Forest Industry Capital Investment Implications for U.S. Timberland Investors
BY BROOKS MENDELL, PH.D. ON MAY 22, 2014
All arrows continue to point up for timber prices and revenues received by U.S. timberland investors in 2014 and moving forward. Why? Because capital investment activity in U.S. forest industry capacity continues to increase. Announcements from 2013 alone include investments and reopenings of sawmills, oriented strand board (OSB) plants, and plywood facilities. This article captures the overall trend in Forisk’s research of capital assets, which find forest products firms currently improve existing assets while simultaneously adding new capacity to meet current and expected demand for building products.
Where are Forest Industry Firms Investing?
In 2013, most capital improvements at U.S. forest products facilities were for sawmills in the South (see table). This reiterates two themes observed across asset classes related to wood and timber. First, the forest industry prioritizes investments tied to recovering housing markets, rather than growth or opportunities related to consumer demand for packaging or paper products. In 2013, 26 companies made over $2.1 billion in capital investments at 35 facilities in the U.S. These facilities include 21 sawmills, 4 OSB/panel facilities, 3 plywood facilities, and 7 pulp/paper mills.
article continues below
Second, firms throughout North America – including firms based in Canada – increasingly view the U.S. South as operationally advantaged and cost competitive for capital investments. Regionally, 66% of the projects occurred at facilities in the South. And Canadian lumber producers continue to actively invest in and acquire assets in the U.S. South. Four Canadian firms – Interfor, Southern Parallel, Canfor, and West Fraser – invested over $200 million in assets in the U.S. South in 2013.
Implications for Timberland Investors
Capital investments and increasing demand for wood raw materials – sawtimber, chip-n-saw and pine pulpwood and in-woods chips – in all U.S. regions speak to strengthening markets. The Forisk Forecast for grade timber prices in the U.S. South and Pacific Northwest by state projects increases of 6% to 13% for 2014, implying stronger revenues and returns for current timberland investors.
BROOKS MENDELL, PH.D.
Brooks Mendell, Ph.D. is President and Founder of Forisk Consulting, a forest industry, timber REIT, bio-energy and timber market research firm. Dr. Mendell has over fifteen years of operating, research, and consulting experience in forest business and finance. Mendell has published over sixty articles and two books on topics related to timber and timberland REITs and markets, forest business management and operations, and communication skills.
Reprinted from LAND THINK
VIEW TIMBERLAND TRACTS FOR SALE:
Offering the largest and most comprehensive marketing solutions to land owners preparing to sell.
Employing the most powerful tools available to locate properties that best meet our buyers needs.
Our habitat professionals will meet you on site to discuss planning and improving your property to best meet your management goals.
Sartains Heritate Properties offers an award winning and nationally recognized land design team that can implement all aspects of land development.
Our partnerships have been cultivated between companies that show outstanding leadership, service, and continue to go the extra mile for their clients.
Amazing photos of our clients and the game caught on properties we helped them purchase.
Since 1954 we have assisted our clients in achieving their financial goals weather it’s buying, selling, leasing or the development of tracts, we can assist you in all aspects of your land needs. We employ the most powerful internet, regional and local marketing tools available to ensure that your property is seen by the buying public... Learn more »
Sartain’s Heritage Properties, LLC.
106 First Choice Drive
Madison, MS 39110