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April 2011

In This Issue
Containerboard Outlook
Housing Update
PNW Market Outlook--Japan and China
M&A Activity Set to Increase in 2011
A Lesson in Forecasting: Oil Prices
Quick Links


Top 3 Stories from the March Issue




Pete Stewart's, "What 2010 Softwood Fiber Prices Tell Us about the Future" was published in the March 16, 2011 edition of TAPPI's Ahead of the Curve newsletter. His article is reprinted here with permission.


In 2010, prices for softwood fiber were significantly higher in both the South and the Pacific Northwest. In the South, the price of pine fiber increased by $2.00/green ton, or 6 percent, just $0.10/green ton below the historic high. In the Pacific Northwest, total conifer fiber prices increased $6.39/bone dry ton, or 7 percent. Following 2009, these increases in fiber prices show that markets began to stabilize in 2010. These higher prices may be an early indication that storm clouds are forming over containerboard and linerboard manufacturers in the years ahead.

Unstable HousingWhat Lawrence Yun, the chief economist at the National Association of Realtors (NAR), said last month about the housing market--"We should not expect the recovery to be in a straight upward path-it will zig-zag at times"--held true in February. Results were mixed. Sales of both new and existing homes were down, as were building permits and starts. Pending home sales were up, however, as were builder confidence and new home completions.




In 2010, log prices in the Pacific Northwest recovered due primarily to demand from China (see story on Northwest log prices in last month's issue). Prices have continued to charge upward in 2011, with export prices well over $600 for both Douglas fir and hem-fir. Westside mills producing dimensioned lumber and plywood for the US market continue to be challenged, as high raw material costs are hollowing out their profits.


Some relief may be on the horizon, however. The earthquake and tsunami in Japen are likely to alter theis dynamic. Once Japan begins the rebuilding process, demand for building produNorthwest Log Stackcts from the PNW will start to compete with the demand for logs from China. In the 1980s and 1990s, when the Japanese economy was healthy, many companies in the PNW cut products for Japan. As a result, there is a great deal of Japanese export business expertise on the wood products side in the region. Many of these companies will be looking to maximize business in Japan when the rebuilding effort begins.






Merger and acquisition activity in the forestry, paper and packaging industries hit bottom between mid-2009 and mid-2010. According to PricewaterhouseCoopers' (PwC) report on global deal making in these industries, the floor of the downturn "straddled" 2009 and 2010. In 2009, 369 deals with a total value of $18.7 billion closed. In 2010, 385 deals were struck, more than any year since PwC started tracking industry consolidation in 2003. Those deals were smaller in general, however, totaling just $12.7 billion. The average deal value in 2010 was down 29 percent to $68.2 million.


More on 2010/2011 M&A Activity





"The only function of economic forecasting is to make astrology look respectable."--John Kenneth Galbraith


When the economic data is sending mixed signals, wading into the forecasting arena is a bit like wading into a school of jellyfish. When unforeseen events occur in the midst of uncertain economic times, however, the jellyfish can quickly turn into piranhas.


While clearly not the equivalent of developing a horoscope, forecasting is certainly as much of an art as it is a science.






27 & 29: Gordon Culbertson will be at the AFRC meeting at 

Skamania Lodge with exciting details about the launch of Forest2Mill in the Pacific Northwest


28: Daniel Stuber will talk about how Forest2Market customers use 3Log at the 3Log Conference in Vancouver, BC


28: Gordon Culbertson will talk about future fiber supply and markets at the Olympic Logging Conference in Victoria, BC


29: Bill Nocerino and Suzanne Hearn will highlight the value of lumber price reports based on order and invoice data at NELMA's Annual Convention in Boston. Look for the Business Tools session.




5: Suzanne Hearn will be at the NAWLA Regional meeting in Portland, Oregon


12: Gordon Culbertson will talk about the Chinese Export Market at the FRA meeting in Spokane, WA


15-17: Bill Nocerino and Suzanne Hearn are exhibiting at the AWPA's 107th Annual Meeting.

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