I am here to first admit I was wrong.. Last summer in one of my lumber threads I mentioned it might take 20 years to get a real supply/demand correction on SYP timber. Well, I am now changing that to less than 10 years.
Over my career (since 2006) in and watching the lumber markets, the single most important product is SPF (spruce-pine-fir) out of the northwest and Canada. In fact historically nearly 20% of all lumber used in US residential construction, is out of British Columbia. Starting in the 90's, BC was hit hard by beetle infestations that continued to intensify up until around 2010. It wiped out 45 million some odd acres (1.5 times the size of Mississippi) of timber in that timespan. The beetle kill timber is still able to be harvested and sawed into lumber for about 7-10 years after its killed. It's noticeable by the blue stains in the lumber, even sold as "blue stain spruce" in some appearance applications. You have probably seen the blue stains in studs at Home Depot or Lowe's.
Well the gig is up. We have gone through all of the beetle kill timber in BC and it will take decades for the wood basket to replenish. To counter this, we have seen Canadian companies like West Fraser, Interfor, Canfor, and Tolko investing in our outright buying southern sawmills. Well, I think Dorn has mentioned it before, but the Canadian's are carpetbagging in with big money. I did not realize how much sawmill capacity was actually coming on board.
In Jasper, Alabama, Tolko bought a 50% stake in Jasper lumber and are tripling its capacity.
In Corinth, Mission Forest Products is building a $160 million new lumber mill that will probably come online later this year or next. Here is an aerial of construction, its getting close, but it sounds like there are some pretty nasty delays on equipment throughout the industry.
View attachment 23849
Beiwer Lumber is almost finished with a new $130 million mill in Winona. They may be running before summer.
Idaho Forest Group is putting a big new mill in Lumberton that will be finished in the next year or sooner as well.
https://lumberton.ifg.com/2021/12/ifg-november-2021-update/
Enviva is getting ready to fire up the worlds largest biomass pellet mill in Lucedale.
Similar investments are already underway in Louisiana and Arkansas as well.]
This is really good news for timber owners, especially if you have SYP. The one negative I can see is there hasn't been any new OSB mills announced in the region and those suckers take years to build from scratch.
Institutional investors are also starting to pile money back into timberlands in the region as an inflation hedge and the upside of timber realizations down the road are looking more attractive. This was a pretty hot talking point on the recent earnings calls for Weyerhaeuser and Rayonier which have large southern timber holdings.
Obviously talk to a forester if you have one, but the future prices of sawlogs especially are starting to look better. Probably not this year or next, but unless we go into a massive recession the worm is turning. Last year saw a good bump, but a lot of that had to do with weather. But overall the prospects are looking better, sooner, than I expected.
ETA. The biggest headwind is going to be logging. There are already shortages in that industry and buy increasing demand for timber in the area, its going to get a lot worse. Its a hard, dangerous, capital intensive, and traditionally not very lucrative industry, but I am guessing that last part may change quite a bit going forward.
Over my career (since 2006) in and watching the lumber markets, the single most important product is SPF (spruce-pine-fir) out of the northwest and Canada. In fact historically nearly 20% of all lumber used in US residential construction, is out of British Columbia. Starting in the 90's, BC was hit hard by beetle infestations that continued to intensify up until around 2010. It wiped out 45 million some odd acres (1.5 times the size of Mississippi) of timber in that timespan. The beetle kill timber is still able to be harvested and sawed into lumber for about 7-10 years after its killed. It's noticeable by the blue stains in the lumber, even sold as "blue stain spruce" in some appearance applications. You have probably seen the blue stains in studs at Home Depot or Lowe's.
Well the gig is up. We have gone through all of the beetle kill timber in BC and it will take decades for the wood basket to replenish. To counter this, we have seen Canadian companies like West Fraser, Interfor, Canfor, and Tolko investing in our outright buying southern sawmills. Well, I think Dorn has mentioned it before, but the Canadian's are carpetbagging in with big money. I did not realize how much sawmill capacity was actually coming on board.
In Jasper, Alabama, Tolko bought a 50% stake in Jasper lumber and are tripling its capacity.
In Corinth, Mission Forest Products is building a $160 million new lumber mill that will probably come online later this year or next. Here is an aerial of construction, its getting close, but it sounds like there are some pretty nasty delays on equipment throughout the industry.
View attachment 23849
Beiwer Lumber is almost finished with a new $130 million mill in Winona. They may be running before summer.
Idaho Forest Group is putting a big new mill in Lumberton that will be finished in the next year or sooner as well.
https://lumberton.ifg.com/2021/12/ifg-november-2021-update/
Enviva is getting ready to fire up the worlds largest biomass pellet mill in Lucedale.
Similar investments are already underway in Louisiana and Arkansas as well.]
This is really good news for timber owners, especially if you have SYP. The one negative I can see is there hasn't been any new OSB mills announced in the region and those suckers take years to build from scratch.
Institutional investors are also starting to pile money back into timberlands in the region as an inflation hedge and the upside of timber realizations down the road are looking more attractive. This was a pretty hot talking point on the recent earnings calls for Weyerhaeuser and Rayonier which have large southern timber holdings.
Obviously talk to a forester if you have one, but the future prices of sawlogs especially are starting to look better. Probably not this year or next, but unless we go into a massive recession the worm is turning. Last year saw a good bump, but a lot of that had to do with weather. But overall the prospects are looking better, sooner, than I expected.
ETA. The biggest headwind is going to be logging. There are already shortages in that industry and buy increasing demand for timber in the area, its going to get a lot worse. Its a hard, dangerous, capital intensive, and traditionally not very lucrative industry, but I am guessing that last part may change quite a bit going forward.
