1. Southern Timber Market Status and Outlook
Yanshu Li
Warnell School of Forestry & Natural Resources
University of Georgia
2019 Southern Outlook Conference
September 25, 2019
Atlanta, GA

2. Overview Supply (abundant) Demand (stable)
Trade (impacts vary by product)
Impacts of Hurricane Michael (devastating, local)
Timber prices (stagnant)
Timber market outlook

3. Major timber products Paper, paperboard products Pulpwood Pine
Wood panels
Paper, paperboard products
Pulpwood
Sawlog & veneer log
Pine
Hardwood
Lumber
Roundwood

4. Supply

5. U.S. South is the “wood basket” of the country
Source: USFS FIA & TPO

6. Roundwood production, by species group
U.S. South
Source: USFS FIA & TPO

7. Growth-to-removals ratios have increased

8. Growing stock has been accumulated in the South
+ 12.5%
Source: USFS FIA

9. More acreage is in the sawtimber class
Source: USFS FIA

10. We are growing more than we cut
1.56
1.77
2.09
2.15
1.80
1.93
2.29
1.41
1. 50
1.17
1.39
2.32
1.34
Growth/removals ratio
Source: USFS (2017)

11. Demand

12. Lumber production has increased as housing market recovers, but at a slower rate
Why lumber production grows slower?
Housing start grew mostly in multi-family
Substitution from other materials
Substitution from Canadian lumber
Source: US Census Bureau, WWPA, SFPA

13. Lumber production has increased as repair and remodeling expenditure rises
US softwood lumber production
Homeowner repair and remodeling expenditure
US South sfwd lumber production
Source: Random Length, WWPA, Harvard Joint Center for Housing Studies

14. US structural panel production has increased
Source: USFS FIA

15. Paper and paperboard production in the U.S.
Source: FAOSTAT

16. Southern softwood lumber mill capacity expansion
Since 2017:
new mill startups: 9
new mills planned: 8
mill expansion: 25
By 2021:
capacity increase by 4.7 billion bf
25% increase from the 2016 level
reach ~22.6 billion bf
Source: TMS

17. Source: TMS

18. Source: TMS

19. Trade

20. Southern yellow pine log exports
30%
1 m3 = 35 ft3, 6000 million ft3 (annual prod)m, less than 1%
Data source: USDA FAS

21. Southern yellow pine lumber exports
Data source: USDA FAS

22. Hardwood lumber exports
Data source: USDA FAS

23. Impacts of Hurricane Michael

24. Hurricane Michael Strongest hurricane in decades
Widespread timber damage in FL Panhandle and Southwest GA
Source: GFC (2018), Florida Forest Service (2018)

25. Georgia
Florida
Acres affected:
2,368,000
2,800,000
Catastrophic damage (>95%)
79,500
350,000
Severe damage (75%)
296,000
1,041,000
Moderate damage (25%)
1,456,000
1,418,000
Light damage (10%)
536,000

26. Impacts on the local timber industry are profound and long-lasting
Timber loss: $1.3 billion (FL), $760 million (GA)
400,000 acres in GA and 1.4 million acres in FL need to be salvaged, cleaned up, and replanted
Loss of additional timber due to insect and disease
Increased fire concern
Local sawmills facing lack of wood supply (10-20 years)

27. Assistance to landowners
Emergency Forest Restoration Program ($480 million, part of Disaster Relief Package)
Georgia:
Forest debris management program ($20 million)
Georgia timber tax credit program ($200 million)

28. Timber prices in Georgia Region 2

29. Southern timber prices

30. South-wide sawtimber stumpage prices
Data source: TMS (2018)

31. South-wide pulpwood stumpage prices
Data source: TMS (2018)

32. Key supply and demand factors affecting timber products prices
U.S. housing start and residential repairing & remodeling activities are key drivers for the demand for solid wood products
Demand for paperboard depends on the growth of manufacturing sectors and general economy
Industrial uses will rise with overall economy trend
Trade policies (e.g., US-Canada Softwood Lumber Agreement; US-China tariff war)
Demand for energy products

33. Some other factors to consider
Cross Laminated Timber
Reduction in timber supply in Western U.S. and Canada
More timber harvest on public land (West)
Reduced log and lumber exports in the Pacific Northwest
New mills are more efficient (less wood)
U.S.-China trade policy
The executive order instructs the secretaries of agriculture and interior to consider harvesting a total of 4.4 billion board feet of timber from forest land managed by their agencies on millions of acres, and put it up for sale. The order would translate into a 31 percent increase in forest service logging since 2017.

34. Southern timber market outlook

35. Housing starts will continue slow recovery
2021
Source: US Census Bureau (Sep. 2019), NAHB (forecast)

36. Remodeling and repairs growth slows

37. Outlook Demand for southern timber is expect to improve slowly
A large oversupply on the stump will continue to keep sawtimber prices down
Pulpwood prices are expected to remain flat or lower due to increased lumber production
Paper and paperboard industry fared better during the recession and recovered sooner
Reduced supply of mill residues from lumber mills due to curtailment or closures
Reduced supply of pulpwood due to reduction in harvest (for sawlogs)
Demand for OSB pushes up pulpwood prices as housing start improves
Emerged demand for energy product (wood pellets, woody biomass for electricity)
As sawmill production resumes, improved supply of mill residues and pulpwood put downward pressure on pulpwood price