Two Trees Forestry
Market update: June 2009
Wood markets likely to stabilize after tumultuous winter
One wood broker told me that we are in a "small window of inopportunity." Another buyer said, "I used to be able to predict trends a season ahead, then a month, then a week ..." Fortunately, with summer now upon us, some clarity has appeared as the large winter-produced inventories dwindle and paper and wood orders pick up. From here, I see stable markets and good prices for pine sawlogs, low prices for hardwood pulpwood, modest prices for firewood and popple groundwood, and potentially improving pricing and demand for oak sawlogs and veneer. I also see loggers hunkered down, with less work than in years past, equipment for sale, and some employees let go.
The steady run of high pulpwood prices that began in the spring of 2008 ended abruptly in December, when mill prices and demand plummeted. Popple and hardwood pulpwood, the darlings of the price run-up, fell way off, while all other pulpwood products became subject to severe delivery quotas. Then in March, Verso Paper and NewPage stopped buying pulpwood. Purchasing has since resumed, but at lower prices. As a result many loggers now chip pulpwood into biomass. Pine sawtimber maintains a relatively steady market, though those mills are tightly managing their inventories. Hardwood logs, oak and sugar maple particularly, have seen low demand and prices. Finally most mills have new cash management policies, with restricted buying and delayed payments. The latter has caused another week's delay in landowners receiving payments.
Currently, firewood buyers are providing higher priced outlets for low-grade hardwood. Biomass (chip) buyers have kept up demand and even with a perfect winter didn't institute quotas.
The biomass plants benefited by selling both electricity and renewable energy credits. This latter comes from fossil fuel burners that buy credits to offset their own use/emissions from those who generate energy from biomass, wind, hydro, geothermal, and solar. Interestingly Boralex, a biomass energy company has boosted its ability to procure biomass by financing more than 50 chippers to loggers.
So as summer begins glimmers of optimism have emerged, including Domtar's decision to reopen its Washington County pulpmill, after what turned out to be only a seven-week shutdown. Rumors also abound that new wood pellet plants are being planned.
Lastly, the work-a-day world for logging contractors is also uncertain. A number of contractors laid-off workers and/or sold equipment, as they sought work from market-skittish landowners. Fortunately that concern is beginning to wane. From what I can see when landowners are ready the logging community will be ready and willing/able to pay reasonable to good rates for their wood.