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Hakan Ekstrom's  Instablog

Hakan Ekstrom
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Mr. Ekstrom is the President of Wood Resources International LLC . The company is an internationally recognized forest industry consulting firm established in 1987, which publishes two quarterly timber price reports and have readers in over 25 countries. The Wood Resource Quarterly, established... More
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  • US Sawlog Prices Started Falling In The 2Q/14 After A Three-Year Upward Trend, This Due To Lower US Lumber Prices And Weaker Log Export Markets In Asia

    After a healthy 2013 and early 2014, lumber markets in the US started weakening in the spring with lumber prices falling over ten percent so far this year. The reduced lumber prices together with lower demand for US logs in Asia in the second quarter have put downward pressure on US sawlog prices so far this year.

    The sawmilling sector in the US has been in a steady comeback mode ever since the global financial crisis struck in 2008. From 2009 to 2013, production has gone up every year, and the total production increased 28 % over this four-year period, at about the same pace in the South and the West. During the first quarter of 2014, production fell in the South by 1.1% as compared to the same period in 2013, while production was up 2.1% in the West (most in the Inland region).

    Both lumber export from and imports to the US have gone up in the 1Q/14 year-over-year. Export volumes were up 18 % with the biggest increases in shipments to China (+73%) and Mexico (+6%). Importation of lumber increased five percent in the first quarter with Canada (+6%) and Germany (+104%) accounting for the biggest volume gains compared to the 1Q/13.

    The recent price trend for lumber in North America has been downward after sharp increases last summer and fall. Prices in May this year were down between 8-17%, depending on species, from their recent peak in the beginning of the year.

    Healthy log export markets to Asia during the first quarter this year and increased lumber production along the West coast resulted in continued upward price pressure on sawlogs in the US Northwest in early 2014. In the 1Q/14, Douglas-fir log prices reached their highest level since 2006 and prices for hemlock logs were at an 18-year high. The dramatic price swings in Western US the past five years stand in sharp contrast to the US South, where average prices have only moderately adjusted upward from 2009 to the 1Q/14.

    With the demand for logs from both domestic sawmills and the export market in Asia weakening during in the second quarter, sawlog prices started to fall back in both the South and the West after having trended upward for over three years. In May, prices for sawlogs were down between 5-15%, depending on species and region, as compared to the beginning of the year.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jun 27 9:02 PM | Link | Comment!
  • New Zealand Is Now The World's Largest Supplier Of Softwood Logs With Exports Increasing Fourfold To Almost Two Billion Dollars In Five Years

    More than 20 percent of the world's softwood log trade originates from New Zealand. In 2013, the country exported 57 percent of the country's timber harvest and the value of the trade had tripled in five years. A majority of the log volumes were destined for China, but South Korea, India and Japan were also sourcing logs from New Zealand last year.

    New Zealand has become the world's largest exporter of softwood logs, with shipments in 2013 accounting for over 20 percent of global trade, according to estimates by WRI. Russia and the US ranked second and third as global log suppliers, each shipping about 15 percent of the softwood logs traded in the world last year.

    Not only has the volume of logs exported from New Zealand increased dramatically the past five years, with almost a doubling of exports to over 16 million m3, but the value of the logs has gone up even faster. The average value of exported logs reached a new record high in March this year, which was double the value just four years ago, as reported in the Wood Resource Quarterly (WRQ).

    Despite the dramatic increase in sawlogs leaving the country and the closures of a number of manufacturing facilities in New Zealand, domestic log consumption has not changed much the past ten years. In 2013, the forest industry consumed just slightly less logs than the ten-year annual average consumption.

    China is, of course, the reason for the surge in log exports and the record high timber harvest levels in New Zealand. In 2013, shipments to China accounted for 72% of the total export volume, followed by South Korea, India and Japan. The magnitude of the log export volume cannot be underscored enough. In the 4Q/13, as much as 57 percent of the timber harvest in New Zealand was exported in log form. Such a high share of exports of unprocessed wood is unmatched in the rest of the world.

    While timberland owners have mightily benefited from the strong log export market, domestic sawmills have not seen the same surge in export volumes. In 2008, the total value of exported lumber equaled that of exported logs at approximately 500 million US dollars. Since that time, the export value for lumber has gone up a respectable 30%. However, this pales in comparison with the value of logs that have gone up fourfold to reach close to two billion US dollars in 2013.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jun 27 8:56 PM | Link | Comment!
  • Wood Pellet Exports From North America To Europe Have Doubled In Two Years To Reach 4.7 Million Tons In 2013 With The US South Accounting For 63% Of The Volume

    North America exported wood pellets valued at over 650 million dollars in 2013, a dramatic increase of more than 250 percent in just two years, according to data compiled by the North American Wood Fiber Review. The US South shipped almost three million tons last year, which was almost two-thirds of total export volume from North America.

    With no slowdown in sight, North American wood pellet exporting companies keep building new facilities to manufacture pellets for the European market. Export volumes hit a new record high in the 4Q/13 and the total shipments for 2013 were up almost 50% from the previous year and more than double that in 2011. The total value of wood pellet exports reached over 650 million dollars last year.

    A rapid expansion of pellet production capacity in the US South during 2012 and 2013 has resulted in a tripling of pellet production in the region in just two years. The expansion, which is entirely driven by demand for biomass in Europe, has increased pellet exports from 800,000 tons in 2011 to 2.9 million tons in 2013 according to data compiled by WRI and reported in the North American Wood Fiber Review (Note. WRI data is partly based on an industry survey since customs data on both sides of the Atlantic are not always reliable).

    Many of the recent investments in pellet capacity in the US South have occurred along the Atlantic coast, with Enviva and Fram Renewables expanding production in the states of Georgia, North Carolina and Virginia.

    The expansion in Canadian pellet export has been less dramatic than that of the US, but 2013 volumes were still over 50% higher than in 2011, with British Columbia shipping a majority of the volume. In Canada, there have been two recent developments of interest, 1) the first regular shipments of pellets to South Korea started in the second half of 2013 and, 2) exports from Eastern Canada from Quebec, Nova Scotia and New Brunswick increased during this same time period.

    Eastern Canada will see additional pellet export volumes later in 2014 when Rentech begins operation at its two pellet facilities now underway in Ontario. As reported in the NAWFR (woodprices.com), a Quebec pellet export facility under construction at the Port of Quebec is the first dedicated infrastructure for pellet exports along the St. Lawrence Seaway. Its presence, when completed, reduces the heretofore, substantial entry barrier for a number of smaller pellet companies which are interested in the international market.

    In the 4Q/13, export volumes from the Eastern provinces accounted for 25 percent of Canada's total pellet exports, a share that is likely to increase in 2014 and 2015.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    May 07 11:22 AM | Link | Comment!
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