Timber Mart-South Market News Quarterly
2nd Quarter 2011 -- Vol. 16 No. 2-A
Timber Mart-South Market News Quarterly Abridged Version
The Journal of Southern Timber Market News A Quarterly Report of the Market Conditions for Timber Products of the US South Copyright © 2011 by Timber Mart-South, Inc.
Tom Harris, Publisher (706)542-2832 (706)542-4756 Jacek Siry, Research Editor Sara Baldwin, Robert Simmons & Jonathan Smith, Editors Staff: Lee Lewis, Russell McCarty, Stephen Smith and Justin Wright Mailing address: Timber Mart-South, 1860 Barnett Shoals Road, PMB 103-598, Athens, GA 30605. Phone: (706)542-4756 • Fax: (706)542-1670 • E-mail: [email protected] Web site: www.TimberMart-South.com Copyright © 2011:
This publication is copyrighted under the statutes of the United States. The compilation of facts and information herein contained are the subject of private property rights of the publisher. Reproduction or transmission, either manually or electronically, in whole or in part, without express permission of the owner or other unauthorized use, is not permitted. Publisher provides the information herein as a convenience to its readers. Publisher does not represent or endorse the truth, accuracy, reliability or completeness of any of the information contained in this publication. PUBLISHER PROVIDES THE INFORMATION IN THIS PUBLICATION ON AN ‘AS IS’ AND ‘AS AVAILABLE’ BASIS, WITH NO WARRANTIES WHATSOEVER. THOSE WHO USE PRICES PUBLISHED HERIN FOR A SPECIFIC PURPOSE, SALE OR CONTRACT DO SO AT THEIR OWN RISK. UNDER NO CIRCUMSTANCE WILL PUBLISHER HAVE ANY LIABILITY FOR ANY LOSS OR DAMAGE WHATEVER CAUSED BY ANY READER’S RELIANCE ON INFORMATION OBTAINED THROUGH THIS NEWSLETTER.
ISSN 1945-4082A The University of Georgia Warnell School of Forestry & Natural Resources is under contract with the Frank W. Norris Foundation to compile and publish the TMS Market News.
Table of Contents of the Abridged Version Prices & Market Conditions ....................................................................................................3 Market Indicators ....................................................................................................................4 Lumber & Panel Indicators, US Building Construction, Pulp & Paper Indicators, Energy & Carbon Markets, Equity Markets, Manufacturing Activity Timberland Transactions .......................................................................................................12 Openings & Closings .............................................................................................................14 Biofuel & Bio-Energy.............................................................................................................16 Restructuring .........................................................................................................................16 Weather Etc...........................................................................................................................18
For a the full issue, please contact us or order http://www.tmart-south.com/tmart/subscrib.htm Please see our advertisers’ section; see a list on page 18.
Page 2
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Timber Mart-South Market News Quarterly 2 nd Quarter 2011 – Vol. 16 No. 2-A
South-wide Pine Stumpage Prices quarterly averages
Prices & Market Conditions
$50 Sawtimber
South-wide timber markets remained weak in the 2nd Quarter. Four out of the five major product stumpage prices dropped from last quarter. All five were well-below prices in the 2nd Quarter 2010 when markets were just easing off a weatherinduced price spike. TMS prices do not include salvage timber but in some cases pulpwood prices were affected by the quantity of extra timber on the market due to tornado and fire damage.
$/ton
$40 $30
Chip-n-saw
$20 Pulpwood
$10 $0 2002
2004
2006
2008
2010
2012
Tim ber Mart-South
South-wide Hardwood Stumpage Prices quarterly averages
South-wide Average Stumpage Prices $/ton
Pine Sawtimber
2Q 11
1Q 11 up/(dn) 2Q 10 up/(dn)
$23.80
$25.94
($2.14)
$30
year ago
$29.41
($5.61)
Note: for a table of the five major products, please see our full News Quarterly. Order or subscribe at http://www.tmart-south.com/tmart/subscrib.htm
$25 $/ton
one quarter
Mixed Hardwood Sawtimber
$20 $15 $10 $5 $0 2002
Pulpwood
2004
2006
2008
2010
2012
Tim ber Mart-South
Pine Stumpage Prices All three south-wide average pine stumpage prices fell this quarter. Pine sawtimber and pine chip-nsaw declined to levels not seen since 1992. Pine pulpwood was down nearly a dollar per ton from last quarter and about $2 dollars per ton from a year ago.
Page 3
Hardwood Stumpage Prices The South-wide average mixed hardwood sawtimber stumpage price eased upward this quarter, the only major timber product to increase. Prices continue to be about $2 per ton below the all-time high set in the 3rd Quarter 2010. Hardwood pulpwood prices declined for the fifth straight quarter, slipping back to 2008 levels.
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Market Indicators The pace of economic recovery cooled somewhat this quarter. Uncertainty abounds, with concerns about creeping inflation and high levels of US debt compounded by natural disasters that impacted the South and Central US. Outside the US, China moved to slow its economic growth and combat inflation, affecting imports of forest products from the US. Japan battled to control a nuclear reactor damaged by last quarter’s tsunami and earthquake but made progress in restoring its manufacturing sector. Rising world oil prices were met with the unusual measure of oil releases from strategic reserves at the end of the quarter. However, history will perhaps best remember this quarter as the one when the US Navy Seals captured and killed Usama bin Laden, the Saudi Arabian-born leader of the Al Qaeda terrorist group.
