We are approaching the high temperatures and peak fire season of mid-summer, and there are a number of ongoing developments and considerations for those involved in the Pacific Northwest log market trade. As I travel through the territory and discuss day-to-day operations and changing trends with Forest2Market customers and seasoned industry veterans, the conversations typically involve at least one of the following topics: fires, inventories and exports/imports. And in this industry, all three of these topics are closely connected; an imbalance in one area may dramatically affect another.
The most densely forested countries in Europe, Finland and Sweden-with their ideal growing conditions for conifers, easily workable and valuable tree species, good harvesting conditions and infrastructure and accessibility to major European markets-have a robust and prosperous forest products industry. In 2014, the countries were the largest pulp producers in Europe, representing more than 60 per cent of total European pulp production (36.5 million tonnes) and 13 per cent of global pulp production (173 million tonnes). Sweden is the world's fifth largest pulp producer, and Finland is the sixth. They follow just Brazil, Canada, the United States, Chile and Indonesia. Scandinavia also has a world-class sawn wood industry, which will be the focus of follow-on articles.
Forestry-related industry performance for the latter part of May and June was mixed over April data in both the manufacturing and non-manufacturing sectors. Total industrial production (IP) decreased 0.2% (+0.2% expected) in May, the fourth decline in five months. At 105.1% of its 2007 average, total IP in May was 1.4% above its year-earlier level.
Despite the one-month dip in May (11 percent below the revised April number), housing starts continue to provide some positive news in an otherwise sluggish economic environment. Coming off of an eight-year high and an April rally that posted a 20.2 percent increase over the revised March estimate, the sector continues its forecasted summer surge by posting respectable gains in June.
In most of the South, stumpage price trends have been responding to the hot and dry summer weather by remaining stable or falling slightly as supply flows freely. The lone standout, however, is the West-South region, which has experienced abnormally-high rainfall since April. Prices in this area are mostly higher; pine and hardwood pulpwood prices are up by roughly 6 percent.
The following charts are based on data from the Forestweb North American Pulp Index, which is published by Industry Intelligence. They show that pulp prices are trending lower (Figure 1) and are below their five-year average (orange dotted line in Figure 2).
The world of environmental science, for better or for worse, can be construed as being a relatively subjective field. And because of this fact, environmental policies that flow from Washington are oftentimes ill-conceived and shortsighted. The White House's recent policy statement rejecting HR 2822-a resolution that would label forest biomass fuels as carbon neutral, renewable resources-is a prime example of this disconnect.