afa annual meeting | general session | afternoon
TRANSCRIPT
WELCOME
Why Arkansas?
Fred Stimpson | Canfor Southern PineTodd Mullis | Interfor
Chuck Watkins | West Fraser
Arkansas Forestry AssociationFayetteville Arkansas- October 2016
• Canfor Corporation
• Canfor Southern Pine
• Vision for the future in the US South
Introduction
Canfor Corporation
CFP
TOP GLOBAL SOFTWOOD LUMBER PRODUCERS - 2015
Canfor Corporation (CFP)
Locations23 Sawmills 12 in Canada 11 in US
4 Green Energy Plants
3 Engineered Product Mills
4 Pulp Mills / 1 Kraft Paper Mill (integrated)
Production Capacity
Lumber 5.8 billion board feet
Pulp/Paper 1.4 million tonnes
7
2015 Lumber Sales$2.7 Billion
United States Asia
Canada Other
2015 Pulp Sales$1.2 Billion
Americas
Asia
Europe
BC AB ON
TX LA
AR
MSAL
GA SC
NC
Significant Strategic Capital Upgrades
From 2010 to 2015, the Canfor lumber business has invested more than $500 million on high returning capital upgrades in regions and operations with an excellent fibre base:
Planer Upgrades
Energy Systems
Productivity Improvements
Grade Optimization
8
Canfor Southern
Pine
Excellent, High-Quality Fibre Supply
High Quality Products & Customers
Well Capitalized Mills
Strong & Flexible Balance Sheet
Canfor Southern Pine – Why
Canfor Southern Pine – High Quality Fibre
NC
SCGAALMS
FL
INAR
LATX
Diminishing supply of the BC timber base
AAC reduction primarily due to the
Mountain Pine Beetle infestation and First Nations
land claims
Strong fiber supply in the US South
High quality timber across the region
Positive growth to drain ration = long term
supply
Provides species and geographic diversity for
our markets and customers
1.94
1.65
1.60
1.77
1.99
1.24
1.04
1.66
1.49
Southern Yellow Pine Sawtimber Resource
• =
US South Expansion
• Top quartile operational assets
• Diverse commodity & specialty product mix
• Good access to domestic and offshore
markets
• Opportunity for further growth
Page 13
SPF - 92%
SYP; 8%
2006
SPF -76%
SYP; 24%
2016
Production Mix
YEAR COMPANY LOCATIONS
2006 New South
• Conway, SC• Camden,
SC• Graham, NC
2007 Darlington • Darlington,
SC
2013 Scotch Gulf
• Fulton, AL• Jackson, AL• Mobile, AL
2015
Beadles & Balfour
• Moultrie, GA• Thomasville
, GA201
5Southern Lumber
• Hermanville, MS
2015
Anthony Forest Products
• Urbana, AR• El Dorado,
AR• Washington,
GA• Sault Ste.
