As the end of the year approaches, it's an opportune time to analyze delivered roundwood prices and quantities supplied across the US. The following information compares year-to-date (YTD) 2015 pulpwood price averages to the same period in 2014 in Forest2Market's four primary operating regions. A comparison for conifer sawtimber between the US South and Pacific Northwest (West-Side) is also provided.
In the first part of this series, I discussed the basics of supply chain logistics for the forest products industry, as well as some of the additional relative costs by region. As I broke down these costs and began to compare them by area, it became apparent that some of the high-level views simply weren't telling the entire story. For instance, while the elevated view of Brazil's preferred harvesting and transportation methods did not appear to be as cost effective as methods used in the US South, average payloads were 32% higher and the average haul distance was 10% shorter. This case very clearly illustrated the importance of relying on high-quality data when analyzing supply chain components. As noted in the graph below, Brazil's relative supply chain costs are substantially lower than those in other regions. So, how do we uncover these fine points and develop new opportunities for maximizing profit? The answer starts with the use of superior datasets.
It's been a challenging year for the forest products industry in the Pacific Northwest (PNW). From record wildfires to mill consolidations, the sector experienced an enormous amount of change in this part of the world in 2015. As we approach the end of the year, it's a good time to reflect on industry happenings and trends in 2015 as well as the outlook for the coming year. So, what have we learned and more importantly, where are we headed?
Forest2Market is pleased to announce that Swedish company Bergs Timber has joined its Baltic Rim Timber Price Index and Supply Chain Optimization service. These services, which will be available in Scandinavia and the Baltic Rim in the first quarter of 2016, provide timber pricing, competitive indexing, and other analytics that can be used to extract value from the supply chain.
Wood fuel prices have declined over the last two quarters to an average of $21.32 per ton in 3Q2015. The primary factors that have contributed to this drop in price include: Demand for wood fuel has decreased as pulpwood purchases have increased, and as the price of natural gas has fallen; Supply of wood fuel has increased as lumber production and harvested biomass have also increased.
The building season is quickly coming to an end in many parts of the country, and it looks like housing starts will not experience the end-of-year rally that economists and industry watchers were hoping for. This sector has, after all, been the lone bright spot in the US economy for the last several months as the stock market continues its wild roller coaster ride based on diminishing global growth reports and strained geopolitical relations in much of the world.
Over the last few months, we have written extensively about the extreme wildfire season in the Pacific Northwest (PNW) and some of the lingering effects that the devastation will have in the near-term. The fires have been in the mainstream news for months, but a recent Wall Street Journal piece about the "controversial" subject of forest thinning and its impact on fire suppression simply gets it wrong.
Forest industry performance in September and October was reported by both the US government and the Institute for Supply Management. Total industrial production (IP) decreased 0.2% in September (+0.4% YoY) after edging down 0.1% in August (originally -0.4%). Manufacturing output retreated 0.1% (but +1.6% YoY) for a second consecutive monthly decrease. Mining fell 2.0% (with oil and gas drilling down 4%, to its lowest level this century), while utilities rose 1.3%. Wood Products output fell 2.0% (-2.0% YoY) while Paper decreased 0.5% (-2.5% YoY). For 3Q as a whole, total IP rose at an annual rate of 1.8%, and manufacturing increased 2.5% on gains from motor vehicles and parts.
