Wood fiber prices decreased for the majority of pulp and paper producers in the third quarter of 2016, particularly newsprint, the hardwood pulps, coated papers and boxboard segments. Forest2Market's Western Hemisphere Benchmark shows that these three segments dropped by 2-6 percent, quarter-over-quarter.
Forest certification systems emerged following the United Nations Conference on Environment and Development (UNCED or "Earth Summit") held in Rio de Janeiro, Brazil in 1992 and, in particular, the Non-Legally Binding Authoritative Statement of Principles for a Global Consensus on the Management, Conservation and Sustainable Development of All Types of Forests[i] that recognized the importance of the conservation, management and sustainable development of forests. Since this summit, several certifications have begun to be used to certify timber and subsequent wood products as sustainable. Two important certifications are the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC). These two certifications comply with the forest management requirements of the Sustainable Biomass Partnership (SBP) certification for biomass.
Based on US Census Bureau trade data through August, structural (conifer) plywood imports into the US are on track to increase 60.4 percent in 2016 to a total of 1.0 billion square feet (BSF)-roughly equal to 12 percent of domestic production. Continued improvements in housing and construction markets, along with a strong dollar, have contributed to this increase. At 1.0 BSF, 2016 imports will reach a 10-year high eclipsing 2007's measurement of 0.7 BSF, but below the peak of 1.7 BSF in 2005.
Over the last few decades, the US South has become the most active region in the country for the forest products industry. While a number of factors have contributed to this trend, it has ensued primarily because the South provides ample access to fast-growing, quality wood fiber that is managed on private lands and is therefore not subject to much of the overbearing regulation that is so pervasive in other parts of the country. This abundance of affordable wood has attracted investment from existing, foreign-owned wood products companies, as well as those participating in new industry sectors, including industrial wood pellets, biofuels and biochemicals.
As we approach the end of the year, it's a good time to analyze year-to-date (YTD) and historical stumpage market trends and prices throughout the US South. While winter seasonal pressure typically drives prices higher, I want to take note of the data before 4Q affects the market.
Total industrial production (IP) decreased 0.4 percent in August (-1.1 percent YoY), offsetting most of July's +0.6 percent. Manufacturing output also declined 0.4 percent, erasing July's gain. New orders increased 0.2 percent in August. Interestingly, YoY comparisons of seasonally adjusted ex-transportation data were negative (-1.6 percent)-the 22nd consecutive month of YoY contractions-but not-seasonally adjusted estimates reflected a 0.7 percent increase. New orders for non-defense capital goods excluding aircraft, a proxy for business investment spending, rose by 0.9 percent (-0.9 percent YoY). Business investment spending has contracted on a YoY basis during all but two months since December 2014.
New-home construction in the US dropped unexpectedly in September primarily due to a fall in multifamily building. While the data was mixed, residential real estate continues to confound as the market can't decide which way it wants to go from month to month.
Even though the October 12 deadline has passed, there is still hope for a resolution to the US/Canada dispute over the embattled Softwood Lumber Agreement (SLA). Both sides are still negotiating in Washington, and there won't be any punitive measures taking effect in the near term. That said, a bipartisan group of senators is urging President Obama to encourage Canada to forge an agreement on a new softwood lumber trade deal.
Last week, Eduardo Porter wrote a column in the New York Times in which he promoted the standard anti-forestry, reactionary talking points that many news media outlets (sadly) rely upon. In his piece, he warned that the use of biomass for electricity generation equates to "burning forests," and argued against the carbon neutrality of biomass as a renewable feedstock. As advocates for sustainably-managed working forests, we have addressed these misleading inaccuracies on a number of occasions.