Marie, ON
US South Expansion
Qualified People
• Management• Skilled Tradesmen• Millworkers
Challenges Ahead
Southern Pine
2020 Vision
Supply Shortage = 2 Bfbm
2020 – US SOFTWOOD LUMBER SUPPLY CRUNCH
Source: WWPA, Canfor
Demand: 53 Bfbm Supply: 51 Bfbm
2016 Est.
2020
New Home 15 18
R&R 18 19
Industrial 13 14
Non-Res 2 2
Total 48 53
2016 Est.
2020
US South 17 19
US Coast 8.5 9.5
US Inland 5.0 5.5
US other 1.9 2
US Total 32 36
Imports - Canada 14.6 15.2
Imports - EU & Other 0.7 0.8
US Exports (minus) 1.5 1.3
Total 46.2 50.7
2 B7.7 B3 B2 B
Canadian Exports
2.0 BCoast 10B
Inland6.0 B
South19 B
US Production EU Imports
2016: 0.20 B2020: 0.24 B
US Exports2016: 1.5 B2020: 1.3 B
BC Exports2016: 4.1 B 2020: 4.2 B
17
SYP MARKET EXPANSION – MOVING NORTH AND WEST
SYP
SPF
SYP expansion will lead to an increase in species substitution
18
Forecasted NA lumber demand will exceed supply by 2 BBF by 2020 8-10 % YOY growth in new home construction
6- 8 % YOY growth in repair and remodel
Increased consumption of wood in new building designs
Significant increase in softwood lumber consumption in China, SE Asia and India Shift from Hardwood to Softwood
Shift from Concrete & Steel to wood frame construction
Southern Yellow Pine will be the critical species in filling the supply gap
High quality timber is required to support the increasing demand for premium
specialty and structural products
The Road Ahead – The Future Looks Bright
Arkansas Forestry AssociationFayetteville Arkansas- October 2016
Thank You
Investing in Arkansas ……… and the US South
Arkansas Forestry Association 71st Annual MeetingOctober 5, 2016
Todd MullisVice President
US South Operations
22
This presentation contains information and statements that are forward-looking in nature, including, but not limited to, statements containing the words “will”, “is expected”, “forecast”, “annualized”, “target” and similar expressions. Such statements involve known and unknown risks and uncertainties that may cause Interfor’s actual results to be materially different from those expressed or implied by those forward-looking statements. Such risks and uncertainties include, among others: price volatility; competition; availability and cost of log supply; natural or man-made disasters; foreign currency exchange fluctuations; changes in government regulation; export and other trade barriers; environmental and community matters; labour disruptions; and other factors referenced herein and in Interfor’s current Annual Report and Management’s Discussion & Analysis, both available on www.sedar.com. The forward-looking information and statements contained in this presentation are based on Interfor’s current expectations and beliefs. Readers are cautioned not to place undue reliance on forward-looking information or statements. Interfor undertakes no obligation to update such forward-looking information or statements, except where required by law.
FORWARD-LOOKING INFORMATION
22
23
• Interfor’s Platform• North American Lumber Log Supply• US Lumber Demand• The Future of Southern Yellow Pine• The Road Ahead
ITEMS FOR DISCUSSION
23
INTERFOR’S FOUR REGIONS
24
25
March 2013Rayonier Acquisition• Baxley• Eatonton• Swainsboro
July 2013Keadle Acquisition• Thomaston
Sept 2013Swainsboro second shift
March 2014Tolleson Acquisition• Perry• Preston
Jan 2014Baxley second shift
Nov 2014PTC office opening
March 2015Simpson Acquisition• Georgetown• Meldrim
June 2015Price Acquisition• Monticello
2013 2014 2015
• 5 transactions valued at over $400M
• $55M additional investment to date• Nine operations in three states• Over 1,100 employees• 1.3 Bbf of production capacity• Over 5M tons of logs consumed
From Zero to:
INTERFOR US SOUTH — TIMELINE
26
INTERFOR BELIEVES IN AND IS COMMITTED TO THE US SOUTH
27
LUMBER FOCUS ONLY
Interfor0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Lumber Panels Engineered Products
% of Sales
Other Major Lumber Producers
28
DougFir/Larch
30%
Hem-Fir10% Spruce-Pine-Fir
11%
SouthernYellow Pine
34%
Cedar11%
Lodge Pole/ Ponderosa Pine
4%
INTERFOR’S BROAD RANGE OF PRODUCTS
(1) By value for 2015
Lumber Sales By Species 1
Western Dimension
Cedar
Southern Yellow Pine
Lodge Pole Pine
29
Canada8%
China/Tw/HK5%
Other4%
Japan 10%
USA73%
NORTH AMERICAN DRIVEN BUSINESS; BUT DIVERSE SET OF MARKETS SERVED
(1) By value for 2015
Lumber Sales By Market 1
NORTH AMERICAN LUMBER SUPPLY LOG
30
31
BC INTERIOR OVERVIEW
Cumulative Percentage of Merchantable Forest Volume Killed Since 1999
Very High (>45%)
High (31-45%)
Moderate (16-30%)
Low (<16%)
None (0%)
Adams Lake
Castlegar
Grand Forks
Source: BC Ministry of Forests
32Source: FLNRO
AAC: Allowable Annual Cut
1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 -
10
20
30
40
50
60
70 AAC m3/yrMillion m3
BC INTERIOR HARVEST WILL DROP
33
US South Timberland Ownership
THE MERITS OF PRIVATE LAND SUPPLY
• Positive “Pro Business” environment. • Timberland is an attractive asset class. • Significant standing timber inventory.
