TimberMart-South 1

Southern Timber Market TrendsEmerging Markets

Arkansas Forestry AssociationLittle Rock

September 26, 2012

Thomas G. Harris, Jr., Sara Baldwin, Jonathan Smith & Robert Simmons

TimberMart-South 2

TimberMart-SouthCenter for Forest Business

D.B. Warnell School of Forest ResourcesThe University of Georgia

Thomas G. Harris, Jr. , Sara Baldwin, Jonathan Smith & Robert Simmons

Objectives

• Review Recent Timber Market Trends

• Examine New Market Opportunities

• Strategies for the New Market

• Finish on Time

Forestry Market TrendsStructural Change

• Globalization of Forestry Commerce

• Industry Disintegration

• Timberland Ownership Change

• TIMOS, REITS and other new owners

• Declining Paper Markets

• Solid wood products Capacity increases

• BioenergyTimberMart-South 44TimberMart-South 4

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Forested Regions of the World

Where Does the Wood Go?Total Roundwood Use for US South

The South’s Timber Industry-An Assesement of Timber Product Output and Use, 2009

* Total fuelwood is any roundwood product, with or with out bark, used to generate heat at a manufacturing facility or to produce heat for residential settings.

Total 6.7 billion cubic feet

Where Does the Wood Go?Softwood Use in US South

The South’s Timber Industry-An Assesement of Timber Product Output and Use, 2009

Total 4.96 billion cubic feet

Where Does the Wood Go?Hardwood Use in US South

The South’s Timber Industry-An Assesement of Timber Product Output and Use, 2009

Total 1.78 billion cubic feet

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U.S. Timberland Inventory net volume of growing stock by county

Source: US Forest Service

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U.S. Timberland Production roundwood volume harvested by county

Source: US Forest Service

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South’s Timber IndustryPrimary wood-using mills

Source: US Forest Service

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U. S. South Annual Average Pine & Hardwood Sawtimber Stumpage

Prices Pine sawtimber $23.97 (2011) from a low of $4.10 per ton 1960

to a peak of $40.46 per ton in 1998

Source: U.S. Forest Service & Timber Mart-South

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Sources: Timber Mart-South, U.S. Forest Service & U.S. Bureau of Labor Statistics

South-wide Average Pine Stumpage Annual Average Real Prices in 1982 US$/Ton

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U. S. South Annual Average Pulpwood Stumpage Prices

Source: U.S. Forest Service & Timber Mart-South

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U. S. South Lumber Production

Source: U.S. Forest Service, U.S. Census, and Random Lengths Yardstick

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U. S. Wood Pulp Production

Sources: Pulp & Paper International and American Pulp & Paper Association (AF&PA)

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U. S. South Total Pulpwood Production

Source: US Forest Service , Forisk & CFB

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Annual Housing Starts:1980 through 2011, est. 2012

Sources: U.S. Census Bureau (Single Family + Multifamily Starts)

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Monthly Housing Starts:January 2006 through June 2012

US Total & US South

Sources: U.S. Census Bureau (Single Family + Multifamily Starts)

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US South Housing Starts vs. Pine Sawtimber Stumpage

1976 to 2011, 2012 ytd

Sources: U.S. Census Bureau (Single Family + Multifamily Starts)

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Paper & Paperboard ProductionJanuary 2006 through June 2012

Source: AF&PA

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NBSK Pulp PricesMonthly January 2006 through July 2012

Sources: FOEX Ltd

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Remodeling Expenditures (LIRA)1996 through present

(3Q 12 through1Q 13 predicted)

Source: Harvard University

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Southern Pine Lumber ProductionAnnual 1950 through 2011, 2012 est.

Sources: Southern Forest Products Association

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Southern Saw Mill Capacity & Number of Mills

Source: USDA & TMS estimates,

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Southern Pulp Mill Capacity & Number of Mills

Source: USDA & TMS estimates,

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US South Fuel Wood Pellet Mills

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US South Fuel Wood Pellet Mills

• 29 Operating wood fuel pellet manufacturing facilities.

• At least one in each state • Capacity is about 3.2 million tons of

pellets• Conversion is about 2 tons of green wood

per ton of pellets.

Top Pellet Producers

• Top 3 mills have about half the total capacity – 1.6 million tons per year– Georgia Biomass, Waycross GA– Green Circle Bio, Cottondale FL– Enviva, Ahoskie NC

• 5 Mills at 120,000 - 150,000 tpy

• 21 Mills at 6,000 - 90,000 tpy

Proposed Wood Fuel Pellet Projects

• 15 new facilities proposed in last 12 months – 5 in 3rd Quarter– All in Georgia or South Carolina

• 6.0 million tpy announced capacity

• 12 million tpy increased wood demand

Proposed Wood Fuel Pellet Projects• 6 proposed for 2012 startup, largest

– Enviva, Northampton NC - 440,000 tpy

– Westervelt, Aliceville AL - 310,000 tpy

– Fram, Lumber City GA - 138,000 tpy

• 5 proposed for 2013 startup– German Pellets, Woodville TX - 550,000 tpy

– Franklin Pellets, Franklin VA - 500,000 tpy

– Enviva, Courtland VA - 500,000 tpy

– Point Bioenergy, Baton Rouge LA - 440,000 tpy

– Zilkha Biomass, Selma AL 440,000 tpy (former Dixie Pellets)

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Operating & Proposed Pellet Mills

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US South Wood Biomass to Electric Power Facilities

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US South Wood Biomass to Electric Power Facilities

• 15 Operating wood biomass to electric power facilities.

• At least one in 9 of 11 states in the South • Capacity is about 600 Megawatts of power• Average output 40 Megawatts• Conversion is about 10,000 tons of green

wood per Megawatt.

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Proposed Wood Biomass to Electric Power Facilities

• 17 Active projects announced in the last 12 months for 2012-2013 startup

• 780 Megawatts of power output• 3 Proposed for 2012 startup

– Piedmont Green Power, Barnesville GA - 50 MW– Green Power Solutions, Dublin GA 50 MW– WGS Energy, Twiggs County GA 35 MW

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Operating & Proposed Wood Biomass to Electric Power Facilities

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The South’s Pulp Mills as Potential Biomass to Power Facilities

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The South’s Pulp Mills as Potential Biomass to Electric Power Facilities

Wood Fuel Pellet & Pine Pulpwood Prices

TMS & RISI

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Proposed Biomass to Liquid Fuel Facilities

Wood Energy Market Future

• ?????• Negatives

– Policy Driven– Weak economics

• Positives– Renewable– “Green”– Wood is Good

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Southern Pine Plantingby ownership type

Source: Georgia Forestry Commission & Smurfit-Stone Container

11 southeastern states plus OK & KY* Est. some states 2005-2008

Management Strategies

• Emphasis Markets and Timing

• New Sales Approaches– Landowner & Logger coordination– Longer term arrangements?

• Keep growth rates up

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Southern Timber Trends

Final

Questions

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Southern Timber TrendsSources

• FRA 2000 www.FAO.com• SFRA www.srs.fs.fed.us/sustain/• Wood Markets 2002• North American Pulp and Paper Factbook• Pulp and Paper International• USDA Forest Service • Wood Resources International

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Southern Timber TrendsSources (cont.)

• Forest Resources Association• APA Engineered Wood Association• Random Lengths• US Department of Commerce• US Census Bureau• US Federal Reserve• AF & PA• SFPA