaeuser in New Bern, NC; West Fraser in Lake Butler, FL; Interfor in Meldrim, GA and Summerville, SC; Canfor in Mobile, AL; and Teal-Jones in Antlers, OK. Openings and expansions offset closures. Re-openings included Sigurdson Forest Products in British Columbia and DR Johnson in Prairie City, OR. Carthage Timber Products in Carthage, AR; and RFOR in Bellemont, AZ are commissioning new sawmills.

Regionally, most of the wood use decline came from mills in the U.S. South. “This quarter, wood-using capacity declined by 1.9 million tons in the region; of this, 1.7 million tons was from sawmill and chip mill reductions. Overall, this is a small decline, as it reduces wood use in the region by only half a percent,” explained Pat Jolley, Product Manager of Forisk’s Mill Capacity Database. He added, “The net decline for the chip sector is a ripple effect from recent pulp mill closures that occurred over 2024.”


Forisk’s North American Forest Industry Capacity Database (“Mill Capacity Database”) compiles mill capacity for softwood and hardwood lumber, structural panels (OSB and plywood), engineered wood products, pulp, veneer, wood pellets, chip mills, and nonstructural panel mills by region across five North American geographies: U.S. North, U.S. South, U.S. West, Eastern Canada, and Western Canada. Updated quarterly, the database includes detailed information for over 2,300 facilities, including location, mill type, wood use estimates, and species. It also provides ownership and capacity data by year for 2013-2023, with estimates for 2024-2026. Forisk’s Mill Capacity Database is available as an annual subscription or as a one-time purchase.


For more information or to subscribe to Forisk’s Mill Capacity Database, please contact: Nick DiLuzio, ndiluzio@forisk.com, 770-725-8447. 

About Forisk Consulting: Forisk delivers forecasts and analysis of forest industry markets and timberland investments. Firms participate in Forisk’s research program by subscribing to the Forisk Research Quarterly (FRQ), Forisk Wood Fiber Review, or the North American Forest Industry Capacity Database; supporting benchmarking studies related to forest operations and mail capacities; and attending educational workshops.

Forisk Consulting | www.forisk.com

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Thursday, December 5, 2024

Why is tracking wood markets at the firm level helpful?

Concentration of Demand is a Key Metric for Timberland Investors and Wood-Using Mills

ATHENS, GEORGIA – December 5, 2024 – According to research by Forisk, tracking the concentration of wood demand at the firm level in local timber markets supports risk management and capital allocation for timberland investors and wood-using firms. The relevance of this research increased the past few years as multiple pulp and paper firms closed mills, including International Paper (which closed its Orange, Texas containerboard mill and announced the closure of the Georgetown, South Carolina pulp mill); Georgia-Pacific (which closed the Foley, Florida mill); and Smurfit Westrock (which closed mills in Panama City, Florida and North Charleston, South Carolina).


Why is tracking wood markets at the firm level helpful? For timberland investors, owning or acquiring private timberland profitably relies on critical assumptions, including the desire for deep and increasing demand for logs in local markets populated by multiple firms, which offers competitive conditions for higher timber prices and, ultimately, better investment returns. Alternately, from the view of grade-using mills, wood baskets with stable competition, possibly concentrated in fewer firms, implies less potential upward pressure on log prices over time.


According to Brooks Mendell, Forisk’s President and CEO, “We find that timberland investors prefer and benefit from situations where no two firms combined account for 50% or more of the wood demand for grade, while grade consumers prefer situations with fewer competing mills and higher levels of firm concentration.”


Market concentration at the firm level speaks to different risks for timberland owners and wood consumers. Therefore, it helps to track the aggregate demand at the firm, versus the mill, level over time. Forisk’s recently launched Custom Market Forecast (CMF) includes timber forecasts for client-specific timber markets and wood baskets, as well as other strategic metrics including the top five grade and pulp consumers in the custom market area. The math of capital investments in timberland and wood-using mills requires a constant benchmarking to other opportunities and potential risks, and the concentration of demand corresponds to different levels timber pricing and stability.


For more information or to access Forisk’s Custom Market Forecast (CMF), please visit our website or contact: Nick DiLuzio, ndiluzio@forisk.com, 770-725-8447. 

About Forisk Consulting: Forisk delivers forecasts and analysis of forest industry markets and timberland investments. Firms participate in Forisk’s research program by subscribing to the Forisk Research Quarterly (FRQ), the Forisk Wood Fiber Review, or the North American Forest Industry Capacity Database; supporting benchmarking studies related to forest operations and mill capacities; and attending educational workshops.