• Abundant commercially harvestable pine habitat.
NIPF60%Pu
blic
13%
Corpo-rate
(REIT, TIMO)27%
Source: Forisk – 2015 Q3
343434
LOG INVENTORY IS GROWING IN US SOUTH
Source: Forisk Quarterly Q3-2015 Forecast
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
-
0.5
1.0
1.5
2.0
2.5
3.0 Historic Forisk Base Case Forecast
Grad
e In
vent
ory
(Bill
ion
tons
)
UNITED STATES LUMBER DEMAND
35
36
US HOUSING STARTS WILL GROW
36
70 73 76 79 82 85 88 91 94 97 0 3 6 9 12 15 180.00.20.40.60.81.01.21.41.61.82.02.22.4
Housing Starts Underlying Demand
Pent-Up Demand
Millions
Source: FEA Q4-2015 Forecast; Published December 2015
37
DEMAND ON NORTH AMERICAN MILLS WILL BE DRIVEN UPWARD
37
BBF
Source: FEA Q4-2015 Forecast; Published December 2015
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 202025303540455055606570758085
US Canada Net Exports
THE FUTURE OF SOUTHERN YELLOW PINE
38
39Source: FEA – 2015 Q3
SOUTH LEADS SINGLE FAMILY HOUSING STARTS
2013 2014 2015 2016 2017 2018 2019 20200
0.2
0.4
0.6
0.8
1
1.2
1.4
Northeast North Central South West
millions
404040
PINE GRADE INVENTORY & HOUSING STARTS
Source: Forisk Quarterly Q3-2015 Forecast
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
0.0
0.5
1.0
1.5
2.0
2.5
Base Housing Low Housing Historic Base Low
U.S
. Sou
th P
ine
Grad
e In
vent
ory
(tho
usan
ds)
U.S. Housing Starts (m
illions)
41
SOUTHERN YELLOW PINE: THE ROAD AHEAD• 2016 North American lumber demand dynamics
have been positive.
• Domestic consumption is forecasted to increase significantly over the next five years….the US South will lead the way.
• Log supply constraints will continue in Canada, but log inventory is growing in the US South.
• The US South is well-positioned and remains a good investment opportunity.
42
THANK YOU
Arkansas Forestry AssociationAnnual MeetingOctober 5th, 2016
44
• Who is West Fraser? Our History and Culture
• Why expand into Arkansas and the US South?
• Investing in Capital and People
Outline
45
46
First Mill - 1955
47
West Fraser
Operating Philosophy
• Low cost• Reinvest profits• Conservative balance sheet• Growth
47
48
Our Values• Frugality• Humility• Competitiveness• Every employee is important• Teamwork
Critical that this is throughout the organization as we grow
49
LUMBER28 mills
PANELS7 mills
PULP & PAPER5 mills
SPF 4.0 BfbmSYP 2.3 BfbmTotal 6.3 Bfbm
Plywood: 830 MMsf3/8”MDF: 300 MMsf3/4”LVL: 3.2 MMcf
NBSK: 570 MtonnesBCTMP: 650 MtonnesNewsprint: 135 Mtonnes
West Fraser Today
• North America’s largest lumber producer• Largest plywood producer in Canada• Third largest pulp producer in Canada
50
Operations diversified by geography
Geographic diversification
B.C.39%
Alberta24%
U.S.37%
Lumber Capacity
51
WEST FRASER LUMBER CAPACITY
B.C. Interior Alberta U.S. South
U.S. South37%
B.C.38%
Lumber Capacity 2015 6.3 Billion feet
Alberta25%
U.S. South
9%
B.C.70%
Alberta21%
Lumber Capacity 20044.3 Billion feet
52
2011 2012 2013 2014 2015 20160
100
200
300
400
500
Lumber Pulp
$ Millions
West Fraser Capital Spending
• Over the past five years, we’ve spent approximately $1.4 billion to modernizeour facilities
• We’ve invested more than $270 million in new energy projects and bio-products Estimated
2016 spend
53
6 Energy and Bioproducts Projects
54
Energy Generation
2010 2011 2012 2013 2014 20150
20
40
60
80
100
120
140
160
140 megawatts of electricity can power 100,000 homes
Meg
awatt
s
Our electrical generation capacity has greatly increased over the last 5 years
55
5 Sawmill Rebuilds
56
8 Planer Rebuilds
57
22 Continuous Kilns
58
Why South?