The Structural Panel Composite price ended June at $281 per thousand square feet, 3/8 inch basis (msf), down for the quarter and from yearago prices. Random Lengths Structural Panel Composite $/msf 24-Jun-11
25-Mar-11
% +/-
25-Jun-10
% +/-
281
304
-7.6%
328
-14.3%
$575 $450 $325 $200
Random Lengths Structural Panel Weekly Composite Price ($/msf)
2006 2007 2008 2009 2010 2011 2012
Lumber & Panel Indicators The Random Lengths Framing Lumber Composite (FLC) moved lower this quarter by nearly $30 per mbf, so that the price ended June at $262 per thousand board feet (mbf); the FLC was down for the quarter, but still $15 per mbf above the end of June 2010. The Southern Pine Composite declined more than the FLC, ending the quarter at $244 per mbf, down $40 per mbf for the quarter and more than $25 per mbf below one year ago. Random Lengths Framing Lumber Composite $/mbf 24-Jun-11
25-Mar-11
% +/-
25-Jun-10
% +/-
262
291
-10.0%
247
6.1%
Random Lengths Southern Pine Composite $/mbf 24-Jun-11
25-Mar-11
% +/-
25-Jun-10
% +/-
244
284
-14.1%
272
-10.3%
Random Lengths Framing Lumber Weekly Composite Price ($/mbf)
$500 $390 $280 $170 2006 2007 2008 2009 2010 2011 2012
Page 4
Southern pine 2x4 lumber prices followed the Southern Pine Composite trend, while 2x10s remained at the lowest prices in years. Prices for dimension lumber in the eastern South were stronger, a trend attributed to proximity to markets with higher demand.
Southern pine plywood prices and Southern Oriented Strand Board (OSB) prices both declined as well, following the Composite down. The Hardwood Review US Kiln Dried Hardwood Lumber Index was $1,111 per thousand board feet (mbf) at the end of the quarter, nearly unchanged from last quarter, but below prices a year ago. Hardwood lumber prices sustained their 2010 rally longer than sofwood lumber and have stabilized at a higher level. Hardwood Lumber Price Kiln dried Index $/mbf 24-Jun-11
25-Mar-11
% +/-
25-Jun-10
% +/-
1111
1103
0.7%
1214
-8.5%
Hardwood Review Kiln-Dried Hardwood Weekly Lumber Index ($/mbf)
$1,500 $1,300 $1,100 $900 2006 2007 2008 2009 2010 2011 2012
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Page 5
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
The Southern Forest Products Association (SFPA) reported that southern pine lumber production was still slow, but has increased yearto-date through April compared to the same period in 2010. For more detail on mill activity this quarter, see Openings & Closings on page 14. Southern Pine Lumber Shipments billion bf, ytd Apr-11
Apr-10
% +/-
Apr-06
% +/-
4369
3970
10.1%
6552
-33.3%
US Building Construction According to the US Census, housing starts have declined in 2011 from 2010 levels. If starts continue at the current rate, total starts nationwide for 2011 will be 533,000, a new record low since 1959. US Residential Housing Starts, 000 units ytd May-11
May-10
% +/-
May-06
% +/-
230
250
-8.2%
815
-71.8%
South Residential Housing Starts, 000 units ytd
SFPA US South Pine Lumber Production (Monthly 000 mbf)
1,900 1,500 1,100 700 2006 2007 2008 2009 2010 2011 2012
According to the latest report from the APA Engineered Wood Association, combined southern panel production increased slightly in the 1st Quarter. OSB production slowed compared to the last quarter of 2010, and plywood production increased. Both OSB and plywood production were higher than in the 1st Quarter of 2010.
May-11
May-10
% +/-
May-06
% +/-
123
134
-8.3%
420
-70.7%
US Census Bureau US Housing Starts (Monthly SAAR Million Units)
2.7 2.1 1.5 0.9 0.3 2006 2007 2008 2009 2010 2011 2012
1Q11
4Q10
% +/-
1Q10
% +/-
2009
2028
-0.9%
1835
9.5%
Total US privately-owned housing starts through May 2011 were 230,000 units, down about 8 percent from the same period in 2010. Markets for new homes have continued to be weak as have markets for existing homes. The policy-created bubble-lette of last Spring appears to have worked its way through the data and now markets are back to bouncing along the bottom.
Southern OSB Production billion sf
Southern Plywood Production billion sf 1Q11
4Q10
% +/-
1Q10
% +/-
http://www.census.gov/const/newresconst.pdf
1462
1409
3.8%
1377
6.2%
http://www.census.gov/const/newressales.pdf
APA Engineered Wood Association US Southern Panel Production (Quarterly 000 msf, 3/8" basis)
3,600 OSB 2,800 2,000 Plywood 1,200 2006 2007 2008 2009 2010 2011 2012
Page 6
Expenditures on residential remodeling have been lower in 2011 than in the first part of 2010 according to the US Census. US Improvement Expenditures (Billion $) ytd May-11
May-10
% +/-
May-06
% +/-
41.3
42.6
-2.9%
52.7
-21.6%
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
US Census Improvement Expenditures (Million US$ monthly) $17,000 $13,000 $9,000 $5,000 2006 2007 2008 2009 2010 2011 2012
Remodeling activity increased this quarter compared to last quarter due to seasonal factors, but decreased from the same quarter a year ago. Expenditures for the first five months of 2011 were $41.3 billion, down about 3 percent from the same period in 2010. If expenditures continue at the same rate, the total for 2011 will be about $112 billion, the lowest level since 2003. http://www.census.gov/const/www/c30index.html The Harvard University Leading Indicator for Remodeling Activity (LIRA) continues to estimate total 2011 improvement expenditures at about $115 billion, exceeding spending in 2010. Activity in 2nd Half will have to increase if these expectations are to be met.
