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Author Topic: Michigan DNR Timber Market Reports  (Read 2294 times)

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Offline Jeff

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Michigan DNR Timber Market Reports
« on: November 27, 2001, 01:09:13 PM »

Timber Market Report
Michigan Department of Natural Resources
Forest, Mineral and Fire Management Division
Fall 2001

Board and Panel Sector


Oriented Strand Board (OSB - Used for wall and roof sheathing, sub-flooring and siding substrate.)

The OSB business is limping along with prices dropping again in the past two months after a brief spike during last summers building season.  The current price for the board is only one-third of last years high price.  Plants are trying to keep inventory of roundwood low and plan to only purchase it as they need it.  Some companies are letting regional and corporate staff go. Plants are keeping board inventory low.  With the mortgage rates at low levels, the board is moving pretty steadily but at a low price.  The industry is expecting improvement by the third quarter 2002.

Particleboard (Used as substrate for countertops, tables, shelving, cabinetry, bookcases, etc.  Usually covered with melamine, wood veneer or plastic.  Sometimes used as sub-flooring.)

The particleboard business is slow industry wide.  Production of particleboard started slacking off last January and it looks like the year will average only 80% capacity. There is expectation that production will pick up later in 2002.  Its going to be a long time before they enjoy the good markets of two years ago as other plants across the country increase capacity.  Additionally, there are new plants scheduled to come on line in 2002.


Hardboard (A dense thin panel product used as a substrate for inexpensive wall paneling, furniture panels, and commercial displays.)

It was not a good year for the hardboard industry. Industry watchers are looking for major improvement in the third quarter of 2002.  

Hardwood Lumber Sector

Grade Lumber (Lumber used in the production of fine solid-wood furniture, flooring, solid-wood cabinetry, etc.  Green hardwood lumber is dried then sawn to produce defect-free blanks of various dimensions marketed as commodity hardwood dimension.  Hard maple, red oak and soft maple are the major species of hardwood lumber.  Lesser species include ash, yellow and white birch, cherry, basswood, beech, aspen and white oak. Often ash is used as a lower priced oak substitute.)

Lumber production and demand is down 25 to 30 percent.  Some mills are shutting down a portion of their dry kiln capacity until demand and prices improve. Industry watchers are hoping they are seeing the bottom of the market now and prices will start to increase late December. The more successful mills are merchandizing their incoming logs and only sawing the more profitable species i.e. red oak and maple. Basswood and ash still down.  Strong competition on bid sales is hurting some of the smaller mills.  The low grade lumber market is not very good. Pallet log prices are still slipping and cants arent moving well.

Industry watchers are looking for a shake up in the national hardwood lumber business in the coming year.  Already mills are diverting Appalachian production to the Great Lakes Region as their traditional customers have turned to China instead.  Mills in the Great Lakes Region are taking some downtime. Harvesting hardwood sawtimber usually results in hardwood pulpwood being produced concurrently and there is difficulty in finding a market for the hardwood pulpwood.

Pulp and Paper Sector

The pulp and paper business is in the doldrums and most companies are taking down time for the first time in decades.  Prices for both pulp and paper are low industry wide.  Hardwood pulp is in particular oversupply.  Customers who were so concerned about paper quality a couple years ago are now content with less expensive lower quality foreign imports.  Imports still enjoy a currency exchange rate advantage.

Most companies are trying to hold onto the mill capacity they have.  Some of the mills with older, slower or smaller paper machines are dropping out, especially in the eastern United States where many mills are well over a century old.  There are many older mills in the Great Lakes region also which is causing some similar concerns.  Most Great Lakes mills have invested heavily into upgrades, but its too soon to know their long-term economic viability.  Some companies are repositioning through mergers and acquisitions.  Todays pulp and paper economy landscape will not look anything like it will be five years from now.


Softwood Lumber and Specialty Products Sector

Most softwood lumber is used to make lumber for construction (2x4s, 2x6s, etc.), decks and landscape timbers.  The main species are red pine, jack pine and spruce.   Lesser species include white pine, fir, cedar and tamarack.

Markets are very slow with some mills taking down time now with the possibility of more in the first quarter. When the Canadian lumber tariff is lifted we expect lumber prices to drop to an even lower level.  Softwood lumber is also coming in from Scandinavia, which is indicative of what is happening worldwide with cheap imports due to value of dollar.