59
Mountain Pine Beetle
59
60
Southern Yellow Pine Timber Supply
US South has the largest, fastest growing, timber supply in North America
61
Southern Yellow Pine Lumber Markets
US South is the largest, fastest growing, lumber market in North America
62
West Fraser – Current US Operations
62
LumberArkansas
TEXAS LOUISIANA
ALABAMAGEORGIA
ARKANSAS
TENNESSEE
MEMPHIS
FLORIDA
NORTH CAROLINA
SOUTH CAROLINA
63
West Fraser Arkansas
2015 WF ArkansasLog Tons Delivered 2.2MSawmill Production 535MMBF
Employees 647Logging Contractors 2447
Arkansas Represents 23% of US Lumber Production
64
West Fraser Arkansas
West Fraser has invested $88.3M in capital projects from 2012-2016 in our Arkansas Divisions
65
• Promoting from within is a corner stone of our Company
• Growth generates opportunity
• Leaders are promoted within West Fraser
• The future of the forest industry is growing stronger as the world turns green
Opportunities
66
67
North American Outlook
Appendix
68
Wood is Good
Source: reTHINK Wood
69
Wood Innovation: Brock Commons, UBC
70Source: US Census Bureau, Statistics Canada, WWPA, West Fraser
North American Lumber Consumption & Exports
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016F 2017F 2018F 2019F 2020F0
10
20
30
40
50
60
70
80
North American Consumption North American Offshore Exports
Billion Feet
Forecast
71
U.S. HousingM
illio
n U
nits
Source: FEA, 06-16
Significant pent up demand bodes well for long-term recovery
Pent Up Housing Demand (conventional + mobile)
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Production Underlying Demand
72Source: US Census Bureau & Statistics Canada
North American Lumber Production
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20157
9
11
13
15
17
19
21
23
0
10
20
30
40
50
60
70
80 75
72
65
53
42 47 49
51 54 56
59
Total North America (R Axis) BC Interior Rest Of Canada US South Rest of US
Billion Feet
73
North American Lumber Capacity
Why Arkansas?
Fred Stimpson | Canfor Southern PineTodd Mullis | Interfor
Chuck Watkins | West Fraser
Door Prizes• Vera Lloyd Giveaway | Scott Meek (Claim at
registration table)• Winthrop Rockefeller | Mike Price (Claim at
booth)• International Forest Company | Kevin Tucker
THANK YOU TO OUR PREMIER SPONSOR
LUNCHEON SPONSORED BY
FISH FRY SPONSORED BY
THANK YOU TO OUR PLATINUM SPONSORS
THANK YOU TO OUR GOLD SPONSORS
THANK YOU TO OUR SPONSORS
THANK YOU TO OUR EXHIBITORS
Located at the Silent Auction
Cover the Log TruckAll Donations go toward
Arkansas Log A Load
GRAVELY 50-INCH ZERO TURN MOWER WITH SINGLE AXLE TRAILER
TICKETS | $10 EACH OR 3 FOR $20
Biomass Discussion
Dr. Matt Pelkki | UAM School of Forestry & Natural ResourcesDonna Harman | American Forest & Paper Association
Dave Tenny | National Alliance of Forest Owners
Biomass 101
Wood Supply Trends in the U.S. South1995-2015
Dave TennyPresident & CEONational Alliance of Forest Owners
Objective and Scope
Overall: Present factual information on the impact of the export wood pellet market on American forests and other forest products industries in the US South.
