North American Wood Fiber Pricing Supplies and Sawmill Capex

BY BROOKS MENDELL

North American wood fiber pricing for the first half of 2022 highlighted regional nuance and variability. Meanwhile, the macroeconomic environment grapples with headwinds from inflation, consumer confidence, interest rate hikes, and the ongoing war in Ukraine. Overall, demand for fiber remained strong, supporting the industry sentiment that North American forest products are well positioned for the nearterm. For example, AF&PA announced that total packaging papers and specialty packaging shipments increased 1% year to date through May, signaling robust demand within the pulp and paper sector.

Trucking capacity issues were underscored by increasing fuel prices during the quarter. As one U.S. national firm with timber and mill assets in multiple regions reported, “It’s more about truckers than about loggers for us.” Around the country, many fiber buyers and sellers indicated that fuel surcharges were implemented to ease the burden of high fuel prices. However, the use of surcharges was uneven across the continent. U.S. Northeast prices skyrocketed to a four-year high as delivered prices in the U.S. South were flat to negative.

Part of the fiber price stability in the South links to increased supplies of residual chips. As firms continue to add and acquire capacity, most sawmill capacity increases in North America are happening in the U.S. South due to low log costs, ample timber supplies, and proximity to end markets. In total, firms announced 4.5 billion board feet (BBFT) in new capacity to come online by 2024, an increase of 17% in the region. This includes seven new sawmills and two reopenings (Figure 1). Most firms plan to add capacity by expanding existing infrastructure: 26 mill projects will add capacity to existing mills, making up 2.2 BBFT, or 50%, of the announced capacity.

Forest industry firms based all over North America account for the new capital investment activity in the South. PotlatchDeltic in Waldo, Arkansas, and Westervelt in Moundville, Alabama, announced

Figure 1. Existing and Announced Softwood Lumber Mills in the U.S. South. SOURCE: FORISK NORTH AMERICAN FOREST INDUSTRY CAPACITY DATABASE upgrades and expansions. DR Johnson announced the reopening of the mill in Prairie City, Oregon, this summer. Our team is also watching CLAW Forestry and their plans for a new 250 MMBF sawmill in Gloster, Mississippi, to startup in 2024, along with the news that Boise Cascade reached an agreement to acquire Coastal Forest Resources plywood mills in Havana, Florida and Chapman, Alabama. Roseburg broke ground on the Weldon, North Carolina sawmill in late May. This article includes data from the Forisk Wood Fiber Review, a quarterly publication tracking North America’s major wood fiber markets, and the Forisk Research Quarterly, which includes forest industry forecasts and analysis by sector. Author: Brooks Mendell Forisk Consulting LLC 770-725-8477 bmendell@forisk.com