8.0 7.0 6.0 5.0 4.0 2006
Freddie Mac 30-year Fixed US Mortgage Monthly Average Rates (percent)
2007
2008
2009
2010
2011
2012
The Federal Reserve Open Market Committee (FOMC) maintained the federal funds rate at zero to 0.25 percent again this quarter, while saying the economic recovery was continuing at a moderate pace. Keeping the “overnight” rate pegged at rock bottom since December 2008, the committee reported that weak labor markets justified continued low rates, in spite of higher prices for food and energy. At the end of June, the FOMC ended its program, widely known as “QE2” (for quantitative easing, part two), to purchase $600 billion longer-term Treasury securities. Reinvesting principal payments from maturing securities will continue.
http://www.jchs.harvard.edu/media/lira/ Mortgage activity increased this quarter according to the Mortgage Bankers Association (MBA). Refinancing dominated, representing about 70 percent of loan applications, as homeowners moved to capture lower rates. Mortgage rates shifted lower as the quarter progressed. The June average for 30-year fixedrate mortgages was 4.51 percent according to the Federal Home Loan Mortgage Corp. (Freddie Mac). While below the average rate last March and lower than June of 2010, mortgage rates remain above the 4.23 percent low set in October 2010. 30-year Fixed US Mortgage Rates (percent) Jun-11
Mar-11
Δ +/-
Jun-10
Δ +/-
4.51
4.84
-0.33
4.74
-0.23
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Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Pulp & Paper Indicators
FOEX NBSK Index $/ton
US paper and paperboard production year-to-date through May remained steady according to the American Forest and Paper Association (AF&PA). Total production was nearly unchanged compared to the same period in 2010. Paper production was down about 3 percent, but paperboard production eased upward. For more detail on mill activity this quarter, see Openings & Closings on page 14.
% +/-
29-Jun-10
% +/-
1023
977
4.7%
976
4.8%
FOEX BHK Index $/ton 28-Jun-11
29-Mar-11
% +/-
29-Jun-10
% +/-
874
849
2.9%
918
-4.8%
FOEX Ltd. NBSK Pulp Index dollars per ton
$1,100 $900 $500
May-11
May-10
% +/-
May-06
% +/-
33,728
34,078
-1.0%
37,951
-11.1%
AF&PA Paper & Paperboard Production monthly 000 tons
7,600 6,600 5,600
2006 2007 2008 2009 2010 2011 2012
US pulp production more or less tracks paper and paperboard production. Softwood pulp prices moved higher this quarter. The FOEX Ltd. Northern Bleached Softwood Kraft (NBSK) pulp price index ended June at $1,023 per ton, up almost $50 per ton from the end of March, as well as from the end of June 2010. Bleached hardwood kraft pulp prices, at $874 per ton, followed softwood prices upward, but at a slower pace, and remain below prices a year ago.
Page 8
29-Mar-11
$700
AF&PA Paper & Paperboard Production million tons y-t-d
8,600
28-Jun-11
2006
2007
2008
2009
2010
2011
2012
Recovered corrugated container prices were steady for most of this quarter but stepped up in June. According to Official Board Markets, Old Corrugated Container (OCC) monthly average prices in the South were $145 per ton in June, up about $10 from last quarter and about $25 from a year ago. Old Corrugated Containers - US South in $/ton Jun-11
Mar-11
% +/-
Jun-10
% +/-
145
135
7.4%
120
20.8%
Official Board Markets U.S. Southern OCC Prices (dollars per ton)
200 150 100 50 0 2006 2007 2008 2009 2010 2011 2012
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Energy & Carbon Markets Fuel prices leveled off this quarter after a steady climb since last September. The June 2011 monthly average Gulf Coast diesel price was $3.88 per gallon, slightly lower after nearly reaching $4.00 per gallon in April and May. Gulf Coast #2 Diesel – Retail (cents per gallon) Jun-11
Mar-11
% +/-
Jun-10
% +/-
388
384
1.0%
289
33.9%
500
Gulf Coast No 2 Diesel Retail Prices Monthly (cents per gallon) US EIA
W Texas Int Crude Oil (dollars per barrel)
350 200
May-11
Feb-11
% +/-
May-10
% +/-
100.90
88.58
13.9%
73.74
36.8%
Europe Brent Crude Oil (dollars per barrel)
50 2006
In early June, the US Energy Information Agency (EIA) reduced its forecast of 2011 average crude oil prices for US markets from $104 per barrel to $102. The European benchmark Brent Crude, which normally trends closely with WTI, averaged $115 per barrel in May with spot prices at $108 per barrel in June. The EIA blamed the continued WTI discount to Brent Crude on high crude oil inventory in storage at Cushing OK due, in part, to floods and transportation bottlenecks along the Mississippi River System.
2007
2008
2009
2010
2011
2012
May-11
Feb-11
% +/-
May-10
% +/-
114.99
103.72
10.9%
75.95
51.4%
http://tonto.eia.doe.gov/oog/ftparea/wogirs/xls/psw 18vwall.xls Crude Oil prices declined slightly this quarter. Spot prices for West Texas Intermediate Crude (WTI) were at $95 per barrel at the end of June after averaging $101 per barrel in May. Prices eased in June after members of the International Energy Agency (IEA), including the US, agreed to release oil from strategic reserves to relieve supply disruptions caused by unrest in Libya.
Page 9
160 120 80 40 0
Crude Oil - W Texas Int Spot Price Monthly (dollars per barrel) US EIA
2006 2007 2008 2009 2010 2011 2012
http://tonto.eia.doe.gov/dnav/pet/xls/PET_PRI_S PT_S1_M.xls
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Carbon prices declined in Europe this quarter and the nearly non-existent carbon prices in the US continue to disappoint those who had hoped the market mechanism would help reduce US carbon emissions. The European Point Carbon price for the December 2011 vintage was €13.47 per ton on July 1st (about $19.49 per ton), down more than 20 percent from the end of last quarter but up about 3 percent from a year ago. Spot prices are available at:
Equity Markets Stock markets ended just above where they began this quarter. After surging and then falling, the Dow Jones Industrial Average (DJIA) ended the quarter at 12,414, up less than one percent for the quarter, but more than 25 percent from the end of June 2010. Dow Jones Industrial Average 30-Jun-11
31-Mar-11
% +/-
30-Jun-10
% +/-
12,414
12,320
0.8%
9,774
27.0%
http://www.pointcarbon.com/news/ The Regional Greenhouse Gas Initiative (RGGI) held its twelfth quarterly for carbon emissions of utilities in the Northeastern US auction on June 8th. The clearing price was $1.86 per CO2 allowance, the minimum reserve price for the auction and unchanged from the previous four quarters. Further details on results are available at: http://www.rggi.org/docs/Auction_12_Release_Re port.pdf
Dow Jones Industrial Average 13,500 12,000 10,500 9,000 2010
2011
2012
The S&P 500 ended June at 1,321 and the NASDAQ Composite at 2,774. Both were nearly unchanged from the end of March, and generally followed the same trend as the DJIA.
