In this series, I will discuss the difficult circumstances that consumers of wood fiber are facing. In this first post of the series, the focus will be on the events that have created restricted wood supply and that will likely plague the industry for years to come:  

• The unintended consequences of timberland divestment
• Bad luck in the timing and intensity of the housing bust
• Inattention to--and an inability to react to--global policy changes

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Recently, one of our pulp and paper customers asked us to help him explain to his CEO why his company's delivered wood fiber prices were not declining as the prices of oil and diesel were falling (Figure 1). His explanation-one we both thought was right-was that other factors, including weather, demand, and inflation-exerted more influence on delivered fiber prices than diesel. Since applying data to answer questions and solve problems is in Forest2Market's wheelhouse, we analyzed the delivered price data from the Forest2Mill� benchmark service to substantiate his explanation. With a limited time and scope, we put together the following correlated metrics for his presentation to the CEO.

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Forestry-related industry performance at the end of 2014 was mixed. (Read Forestry-Related Industry Performance: November 2014.) Industrial production (IP) was positive in November. Total IP increased 1.3% (+5.2% YoY), the biggest month-to-month rise since May 2010 and well above expectations of +0.7%. In addition:  

• Manufacturing output increased 1.1%, with widespread gains among industries.
• The gain in factory output was its largest since February and well above its average monthly pace of +0.3% during the previous five months.
• Wood Products and Paper output rose by, respectively, 1.3 and 0.1%.
• Construction gained 0.5%, extending October's +0.2%.
• Consumer goods jumped by 2.5%, swamping October's -0.1%.

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The composite southern pine lumber price climbed to $378 per MBF in the second week of January, and then began to drop. By the fourth week of the month, the composite price was $362 per MBF.

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