Wood Demand: Q3 pine roundwood purchases were mixed in the South. Pine grade volumes decreased 3.3%, while demand for pine pulpwood increased 1.9% (though prices did not). OSB mills, however, followed pine grade mills in reducing wood receipts, consuming 7% fewer tons in Q3 than in Q2. Hardwood grade volumes remained stable, while hardwood in-woods chip receipts fell 7.5%. Looking ahead, pine grade demand typically bottoms during Q4 due to maintenance and holidays, but recent rallies in lumber futures markets signal that sawmills will, at a minimum, maintain current production levels.
Timber REITs: Q3 earnings results show Rayonier (RYN) – along with soon-to-be-REIT Weyerhaeuser (WY) – beat expectations, while Plum Creek (PCL) and Potlatch (PCH) missed expectations. YTD as of November 1, the Forisk Timber REIT (FTR) Index returned 7.90% versus 6.21% for the S&P 500. Once WY completes its REIT conversion, the FTR Index will represent 6% of total public REIT capitalization.
Wood Bioenergy: As of October, 434 operating and announced wood bioenergy projects in the US represent 121.9 million tons of incremental wood demand by 2020. However, based on Forisk analysis, projects representing only 55% of this volume – 66.6 million tons – pass basic viability screening.
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