In May, the governor of New Jersey, one of the states participating in RGGI, announced his intention to withdraw from the program in an orderly fashion at the end of December. Governors of other states responded with expressions of satisfaction that RGGI was working for them, providing needed funds for emission control projects. Note: A CO2 allowance represents a limited authorization to emit one ton of CO2.
Page 10
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Page 11
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Manufacturing Activity Manufacturing activity continued to grow this quarter, although at a slower rate. The Institute for Supply Management’s Purchasing Managers Index (PMI), which aggregates activity in US manufacturing, was 55.3 in June, indicating continued strong economic growth for the 25th consecutive month. A PMI above 50 indicates economic expansion, and below indicates contraction. Paper & Paperboard Products reported growth in all three months this quarter. Wood Products reported strong growth in April but none in May and contraction in June. http://www.ism.ws/index.cfm
Timberland Transactions US timberland markets remained quiet in the 2nd Quarter of 2011. Of 82,000 acres in transactions announced this quarter, nearly all were in the South. The weighted average price per acre was $1,170 nation-wide and $1,165 in the South. A number of sales were detailed in 1st Quarter company earnings releases. As a result, year-todate, 2011 US sales are at 346,000 acres, just below the same period in 2010. This year’s average prices are hovering close to last year’s averages1 at $1,230 for the nation and $1,370 for the South.
1
In March, Timber Mart-South published a summary of transactions since 2000: United States Timberland Markets: Transactions, Values and Market Research: 2000 to 2010. For a description and how to order a copy, see page 17.
Page 12
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Page 13
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Openings & Closings Manufacturers announced plans to expand and/or upgrade pulp and paper mill capacity and production in the South this quarter. Lumber and panel manufacturers continue to remain curtailed.
Pulp & Paper Most of the news this quarter focused on capital improvements, with four updates on new boiler installations and two expansion projects related to specialty or fluff pulp. Regarding last quarter’s disaster-related pulp mill shutdowns in Japan, Japanese pulp producers announced restarts on several mills in April with more expected in August when power will be restored.
Page 14
General supply disruptions occurred in the western South this quarter, as Mississippi River floods affected rail and river transport. Power outages brought shut downs at some facilities. For pulp prices and industry production, see “Pulp and Paper Indicators” on page 8.
Wood Products: Lumber & Panels Several companies announced extended holiday downtime for the July 4th Independence Day holiday. Some planned to be shut down at least a week while others just took one day. Three southern pine sawmill operations announced further curtailments due to poor market conditions. Panel markets continued to be slow this quarter. For more on lumber prices and production levels, see “Lumber and Panel Indicators” on page 4.
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Page 15
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Biofuel & Bio-energy Wood-using biomass energy facilities continued to have ups and downs this quarter. Environmental Protection Agency (EPA) boiler rules regarding biomass faded but so did financial support from the USDA’s Biomass Crop Assistance Program (BCAP). The EPA acknowledged ongoing technical difficulties with commercial scale cellulosic ethanol and reduced production requirements. Out of seventeen project updates this quarter, only three were for new facilities: one new pellet mill and two new cogeneration facilities. No project cancellations were announced in contrast to five last quarter. However, the newly opened Georgia Biomass pellet mill shut down, at least temporarily, in June after an accident.
Restructuring Merger and acquisition activity among the South’s wood pulp producers continued this quarter. Rock-Tenn announced the completion of its purchase of SmurfitStone Container. International Paper announced its bid to take over TempleInland. Weyerhaeuser continues to restructure, divesting more business units and creating a new one.
Page 16
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
New from Timber Mart-South
United States Timberland Markets Transactions, Values & Market Research: 2000 to 2010
Second Edition: 354 pages ¾ Executive Summary of Developments ¾ One Section per Year – new edition covers all of 2010 - top owners, top sellers, top buyers - price ranges - tract sizes ¾ Articles of Interest - 38 timberland-related articles re-printed from Timber Mart-South Market News
- More than 20 well-respected authors ¾ Appendices include - timberland sales tables - timberland inventory and mill maps Order now: $500 per copy Contact: [email protected] or go to: www.timbermart-south.com Subscribers, please ask about available discounts
Page 17
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Weather, Etc. General Weather: Violent weather and extremes of wet and dry characterized the 2nd Quarter. The National Weather Service expects the confirmed tornado count in April to be a new one-month record. The most violent outbreaks occurred from the southern plains to the Atlantic Coast, tracking across the South. May, too, had higher than average tornadoes and the EF-5 tornado that hit Joplin MO was the deadliest single tornado in modern history. http://www.hprcc.unl.edu/maps/current/ Drought: Extreme drought conditions continued to affect most of the South this quarter, with only the Appalachian region spared. Compared with last quarter, extreme conditions spread further eastward along the Gulf Coast.
http://drought.unl.edu/dm/monitor.html
Page 18
Fire Weather: Severe wildland fire potential persists in Texas and adjacent areas of Louisiana and Arkansas. http://www.nifc.gov/nicc/predictive/outlooks/mont hly_seasonal_outlook.pdf Forecast: Extreme dry weather is forecast for the Gulf Coast in July with seasonally normal precipitation for the remainder of the South. Tropical storm activity is expected to bring normal rainfall to the Atlantic Coast regions and heavier than normal rain to Florida. http://www.cpc.ncep.noaa.gov/
List of Advertisers
Page
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5
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15
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11
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7
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8
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10
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9
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16
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19
Southeast Wood Producers Association
16
Timber Mart-South US Timberland Markets
17
UGA Warnell School Golf Tournament 2011
13
Weyerhaeuser Seedlings
12
World Forestry Center
14
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Page 19
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Timber Mart-South Market News Quarterly Abridged Version
The Journal of Southern Timber Market News A Quarterly Report of the Market Conditions for Timber Products of the US South Copyright © 2011 by Timber Mart-South, Inc.