Forisk Consulting | www.forisk.com

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Tuesday, November 12, 2024

Q4 "Forisk News" Newsletter

Q4 Forisk News

Welcome to the Q4 edition of the Forisk News! Since the previous Forisk News went to press, Forisk team members delivered presentations on timberland investments, pulpwood markets, forest supplies, and mill capital investments to audiences in Louisiana, Portland, and Vancouver, as well as delivering our annual Timber Market Analysis course.



In addition, Forisk launched the Custom Market Forecast (CMF) for FRQ subscribers! The CMF leverages models from the Forisk Research Quarterly (FRQ) to deliver timely and cost-efficient market-specific analyses and price/cost forecasts of a client’s wood baskets or timber markets. Click here to learn more or contact Nick DiLuzio (ndiluzio@forisk.com) for additional questions.

Download the "Forisk News" PDF

Research Highlights from Forisk's Blog

Over the past few months, Forisk's researchers posted analysis related to timberland ownership, mill investments, and wood fiber prices. Follow the links below to read more.


Next Forisk Webinar:

"Applied Forest Finance"

April 3, 2025


Taught publicly once per year, this live virtual class details the step-by-step financial analysis required to answer key investment and forest management questions. Attendees will learn how to identify, value, and rank timber and forestry investments.

 

Attendees receive a copy of the updated Forest Finance Simplified handbook and the Aunt Fanny Learns Forestry book, as well as electronic reference materials and Excel models for reinforcing and applying the concepts learned during the course. 

 

Registration will open in early 2025!


This class qualifies for 6.0 Hours of Continuing Education credit for the following: CFE (Forestry), CLE/MTH (Georgia Master Timber Harvester / Logger), and Georgia Real Estate Appraisal.

Learn More

Select Findings from the Q4 Forisk Research Quarterly (FRQ)

The Q4 2024 Forisk Research Quarterly (FRQ) report includes industry analysis and market forecasts through 2033 for timber prices, logging costs, softwood lumber production, structural panels production, paper and paperboard production, forest supplies, and wood bioenergy markets. Select summary findings from the Q4 FRQ report include:


  • Macro and Housing: The economy grew 2.7% from Q3 2023 to Q3 2024. The labor market added fewer jobs during Q3 than it did during Q2, while unemployment rose to 4.2%. Yields on 10-year U.S. Treasuries fell to 4.0% in Q3 2024 from 4.5% during Q2 2024. Single family starts are up 10% YTD over last year through September, while multifamily is down 29% through September.
  • Lumber: North American softwood lumber production increased 2% for Q2 2024 and is flat year-over-year. Last year, softwood lumber imports into the U.S. represented 39% of U.S. lumber production. The softwood lumber price index was flat in Q3 2024 while declining 8% year over year. U.S. South sawmill investments continue with $2.6 billion in announced projects from 2024 to 2026, financing over 3.7 BBF of increased capacity. 
  • Structural Panels (OSB & Plywood): U.S. OSB production decreased 2.7% through Q2 2024, and plywood production decreased 2.7%. Quarter-over-quarter OSB prices dropped 28% and plywood prices declined 16% in Q3 2024. Announced mill openings and investments expect to add at least 5 BSF to North American structural panel capacity through 2026.
  • Pulp & Paper: Paper and paperboard production rose 1% in Q3 2024 and was up 4% year-over-year. Packaging production rose 1% in Q3 2024, up 5% year-over-year. Tissue and printing production increased 2% in Q3 2024. OCC prices held flat in Q3, remaining 89% higher year-over-year. Market pulp prices increased in Q3, rising over 35% year-over-year.
  • Wood Bioenergy: Bioenergy products that pass Forisk’s Wood Bioenergy Database screening plan to consume 100.5 million green tons per year of wood across the country. The U.S. South leads all regions in total projects and demand. Most bioenergy projects are in the biomass to electricity, CHP, and pellet segments, though renewable hydrocarbon projects are increasing. Through August 2024, U.S. wood pellet exports increased 3.8% year-over-year while Canadian wood pellet exports decreased 6.9%. North American wood pellet capacity is expected to grow 3.8% in 2024, to 22.0 million tonnes.
  • Log & Chip Exports: Through August 2024, Canadian softwood exports were up 12% while U.S. softwood log exports were down 7% year-over-year. U.S. softwood chip exports for the same period were down 23%. Southern softwood log exports increased 7% year-over-year, and northern softwood log exports fell 15%. The top three U.S. forestry commodity trade partners, Canada, Japan, and China, account for 85% of U.S. wood product exports.
  • Timberland Investments: All three timber REITs are trading below where they started 2024. As a sector, public timber REITs increased 1.1% for the quarter according to the market cap weighted Forisk Timber REIT Index (FTR). Over 1 million acres of industrial timberland transactions closed in the United States for the last four quarters. TIMOs accounted for the largest portion of acreage bought and sold at 32.8% and 52.6%, respectively.
  • Forest Operations: Year-over-year logging employment losses exceeded 2% across most of North America. Four-quarter average employment fell more than 5% in the U.S. North and western Canada. Logging wages increased across North America. Trucking employment dipped 3% year-over-year, despite steady freight demand.
  • Timber Markets, U.S. South: Southern stumpage prices decreased for pine chip-n-saw and pine sawtimber products in Q3 2024. Prices for all other products increased modestly, according to Timber Mart-South. The 2024 forecast for pine sawtimber implies a 4.1% decline over the 2023 price. Average pine sawtimber prices are not forecasted to recover to 2022 levels until 2029.
  • Log Prices, Pacific Northwest: Domestic Douglas-fir log prices fell 4.8% in Oregon and fell 1.0% in Washington in Q3 2024. Export Douglas-fir log prices increased 0.3% while export Hemlock prices increased 1.7%. Forisk’s “base case” projects a drop for Douglas-fir prices in Oregon and Washington in 2024 followed by increases in 2025. Logging and hauling costs increase slightly over the next decade due to a steady diesel price forecast.
  • Hardwood Markets, U.S. North: Forisk’s Hardwood Price Index increased 1.4% in Q2 2024, up 0.7% year-over-year. Last 4Q starting prices were led by hard maple in the Middle Atlantic, hard maple in New England, and red oak in the Lake States.