Three part study:
• Geographic Distribution of Operational and Closed Wood Fiber Consumers: 1995-2015
• Wood Supply and Pricing Trends: 2000-2014
• Market Case Studies: 2006-2015
Study Area
Operating and Closed Mills 2015
Net Mill Openings and Closures 1995-2015
1995-2000 2000-2005 2005-2010 2010-2012 2012-2014 2014-2015 TotalPeriod
Panelboard: Hardboard and MDF 1 -3 -1 0 0 0 -3OSB 4 4 -5 -2 3 0 4Pulp/Paper -3 -7 -3 -1 0 0 -14Pellet-Operating 0 0 6 1 9 0 16Pellet-Construction 3
-20
-15
-10
-5
0
5
10
15
20
Net
Ope
ning
s/Cl
osin
gs (N
umbe
r of F
acili
ties)
30 Miles 65 Miles 100 Miles 100+ MilesOperational 18 7 (39%) 18 (100%) 18 (100%) 18 (100%)
Closed 18 8 (44%) 13 (72%) 16 (89%) 18 (100%)
Total Current Export Pellets
Proximity AnalysisCompetitive Mill Status
Pine Removals - Study Area
Year
US SouthPulpwood Sawtimber Total Pine
Inventory Non-Pellet Mill Removals Removals
% of Inventory
Pellet Mill Removals Removals
% of Inventory
Inventory Removals Removals% of
Inventory
Inventory Removals Removals
(million tons) (million tons) (million tons) (million tons) % of Inventory
2000 1,007.9 96.6 9.6% 2,009.6 98.2 4.9% 3,017.5 194.9 6.5%2001 1,013.3 94.6 9.3% 2,023.3 97.4 4.8% 3,036.6 191.9 6.3%2002 1,025.0 95.9 9.4% 2,057.6 98.0 4.8% 3,082.7 193.9 6.3%2003 1,032.0 97.2 9.4% 2,084.9 98.7 4.7% 3,116.9 195.9 6.3%2004 1,050.0 100.2 9.5% 2,136.2 101.7 4.8% 3,186.2 201.8 6.3%2005 1,054.2 103.1 9.8% 2,189.8 104.6 4.8% 3,244.0 207.7 6.4%2006 1,060.9 106.9 10.1% 2,233.4 98.2 4.4% 3,294.3 205.2 6.2%2007 1,076.2 110.7 10.3% 2,264.9 94.9 4.2% 3,341.1 205.6 6.2%2008 1,083.8 111.8 10.3% 0.1 0.0% 2,295.4 71.2 3.1% 3,379.2 183.1 5.4%2009 1,086.3 109.0 10.0% 0.3 0.0% 2,333.3 60.6 2.6% 3,419.7 169.8 5.0%2010 1,090.8 116.6 10.7% 0.6 0.1% 2,398.3 64.3 2.7% 3,489.0 181.4 5.2%2011 1,110.5 112.8 10.2% 1.7 0.2% 2,477.5 68.3 2.8% 3,588.0 182.8 5.1%2012 1,129.6 114.9 10.2% 2.4 0.2% 2,563.6 71.1 2.8% 3,693.2 188.4 5.1%2013 1,159.3 115.9 10.0% 3.3 0.3% 2,665.8 75.8 2.8% 3,825.2 195.1 5.1%2014 1,178.5 117.7 10.0% 3.7 0.3% 2,772.8 78.1 2.8% 3,951.3 199.5 5.0%
Average 1,077.2 106.9 9.9% 1.7 0.2% 2,300.4 85.4 3.8% 3,377.7 193.1 5.8%Trendline Growth Rate 1.0% 1.7% 0.7% 94.9% 81.3% 2.3% -3.2% -5.4% 1.9% -0.3% -2.2%
Hardwood Removals - Study Area
Year
US SouthPulpwood Sawtimber Total Hardwood
Inventory Non-Pellet Mill Removals Removals
% of Inventory
Pellet Mill Removals Removals
% of Inventory
Inventory Removals Removals% of
Inventory
Inventory Removals Removals
(million tons) (million tons) (million tons) (million tons) % of Inventory