Tom Harris, Publisher (706)542-2832 (706)542-4756 Jacek Siry, Research Editor Sara Baldwin, Robert Simmons & Jonathan Smith, Editors Staff: Lee Lewis, Russell McCarty, Stephen Smith and Justin Wright Mailing address: Timber Mart-South, 1860 Barnett Shoals Road, PMB 103-598, Athens, GA 30605. Phone: (706)542-4756 • Fax: (706)542-1670 • E-mail: [email protected] Web site: www.TimberMart-South.com Copyright © 2011:
This publication is copyrighted under the statutes of the United States. The compilation of facts and information herein contained are the subject of private property rights of the publisher. Reproduction or transmission, either manually or electronically, in whole or in part, without express permission of the owner or other unauthorized use, is not permitted. Publisher provides the information herein as a convenience to its readers. Publisher does not represent or endorse the truth, accuracy, reliability or completeness of any of the information contained in this publication. PUBLISHER PROVIDES THE INFORMATION IN THIS PUBLICATION ON AN ‘AS IS’ AND ‘AS AVAILABLE’ BASIS, WITH NO WARRANTIES WHATSOEVER. THOSE WHO USE PRICES PUBLISHED HERIN FOR A SPECIFIC PURPOSE, SALE OR CONTRACT DO SO AT THEIR OWN RISK. UNDER NO CIRCUMSTANCE WILL PUBLISHER HAVE ANY LIABILITY FOR ANY LOSS OR DAMAGE WHATEVER CAUSED BY ANY READER’S RELIANCE ON INFORMATION OBTAINED THROUGH THIS NEWSLETTER.
ISSN 1945-4082A The University of Georgia Warnell School of Forestry & Natural Resources is under contract with the Frank W. Norris Foundation to compile and publish the TMS Market News.
Table of Contents of the Abridged Version Prices & Market Conditions ....................................................................................................3 Market Indicators ....................................................................................................................4 Lumber & Panel Indicators, US Building Construction, Pulp & Paper Indicators, Energy & Carbon Markets, Equity Markets, Manufacturing Activity Timberland Transactions .......................................................................................................12 Openings & Closings .............................................................................................................14 Biofuel & Bio-Energy.............................................................................................................16 Restructuring .........................................................................................................................16 Weather Etc...........................................................................................................................18
For a the full issue, please contact us or order http://www.tmart-south.com/tmart/subscrib.htm Please see our advertisers’ section; see a list on page 18.
Page 2
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Timber Mart-South Market News Quarterly 2 nd Quarter 2011 – Vol. 16 No. 2-A
South-wide Pine Stumpage Prices quarterly averages
Prices & Market Conditions
$50 Sawtimber
South-wide timber markets remained weak in the 2nd Quarter. Four out of the five major product stumpage prices dropped from last quarter. All five were well-below prices in the 2nd Quarter 2010 when markets were just easing off a weatherinduced price spike. TMS prices do not include salvage timber but in some cases pulpwood prices were affected by the quantity of extra timber on the market due to tornado and fire damage.
$/ton
$40 $30
Chip-n-saw
$20 Pulpwood
$10 $0 2002
2004
2006
2008
2010
2012
Tim ber Mart-South
South-wide Hardwood Stumpage Prices quarterly averages
South-wide Average Stumpage Prices $/ton
Pine Sawtimber
2Q 11
1Q 11 up/(dn) 2Q 10 up/(dn)
$23.80
$25.94
($2.14)
$30
year ago
$29.41
($5.61)
Note: for a table of the five major products, please see our full News Quarterly. Order or subscribe at http://www.tmart-south.com/tmart/subscrib.htm
$25 $/ton
one quarter
Mixed Hardwood Sawtimber
$20 $15 $10 $5 $0 2002
Pulpwood
2004
2006
2008
2010
2012
Tim ber Mart-South
Pine Stumpage Prices All three south-wide average pine stumpage prices fell this quarter. Pine sawtimber and pine chip-nsaw declined to levels not seen since 1992. Pine pulpwood was down nearly a dollar per ton from last quarter and about $2 dollars per ton from a year ago.
Page 3
Hardwood Stumpage Prices The South-wide average mixed hardwood sawtimber stumpage price eased upward this quarter, the only major timber product to increase. Prices continue to be about $2 per ton below the all-time high set in the 3rd Quarter 2010. Hardwood pulpwood prices declined for the fifth straight quarter, slipping back to 2008 levels.
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Market Indicators The pace of economic recovery cooled somewhat this quarter. Uncertainty abounds, with concerns about creeping inflation and high levels of US debt compounded by natural disasters that impacted the South and Central US. Outside the US, China moved to slow its economic growth and combat inflation, affecting imports of forest products from the US. Japan battled to control a nuclear reactor damaged by last quarter’s tsunami and earthquake but made progress in restoring its manufacturing sector. Rising world oil prices were met with the unusual measure of oil releases from strategic reserves at the end of the quarter. However, history will perhaps best remember this quarter as the one when the US Navy Seals captured and killed Usama bin Laden, the Saudi Arabian-born leader of the Al Qaeda terrorist group.