To learn more about the Forisk Research Quarterly (FRQ) subscription, click here or contact Nick DiLuzio (ndiluzio@forisk.com).

Special Research Featured in the Q4 FRQ

Featured Research: Western Timber Supply Model and Updated Outlook

This feature article updated Forisk’s western timber supply outlook. We quantified the effects of changes in local mill demand, revised U.S. Forest Service data on current inventories, merchantable inventory unavailable in streamside management zones, and Oregon’s recent Private Forest Accord. 

 

Market Update, Q4 2024: In this edition of quarterly observations and summary analysis of forest industry trends, we review how softwood lumber manufacturers balanced production and shipments while rationalizing capacity over the past two years. Then, we revisit how opportunity costs relate to forest investments and rotations. Finally, we look at tracking the concentration of wood demand in local timber markets. 

 

Forisk Facts & Figures: Forisk’s quarterly “story in 3 slides” revisits previous logging capacity analysis. How have employment and wood demand changed in the past two years? Did trends in employment and demand explain recent logging capacity changes? 

The Net Change in Sawmill Closures and Openings Resulted in Less Than a 1% Increase in North American Lumber Capacity

Forisk tracks mill announcements as part of the North American Forest Industry Capacity Database (Mill Capacity Database). Over the past quarter, Forisk tracked 10 mill closures, 12 new mill startups or restarts, and 11 mills completing expansions. Of the 10 closures, 8 were lumber mills, resulting in a loss of 788 MMBF of capacity. However, 8 lumber mills began operating, resulting in an additional 765 MMBF of capacity notes Pat Jolly, Product Manager of Forisk’s Mill Capacity Database. “The net change for the lumber sector including all updates over the period resulted in less than a 1% increase for North American lumber capacity” according to Mr. Jolly. Regionally, Eastern Canada and the U.S. South gained over 1% of their respective capacity, the U.S. North and Western Canada were flat, while the U.S. West lost less than 1%. Read the full Research Release here.

Fiber Prices in Most North American Regions are Mixed Year-Over-Year

U.S. weighted softwood fiber prices increased 4% while Canadian prices decreased 2% year-over-year through Q3 2024 according to the Forisk Wood Fiber Review (FWFR). The price hikes in the U.S. are linked to regional market adjustments caused by wet weather and reduced availability of residual chips due to widespread sawmill curtailments and closures.


Canadian roundwood prices increased 2% and chip prices fell 3% year-over-year. U.S. roundwood prices rose 6% year-over-year and chip prices rose 1% year-over-year, with significant regional variability.

Read the full Research Release here.

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Q4 Research Update: Pulp/paper and chip mills reduced wood-using capacity, while sawmills completed projects that offset losses from closures.

  Pulp/paper and chip mills reduced wood-using capacity in Q4 2024, while sawm...