Forest2Mill E-Newsletter
February 2010
In This Issue
Housing Market Update
US South Stumpage Price Outlook
Pacific Northwest Market Trends
2009 Wood Pellet Production
Forest2Market Celebrates 10-Year Anniversary
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From Forest2Market's Economic Outlook 
For the most part, manufacturing added to recent gains in December. Only finished-product inventories of the solid wood industry fell back relative to October's level, which - depending upon one's perspective - could be construed as either a positive or a negative for the economy.

Given the low capacity utilization rates, falling inventories signal tepid current demand (and hence activity), but potentially greater activity in the future when inventories eventually must be replenished.

Wood Products is one of the industries still in decline, as it led the list of industries reporting contraction. Most aspects of that industry's activity waned in December (Table 1). Paper Products, by contrast, was in the middle of the pack of industries reporting growth. The only aspects that might be interpreted as negative for Paper Products included higher input prices and a greater volume of imports.
House Sold  
November pending home sales data, which fell 16 percent from October's level, predicted the December drop in both existing and new home sales (Table 1). The pending home sales figure was still 15.5 percent higher than it was in November 2008.

Sales of existing homes fell to 5.45 million units in December, down 16.7 percent from November (see Table 1), though this is still 15 percent above December 2008 levels. As we noted in this column last month, this turn was expected.

Lawrence Yun, chief economist at the National Association of Realtors, attributed the swing to the first-time homebuyer tax credit. "We'll likely have another surge in the spring as homebuyers take advantage of the extended and expanded tax credit. By early summer the overall market should benefit from more balanced inventory, and sales are on track to rise again in 2010. However, the job market remains a concern and could dampen the housing recovery-job creation is key to a continued recovery in the second half of the year."
Truck Hauling Timber
Pine Sawtimber
We are beginning to see some signs of strength in the sawtimber market:
  • Lumber prices rose in the last two months of 2009, and early January 2010 prices are higher as well.
  • We expect steady growth in housing starts in 2010, moving from roughly 550,000 per month to 800,000 by the end of 2010. Homebuyer tax credits have precipitated this improvement.
Expect a strong year for pulpwood prices. Why?
  • GDP growth for 2010 will be positive: 2 percent for the first half of 2010, though it will slow in the second half to 0.5 percent. This increases demand for paper.
  • Winter has been exceptionally wet this year across the entire South. As a result, most pulp mills are strapped for inventory and prices are at highs.
  • We have already seen evidence that BCAP is driving up stumpage prices.
Forest2Mill August 2009
Lumber prices have increased in recent weeks, as buyers seeking to replenish supplies found the pipeline empty. As harvest levels are very low, this trend will add even more pressure on mills to secure logs.

For December, Douglas fir log prices were up by double digits across the Westside, with sharper increases in Western Washington. The lowest December regional log prices were in Southwest Oregon, as some major buyers scaled back outside purchases. Douglas fir and whitewood logs destined for Asian markets commanded premiums of around $ 100 per MBF over domestic logs.

Tonnage conifer pulpwood prices were flat across the region in December pending significant curtailments in pulp and paper. Increasing demand for hardwood pulp logs provided continued upward price pressure.
Wood Pellets
Outstrips Demand; Drives Sawdust and Other Mill Residue Prices Lower in the Pacific Northwest
Demand for wood pellets in 2009 was well below both manufacturing capacity and production levels. As a result, prices for sawdust and shavings (the raw materials used by pellet manufacturers) in the Pacific Northwest moved off their 2008 highs, reports Forest2Market, the premier provider of market data and information about the wood supply chain.

Higher heating costs and a robust European market led to strong gains for the pellet industry throughout most of the last decade. According to a June 2009 report by the USDA, wood pellet capacity in North America increased from 1.2 million tons in 2003 to 4.6 million tons in 2008.
In January, Forest2Market celebrated its 10th Anniversary in January.

Marking this occasion, Pete Stewart said, "To a large degree, our success can be traced to an obsession with real data. I spent the first decade of my career buying or selling timber and timberland without reliable data on its value. The idea for Forest2Market originated there, and we have been offering solutions to industry participants built on real market data ever since. To this day, every business solution we develop, every piece of industry information or analysis we provide to our clients is based on transaction-level data and a commitment to provide our clients with accurate and actionable business information."
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