The Structural Panel Composite price ended June at $281 per thousand square feet, 3/8 inch basis (msf), down for the quarter and from yearago prices. Random Lengths Structural Panel Composite $/msf 24-Jun-11
25-Mar-11
% +/-
25-Jun-10
% +/-
281
304
-7.6%
328
-14.3%
$575 $450 $325 $200
Random Lengths Structural Panel Weekly Composite Price ($/msf)
2006 2007 2008 2009 2010 2011 2012
Lumber & Panel Indicators The Random Lengths Framing Lumber Composite (FLC) moved lower this quarter by nearly $30 per mbf, so that the price ended June at $262 per thousand board feet (mbf); the FLC was down for the quarter, but still $15 per mbf above the end of June 2010. The Southern Pine Composite declined more than the FLC, ending the quarter at $244 per mbf, down $40 per mbf for the quarter and more than $25 per mbf below one year ago. Random Lengths Framing Lumber Composite $/mbf 24-Jun-11
25-Mar-11
% +/-
25-Jun-10
% +/-
262
291
-10.0%
247
6.1%
Random Lengths Southern Pine Composite $/mbf 24-Jun-11
25-Mar-11
% +/-
25-Jun-10
% +/-
244
284
-14.1%
272
-10.3%
Random Lengths Framing Lumber Weekly Composite Price ($/mbf)
$500 $390 $280 $170 2006 2007 2008 2009 2010 2011 2012
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Southern pine 2x4 lumber prices followed the Southern Pine Composite trend, while 2x10s remained at the lowest prices in years. Prices for dimension lumber in the eastern South were stronger, a trend attributed to proximity to markets with higher demand.
Southern pine plywood prices and Southern Oriented Strand Board (OSB) prices both declined as well, following the Composite down. The Hardwood Review US Kiln Dried Hardwood Lumber Index was $1,111 per thousand board feet (mbf) at the end of the quarter, nearly unchanged from last quarter, but below prices a year ago. Hardwood lumber prices sustained their 2010 rally longer than sofwood lumber and have stabilized at a higher level. Hardwood Lumber Price Kiln dried Index $/mbf 24-Jun-11
25-Mar-11
% +/-
25-Jun-10
% +/-
1111
1103
0.7%
1214
-8.5%
Hardwood Review Kiln-Dried Hardwood Weekly Lumber Index ($/mbf)
$1,500 $1,300 $1,100 $900 2006 2007 2008 2009 2010 2011 2012
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
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Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
The Southern Forest Products Association (SFPA) reported that southern pine lumber production was still slow, but has increased yearto-date through April compared to the same period in 2010. For more detail on mill activity this quarter, see Openings & Closings on page 14. Southern Pine Lumber Shipments billion bf, ytd Apr-11
Apr-10
% +/-
Apr-06
% +/-
4369
3970
10.1%
6552
-33.3%
US Building Construction According to the US Census, housing starts have declined in 2011 from 2010 levels. If starts continue at the current rate, total starts nationwide for 2011 will be 533,000, a new record low since 1959. US Residential Housing Starts, 000 units ytd May-11
May-10
% +/-
May-06
% +/-
230
250
-8.2%
815
-71.8%
South Residential Housing Starts, 000 units ytd
SFPA US South Pine Lumber Production (Monthly 000 mbf)
1,900 1,500 1,100 700 2006 2007 2008 2009 2010 2011 2012
According to the latest report from the APA Engineered Wood Association, combined southern panel production increased slightly in the 1st Quarter. OSB production slowed compared to the last quarter of 2010, and plywood production increased. Both OSB and plywood production were higher than in the 1st Quarter of 2010.
May-11
May-10
% +/-
May-06
% +/-
123
134
-8.3%
420
-70.7%
US Census Bureau US Housing Starts (Monthly SAAR Million Units)
2.7 2.1 1.5 0.9 0.3 2006 2007 2008 2009 2010 2011 2012
1Q11
4Q10
% +/-
1Q10
% +/-
2009
2028
-0.9%
1835
9.5%
Total US privately-owned housing starts through May 2011 were 230,000 units, down about 8 percent from the same period in 2010. Markets for new homes have continued to be weak as have markets for existing homes. The policy-created bubble-lette of last Spring appears to have worked its way through the data and now markets are back to bouncing along the bottom.
Southern OSB Production billion sf
Southern Plywood Production billion sf 1Q11
4Q10
% +/-
1Q10
% +/-
http://www.census.gov/const/newresconst.pdf
1462
1409
3.8%
1377
6.2%
http://www.census.gov/const/newressales.pdf
APA Engineered Wood Association US Southern Panel Production (Quarterly 000 msf, 3/8" basis)
3,600 OSB 2,800 2,000 Plywood 1,200 2006 2007 2008 2009 2010 2011 2012
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Expenditures on residential remodeling have been lower in 2011 than in the first part of 2010 according to the US Census. US Improvement Expenditures (Billion $) ytd May-11
May-10
% +/-
May-06
% +/-
41.3
42.6
-2.9%
52.7
-21.6%
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
US Census Improvement Expenditures (Million US$ monthly) $17,000 $13,000 $9,000 $5,000 2006 2007 2008 2009 2010 2011 2012
Remodeling activity increased this quarter compared to last quarter due to seasonal factors, but decreased from the same quarter a year ago. Expenditures for the first five months of 2011 were $41.3 billion, down about 3 percent from the same period in 2010. If expenditures continue at the same rate, the total for 2011 will be about $112 billion, the lowest level since 2003. http://www.census.gov/const/www/c30index.html The Harvard University Leading Indicator for Remodeling Activity (LIRA) continues to estimate total 2011 improvement expenditures at about $115 billion, exceeding spending in 2010. Activity in 2nd Half will have to increase if these expectations are to be met.
8.0 7.0 6.0 5.0 4.0 2006
Freddie Mac 30-year Fixed US Mortgage Monthly Average Rates (percent)
2007
2008
2009
2010
2011
2012
The Federal Reserve Open Market Committee (FOMC) maintained the federal funds rate at zero to 0.25 percent again this quarter, while saying the economic recovery was continuing at a moderate pace. Keeping the “overnight” rate pegged at rock bottom since December 2008, the committee reported that weak labor markets justified continued low rates, in spite of higher prices for food and energy. At the end of June, the FOMC ended its program, widely known as “QE2” (for quantitative easing, part two), to purchase $600 billion longer-term Treasury securities. Reinvesting principal payments from maturing securities will continue.
http://www.jchs.harvard.edu/media/lira/ Mortgage activity increased this quarter according to the Mortgage Bankers Association (MBA). Refinancing dominated, representing about 70 percent of loan applications, as homeowners moved to capture lower rates. Mortgage rates shifted lower as the quarter progressed. The June average for 30-year fixedrate mortgages was 4.51 percent according to the Federal Home Loan Mortgage Corp. (Freddie Mac). While below the average rate last March and lower than June of 2010, mortgage rates remain above the 4.23 percent low set in October 2010. 30-year Fixed US Mortgage Rates (percent) Jun-11
Mar-11
Δ +/-
Jun-10
Δ +/-
4.51
4.84
-0.33
4.74
-0.23
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Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Pulp & Paper Indicators
FOEX NBSK Index $/ton
US paper and paperboard production year-to-date through May remained steady according to the American Forest and Paper Association (AF&PA). Total production was nearly unchanged compared to the same period in 2010. Paper production was down about 3 percent, but paperboard production eased upward. For more detail on mill activity this quarter, see Openings & Closings on page 14.