2000 1,286.1 48.9 3.8% 2,113.6 27.5 1.3% 3,399.7 76.3 2.2%2001 1,279.0 47.0 3.7% 2,120.8 27.7 1.3% 3,399.8 74.7 2.2%2002 1,270.8 43.4 3.4% 2,130.0 28.2 1.3% 3,400.8 71.6 2.1%2003 1,255.3 39.8 3.2% 2,139.8 28.7 1.3% 3,395.1 68.5 2.0%2004 1,252.3 40.9 3.3% 2,154.9 28.5 1.3% 3,407.1 69.4 2.0%2005 1,238.2 42.0 3.4% 2,161.7 28.3 1.3% 3,399.9 70.3 2.1%2006 1,232.4 40.9 3.3% 2,181.7 26.8 1.2% 3,414.1 67.7 2.0%2007 1,234.8 39.4 3.2% 2,213.1 25.2 1.1% 3,447.8 64.6 1.9%2008 1,229.3 38.1 3.1% 2,414.6 20.8 0.9% 3,643.9 58.9 1.6%2009 1,229.7 34.1 2.8% 2,431.8 16.5 0.7% 3,661.5 50.6 1.4%2010 1,227.5 36.1 2.9% 0.0 0.0% 2,433.1 16.4 0.7% 3,660.6 52.6 1.4%2011 1,230.8 34.7 2.8% 0.0 0.0% 2,438.6 16.4 0.7% 3,669.4 51.1 1.4%2012 1,224.4 34.6 2.8% 0.5 0.0% 2,431.5 16.3 0.7% 3,655.9 51.5 1.4%2013 1,218.1 33.8 2.8% 1.3 0.1% 2,429.8 15.3 0.6% 3,647.9 50.4 1.4%2014 1,219.9 33.6 2.8% 2.4 0.2% 2,445.6 14.8 0.6% 3,665.4 50.8 1.4%
Average 1,241.9 39.2 3.1% 0.8 0.1% 2,282.7 22.5 1.0% 3,524.6 61.9 1.8%Trendline Growth Rate -0.4% -2.6% -2.2% 117.7% 118.0% 1.3% -5.5% -6.8% 0.7% -3.4% -4.2%
Total Removals - Study Area
Year
US SouthPulpwood Sawtimber Total Pine and Hardwood
Inventory Non-Pellet Mill Removals Removals
% of Inventory
Pellet Mill Removals Removals
% of Inventory
Inventory Removals Removals% of
Inventory
Inventory Removals Removals
(million tons) (million tons) (million tons) (million tons) % of Inventory
2000 2,294.0 145.5 6.3% 4,123.3 125.7 3.0% 6,417.3 271.2 4.2%2001 2,292.3 141.6 6.2% 4,144.1 125.0 3.0% 6,436.4 266.6 4.1%2002 2,295.8 139.3 6.1% 4,187.7 126.2 3.0% 6,483.5 265.5 4.1%2003 2,287.3 137.0 6.0% 4,224.7 127.4 3.0% 6,512.0 264.4 4.1%2004 2,302.3 141.1 6.1% 4,291.1 130.2 3.0% 6,593.4 271.2 4.1%2005 2,292.4 145.2 6.3% 4,351.5 132.9 3.1% 6,643.9 278.1 4.2%2006 2,293.3 147.8 6.4% 4,415.1 125.0 2.8% 6,708.4 272.8 4.1%2007 2,310.9 150.0 6.5% 4,478.0 120.1 2.7% 6,788.9 270.2 4.0%2008 2,313.1 149.9 6.5% 0.1 0.0% 4,709.9 92.0 2.0% 7,023.1 242.0 3.4%2009 2,316.0 143.1 6.2% 0.3 0.0% 4,765.1 77.1 1.6% 7,081.1 220.4 3.1%2010 2,318.2 152.7 6.6% 0.6 0.0% 4,831.4 80.7 1.7% 7,149.7 234.0 3.3%2011 2,341.3 147.5 6.3% 1.8 0.1% 4,916.1 84.7 1.7% 7,257.4 233.9 3.2%2012 2,354.0 149.6 6.4% 2.9 0.1% 4,995.0 87.5 1.8% 7,349.1 239.9 3.3%2013 2,377.5 149.7 6.3% 4.6 0.2% 5,095.6 91.1 1.8% 7,473.1 245.4 3.3%2014 2,398.4 151.3 6.3% 6.0 0.3% 5,218.4 92.9 1.8% 7,616.7 250.2 3.3%
Average 2,319.1 146.1 6.3% 2.3 0.1% 4,583.1 107.9 2.4% 6,902.3 255.1 3.7%Trendline Growth Rate 0.3% 0.5% 0.2% 91.1% 87.2% 1.8% -3.6% -5.4% 1.3% -1.1% -2.4%
Study Area Market Dynamics – Pine
$0
$5
$10
$15
$20
$25
$30
5
25
45
65
85
105
125
145
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Pulp
woo
d/Re
sidu
al P
rice
($/t
on)
Pulp
woo
d Re
mov
als/
Resi
dual
Sup
ply
(mill
ion
tons
)
Pellet Removals Non-Pellet Removals Residual Supply Deficit
Residual Supply Pulpwood Stumpage Price Residual FOB Sawmill Price
Study Area Market Dynamics – Hardwood
$0
$5
$10
$15
$20
$25
$30
0
10
20
30
40
50
60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Pulp
woo
d/Re
sidua
l Pric
e ($
/ton
)
Pulp
woo
d Re
mov
als/
Resi
dual
Sup
ply
(mill
ion
tons
)
Pellet Removals Non-Pellet Removals Residual Supply Deficit
