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Macroeconomic Trends and the Forest Products Sector in the South

Amanda Hamsley Lang


1

 

About Forisk Consulting

 

 

  • Forisk provides management consulting and educational services to senior management and investors in the forest industry and timberland investing sectors.
  • Founded in 2004.
  • Key products:
    • Wood Bioenergy US
    • Timberland Owner List
    • Forisk Forecast
  • Staff experience includes forest economics, wood procurement, business strategy, finance, and equity research.

2

 

Wood Use in the South

Southern Wood Use 2011

  • 240 million tons of wood in 2011
    • 108 million tons ppwd
    • 72 million tons pgrade
    • 36 million tons hpwd
    • 24 million tons hgrade

 

 

 

Open mills in South

  • Total of 1,063 wood-using mills
    • 79 pulp/paper mills
    • 100 chip mills
    • 21 OSB mills
    • 52 plywood/veneer mills
    • 722 lumber mills

 

Source: Wood Demand Report and Forest Industry Shapefiles, Center for Forest Business, UGA

3

 

Georgia leads the US South in current wood demand.

Pine Sawtimber + Chip-n-saw (million tons)

  • Georgia (11.6)
  • Alabama (8.9)
  • Arkansas (8.9)
  • Mississippi (8.3)
  • North Carolina (8.0)

Pine Pulpwood + Direct Chips (million tons)

  • Georgia (22.2)
  • Alabama (15.5)
  • South Carolina (12.1)
  • Louisiana (11.0)
  • Mississippi (10.6)

Source: Wood Demand Report, Q4 2011

 

4

 

South: Pine Sawtimber Demand Sources: Wood Demand Report, Timber Mart-South

Sources: Forisk Consulting, Timber Mart-South                                                       5

 

 

Pine Sawtimber Forecast Assumptions

  • Real GDP
    • Grows 2 – 2.5% thru 2013; highest growth of 3.5% in 2014
  • U.S. housing starts
    • Top 1.0 million in 2014
  • U.S. population
    • Increasing 10% over next 10 years
  • Vacancy percent for rental properties
    • 7.5% - 8% per year for next 10 years
  • Pine sawtimber exports
    • High growth/export scenario only
    • Directly impacts states with ports; indirectly impacts other states
    • Area of ongoing research

Sources of data: EIA, Freddie Mac, Fannie Mae, Mesirow Financial, NAR

6

 

Pine Sawtimber Forecast: US South 

Sources: Forisk Consulting, Timber Mart-South                                                                                7

 

South: Pine Pulpwood Demand

Sources: Wood Demand Report, Timber Mart-South                                                                        8

 

Bioenergy Projects: Screen for Success

  • Technology
    • Does the project rely on proven or unproven technology?
  • Status
    • Is the project under construction or operating?
    • Is the project on hold or is the plant shut down?
    • Has the project received/secured/signed two or more of:
      • Financing
      • Air quality permits
      • EPC contracts (Engineering, Procurement & Construction)
      • Power purchase agreements for electricity facilities
      • Interconnection agreements for electricity facilities
      • Wood supply agreements
      • Location

9

 

Bioenergy Demand: US Projects:

 

 

  • 452 → Expected: 295 (65%)
  • Wood demand: 124 MM → Expected: 72 MM (58%)

Sources: Forisk Consulting, as of April 2012

10

 

U.S. bioenergy project progress

 

Source: Forisk Consulting, as of April 2012

11

 

Pine Pulpwood Forecast Assumptions

  • Multiple end uses: pulp/paper, OSB, bioenergy
    • Incorporates recovery & re-use rates for paper
    • Locally, bioenergy demand can affect prices
  • Macrofactors include:
    • Real GDP
    • Housing starts
      • Affects pulpwood prices regionally
      • Increases demand for OSB (some upward pressure on prices)
      • Increases supplies of residual chips from sawmills, thus reducing demand for pulpwood produced in the woods (downward pressure on prices)
    • U.S. population growth
    • Unemployment (%)
      • Forecast: 9% in 2012; 5.7% in 2021
    • Inflation (%)

Sources of data: EIA, Freddie Mac, Fannie Mae, Mesirow Financial, NAR

12

 

Pine Pulpwood Forecast: US South

 

Source: Forisk Consulting  

13

 

Thank you

Amanda Lang

www.forisk.com

www.foriskstore.com

forisk.wordpress.com

   
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