% +/-
29-Jun-10
% +/-
1023
977
4.7%
976
4.8%
FOEX BHK Index $/ton 28-Jun-11
29-Mar-11
% +/-
29-Jun-10
% +/-
874
849
2.9%
918
-4.8%
FOEX Ltd. NBSK Pulp Index dollars per ton
$1,100 $900 $500
May-11
May-10
% +/-
May-06
% +/-
33,728
34,078
-1.0%
37,951
-11.1%
AF&PA Paper & Paperboard Production monthly 000 tons
7,600 6,600 5,600
2006 2007 2008 2009 2010 2011 2012
US pulp production more or less tracks paper and paperboard production. Softwood pulp prices moved higher this quarter. The FOEX Ltd. Northern Bleached Softwood Kraft (NBSK) pulp price index ended June at $1,023 per ton, up almost $50 per ton from the end of March, as well as from the end of June 2010. Bleached hardwood kraft pulp prices, at $874 per ton, followed softwood prices upward, but at a slower pace, and remain below prices a year ago.
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29-Mar-11
$700
AF&PA Paper & Paperboard Production million tons y-t-d
8,600
28-Jun-11
2006
2007
2008
2009
2010
2011
2012
Recovered corrugated container prices were steady for most of this quarter but stepped up in June. According to Official Board Markets, Old Corrugated Container (OCC) monthly average prices in the South were $145 per ton in June, up about $10 from last quarter and about $25 from a year ago. Old Corrugated Containers - US South in $/ton Jun-11
Mar-11
% +/-
Jun-10
% +/-
145
135
7.4%
120
20.8%
Official Board Markets U.S. Southern OCC Prices (dollars per ton)
200 150 100 50 0 2006 2007 2008 2009 2010 2011 2012
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Energy & Carbon Markets Fuel prices leveled off this quarter after a steady climb since last September. The June 2011 monthly average Gulf Coast diesel price was $3.88 per gallon, slightly lower after nearly reaching $4.00 per gallon in April and May. Gulf Coast #2 Diesel – Retail (cents per gallon) Jun-11
Mar-11
% +/-
Jun-10
% +/-
388
384
1.0%
289
33.9%
500
Gulf Coast No 2 Diesel Retail Prices Monthly (cents per gallon) US EIA
W Texas Int Crude Oil (dollars per barrel)
350 200
May-11
Feb-11
% +/-
May-10
% +/-
100.90
88.58
13.9%
73.74
36.8%
Europe Brent Crude Oil (dollars per barrel)
50 2006
In early June, the US Energy Information Agency (EIA) reduced its forecast of 2011 average crude oil prices for US markets from $104 per barrel to $102. The European benchmark Brent Crude, which normally trends closely with WTI, averaged $115 per barrel in May with spot prices at $108 per barrel in June. The EIA blamed the continued WTI discount to Brent Crude on high crude oil inventory in storage at Cushing OK due, in part, to floods and transportation bottlenecks along the Mississippi River System.
2007
2008
2009
2010
2011
2012
May-11
Feb-11
% +/-
May-10
% +/-
114.99
103.72
10.9%
75.95
51.4%
http://tonto.eia.doe.gov/oog/ftparea/wogirs/xls/psw 18vwall.xls Crude Oil prices declined slightly this quarter. Spot prices for West Texas Intermediate Crude (WTI) were at $95 per barrel at the end of June after averaging $101 per barrel in May. Prices eased in June after members of the International Energy Agency (IEA), including the US, agreed to release oil from strategic reserves to relieve supply disruptions caused by unrest in Libya.
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160 120 80 40 0
Crude Oil - W Texas Int Spot Price Monthly (dollars per barrel) US EIA
2006 2007 2008 2009 2010 2011 2012
http://tonto.eia.doe.gov/dnav/pet/xls/PET_PRI_S PT_S1_M.xls
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Carbon prices declined in Europe this quarter and the nearly non-existent carbon prices in the US continue to disappoint those who had hoped the market mechanism would help reduce US carbon emissions. The European Point Carbon price for the December 2011 vintage was €13.47 per ton on July 1st (about $19.49 per ton), down more than 20 percent from the end of last quarter but up about 3 percent from a year ago. Spot prices are available at:
Equity Markets Stock markets ended just above where they began this quarter. After surging and then falling, the Dow Jones Industrial Average (DJIA) ended the quarter at 12,414, up less than one percent for the quarter, but more than 25 percent from the end of June 2010. Dow Jones Industrial Average 30-Jun-11
31-Mar-11
% +/-
30-Jun-10
% +/-
12,414
12,320
0.8%
9,774
27.0%
http://www.pointcarbon.com/news/ The Regional Greenhouse Gas Initiative (RGGI) held its twelfth quarterly for carbon emissions of utilities in the Northeastern US auction on June 8th. The clearing price was $1.86 per CO2 allowance, the minimum reserve price for the auction and unchanged from the previous four quarters. Further details on results are available at: http://www.rggi.org/docs/Auction_12_Release_Re port.pdf
Dow Jones Industrial Average 13,500 12,000 10,500 9,000 2010
2011
2012
The S&P 500 ended June at 1,321 and the NASDAQ Composite at 2,774. Both were nearly unchanged from the end of March, and generally followed the same trend as the DJIA.