Residual Supply Pulpwood Stumpage Price Residual FOB Sawmill Price
Significant FindingsResidual supply 2007-2014:• 21% less than the supply between 2000 and 2006• Pine/hardwood residual prices increased 12.5% and 10.7%
Pine pulpwood consumption and price 2008-2014:• Non-pellet demand increased by 5.8 mm tons (from 111.8 to 117.7 mm tons) • Pellet demand increased by 3.7 mm tons (from 0 to 3.7 mm tons)• Sawtimber inventory increased significantly more than pulpwood• US South average pulpwood prices increased 4.5% annually • Similar price trends in areas with and without export pellet influence
Hardwood pulpwood consumption and price 2010-2014:• Non-pellet demand decreased by 2.5 mm tons (from 36.1 to 33.6 mm tons) • Pellet mill demand has increased by 2.4 mm tons (from 0 to 2.4 mm tons)• Sawtimber inventory increased and pulpwood inventory declined• US South average pulpwood prices increased 7.4% annually• Similar price trends in areas with and without export pellet influence
EU Export Pellet Outlook
• 2014 – 3.6 mm metric tons (40% market share)
• Near-term growth – 7.4 mm metric tons (from existing installed capacity)
• Additional demand – 3.4 mm metric tons (40% market share)
• Total capacity – 10-11 mm metric tons (7 new mills)
• Total Removals – .6% of pulpwood inventory
Case Study – Coastal Georgia
Coastal Georgia – Removals and Prices
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
Pulp
woo
d Re
mov
als a
s % o
f Inv
ento
ry
Stum
page
Pric
e ($
/ton
)
Annual Precipitation (Indexed) Pulpwood Removals as % of Inventory
Pine Pulpwood Stumpage Avg Precipitation
Trendline (9.6% Annual Growth rate)
Coastal Georgia – Micromarkets Comparison (2010-15)
10%11%11%
9%
6%
3%4%
2%
10%
5%
8%
-3%
1%
0%
-3%
-11%
-8%
1%
9%
11%
8%
-9%
-4%
-2%
-6%
9%
4%
-3%
4%
-1%
-7%
1%
5%
-15%
-10%
-5%
0%
5%
10%
15%
Case
Stu
dy 3
Area
# 2
Area
# 3
Area
# 4
Area
# 5
Area
# 6
Area
# 7
Area
# 8
Area
# 9
Area
# 1
0Ar
ea #
11
Area
# 1
2Ar
ea #
13
Area
# 1
4Ar
ea #
15
Area
# 1
6Ar
ea #
17
Area
# 1
8Ar
ea #
19
Area
# 2
0Ar
ea #
22
Area
# 2
3Ar
ea #
24
Area
# 2
5Ar
ea #
26
Area
# 2
7Ar
ea #
28
Area
# 2
9Ar
ea #
30
Area
# 3
1Ar
ea #
35
Area
# 3
6Ar
ea #
37
Tren
dlin
e An
nual
Gro
wth
Rat
e
Case Study 3 Non-Pellet Area
Pellet Influenced Area (All Years) Pellet Influenced Area (Partial Years)
Key Takeaways• Southern forests are sustainable
• The marketplace is experiencing a post-recession inventory and residual supply correction
• Several factors (e.g. inventory and residual correction, increased post-recession demand, pellets, weather) have affected pulpwood removals and prices
• Price trends are similar in areas with and without pellets
• Pellets will have a relatively minor impact on overall wood supply and prices but may have more significant localized impacts
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