In May, the governor of New Jersey, one of the states participating in RGGI, announced his intention to withdraw from the program in an orderly fashion at the end of December. Governors of other states responded with expressions of satisfaction that RGGI was working for them, providing needed funds for emission control projects. Note: A CO2 allowance represents a limited authorization to emit one ton of CO2.
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Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
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Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Manufacturing Activity Manufacturing activity continued to grow this quarter, although at a slower rate. The Institute for Supply Management’s Purchasing Managers Index (PMI), which aggregates activity in US manufacturing, was 55.3 in June, indicating continued strong economic growth for the 25th consecutive month. A PMI above 50 indicates economic expansion, and below indicates contraction. Paper & Paperboard Products reported growth in all three months this quarter. Wood Products reported strong growth in April but none in May and contraction in June. http://www.ism.ws/index.cfm
Timberland Transactions US timberland markets remained quiet in the 2nd Quarter of 2011. Of 82,000 acres in transactions announced this quarter, nearly all were in the South. The weighted average price per acre was $1,170 nation-wide and $1,165 in the South. A number of sales were detailed in 1st Quarter company earnings releases. As a result, year-todate, 2011 US sales are at 346,000 acres, just below the same period in 2010. This year’s average prices are hovering close to last year’s averages1 at $1,230 for the nation and $1,370 for the South.
1
In March, Timber Mart-South published a summary of transactions since 2000: United States Timberland Markets: Transactions, Values and Market Research: 2000 to 2010. For a description and how to order a copy, see page 17.
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Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
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Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Openings & Closings Manufacturers announced plans to expand and/or upgrade pulp and paper mill capacity and production in the South this quarter. Lumber and panel manufacturers continue to remain curtailed.
Pulp & Paper Most of the news this quarter focused on capital improvements, with four updates on new boiler installations and two expansion projects related to specialty or fluff pulp. Regarding last quarter’s disaster-related pulp mill shutdowns in Japan, Japanese pulp producers announced restarts on several mills in April with more expected in August when power will be restored.
Page 14
General supply disruptions occurred in the western South this quarter, as Mississippi River floods affected rail and river transport. Power outages brought shut downs at some facilities. For pulp prices and industry production, see “Pulp and Paper Indicators” on page 8.
Wood Products: Lumber & Panels Several companies announced extended holiday downtime for the July 4th Independence Day holiday. Some planned to be shut down at least a week while others just took one day. Three southern pine sawmill operations announced further curtailments due to poor market conditions. Panel markets continued to be slow this quarter. For more on lumber prices and production levels, see “Lumber and Panel Indicators” on page 4.
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
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Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Biofuel & Bio-energy Wood-using biomass energy facilities continued to have ups and downs this quarter. Environmental Protection Agency (EPA) boiler rules regarding biomass faded but so did financial support from the USDA’s Biomass Crop Assistance Program (BCAP). The EPA acknowledged ongoing technical difficulties with commercial scale cellulosic ethanol and reduced production requirements. Out of seventeen project updates this quarter, only three were for new facilities: one new pellet mill and two new cogeneration facilities. No project cancellations were announced in contrast to five last quarter. However, the newly opened Georgia Biomass pellet mill shut down, at least temporarily, in June after an accident.
Restructuring Merger and acquisition activity among the South’s wood pulp producers continued this quarter. Rock-Tenn announced the completion of its purchase of SmurfitStone Container. International Paper announced its bid to take over TempleInland. Weyerhaeuser continues to restructure, divesting more business units and creating a new one.
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Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
New from Timber Mart-South
United States Timberland Markets Transactions, Values & Market Research: 2000 to 2010
Second Edition: 354 pages ¾ Executive Summary of Developments ¾ One Section per Year – new edition covers all of 2010 - top owners, top sellers, top buyers - price ranges - tract sizes ¾ Articles of Interest - 38 timberland-related articles re-printed from Timber Mart-South Market News
- More than 20 well-respected authors ¾ Appendices include - timberland sales tables - timberland inventory and mill maps Order now: $500 per copy Contact: [email protected] or go to: www.timbermart-south.com Subscribers, please ask about available discounts
Page 17
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Weather, Etc. General Weather: Violent weather and extremes of wet and dry characterized the 2nd Quarter. The National Weather Service expects the confirmed tornado count in April to be a new one-month record. The most violent outbreaks occurred from the southern plains to the Atlantic Coast, tracking across the South. May, too, had higher than average tornadoes and the EF-5 tornado that hit Joplin MO was the deadliest single tornado in modern history. http://www.hprcc.unl.edu/maps/current/ Drought: Extreme drought conditions continued to affect most of the South this quarter, with only the Appalachian region spared. Compared with last quarter, extreme conditions spread further eastward along the Gulf Coast.
http://drought.unl.edu/dm/monitor.html
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Fire Weather: Severe wildland fire potential persists in Texas and adjacent areas of Louisiana and Arkansas. http://www.nifc.gov/nicc/predictive/outlooks/mont hly_seasonal_outlook.pdf Forecast: Extreme dry weather is forecast for the Gulf Coast in July with seasonally normal precipitation for the remainder of the South. Tropical storm activity is expected to bring normal rainfall to the Atlantic Coast regions and heavier than normal rain to Florida. http://www.cpc.ncep.noaa.gov/
List of Advertisers
Page
Arborgen Supertree Seedlings
5
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15
Davis-Garvin Insurance Agency
11
F&W Forestry
7
Forest Landowners Association
8
Fountains Forestry
10
International Forest Company Seedlings
9
Larson & McGowin
16
Palmer & Cay
19
Southeast Wood Producers Association
16
Timber Mart-South US Timberland Markets
17
UGA Warnell School Golf Tournament 2011
13
Weyerhaeuser Seedlings
12
World Forestry Center
14
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
Page 19
Timber Mart-South ~ Abridged Market News Quarterly
2nd Quarter 2011