The utility pole business is going along fairly well.  It is not related to the new construction economy as a lot of poles are used in routine replacement of old poles.  The utility pole business doesnt experience the  roller coaster ride that softwood lumber does.  Prices for poles remain fairly constant.  High fuel costs resulted in the plant running at a loss for a while this year, but the company is looking for a good 2002.  High wood costs have stabilized.

Logging Sector

Loggers have a lot of things working against them.  They have to pay more for stumpage as the price for the delivered product decreases.  For much of the year fuel prices were eating directly into profits, but recent fuel price relief will buy them some time.  Some producers are down to quotas resulting in three days of production per week.  Others are producing only what they can immediately sell.

A recent Forest Resource Association survey finds loggers are having financial difficulties all across the country due to increasing cost of stumpage and decreasing delivered prices.  As logging companies lose skilled equipment operators to layoffs, they expect there will be difficulty getting good workers back when the economy improves.

Jack Pilon and Anthony Weatherspoon
Michigan DNR-FMFMD
Nov 2001
Just call me the midget doctor.
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Offline Jeff

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Re: Michigan DNR Fall 2001 Timber Market Report
« Reply #1 on: November 27, 2001, 02:30:41 PM »
Jack Pilon, Forest Industry Analyst, DNR - Forest, Mineral and Fire Management Division provided the report above to the Forestry Forum along with another called "New ways trees are being used" which I have added to our knowledge base under forestry. Thanks to Jack and the DNR.
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Offline timberbeast

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Re: Michigan DNR Fall 2001 Timber Market Report
« Reply #2 on: November 27, 2001, 10:26:28 PM »
I know the prices are down,  but this baffles me:  There seems to be a CONSTANT stream of pulp trucks going to Mead in Escanaba,  more than I've ever seen before.  ??????????? :-/
Where the heck is my axe???

Offline Jeff

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Re: Michigan DNR Timber Market Reports
« Reply #3 on: June 03, 2002, 06:11:31 PM »
Timber Market Report
Michigan Department of Natural Resources
Forest, Mineral and Fire Management Division
Spring 2002

Board and Panel Sector  

Oriented Strand Board
(OSB - Used for wall and roof sheathing, sub-flooring and siding substrate.)

It was a tough winter for the oriented strand board companies. Prices were terrible, then started to pick up unexpectedly in March then dropped a bit again in April. Inventories are still at large levels.  Industry watchers are predicting a good building season and in fact new housing got off to a good start with the mild winter, then the wet spring put a damper on it for a while.  Overall for the year, the industry expects 1.6 million units, about the same as last year.  One plus for the industry: homes are getting bigger with average size now at 2,300 square feet.  Some plants will face down time this year; some not.   They continue to buy wood, hoping prices improve some during the heart of building season.  

Even though there is industry over capacity at present time, there's a huge new plant being built in Saskatchewan and is due to come on line next year at this time.  Additionally, two new plants have been announced for construction in New York, but ground hasn't been broken yet.  People are wondering where all this production will be used.  There is concern for the long-term status of some of Michigan's relatively older plants.  Some of that OSB capacity continues to supplant western plywood production.  

All told, wood usage by the OSB plants is expected to be similar to last year.   The plants still want more DNR sales as suppliers occasionally run short of stumpage.  Stumpage prices remain high.  


Particleboard (Used as substrate for countertops, tables, shelving, cabinetry, bookcases, etc.  Usually covered with melamine, wood veneer or plastic.  Sometimes used as sub-flooring.)  

The particleboard business is pretty competitive due to over capacity.  Plants around the country are struggling to get orders as the office furniture segment is way down.  


Hardboard (A dense thin panel product used as a substrate for inexpensive wall paneling, furniture panels, and commercial displays.)

No data.


Hardwood Lumber Sector

Grade Lumber (Lumber used in the production of fine solid-wood furniture, flooring, solid-wood cabinetry, etc.  Green hardwood lumber is dried then sawn to produce defect-free blanks of various dimensions marketed as commodity hardwood dimension.  Hard maple, red oak and soft maple are the major species of hardwood lumber.  Lesser species include ash, yellow and white birch, cherry, basswood, beech, aspen and white oak. Often ash is used as a lower priced oak substitute.)

The hardwood grade lumber business is on the upswing, but it's not real hot.  There is no big money being made, but prices are holding fairly steady.   Some loggers have been hindered by the wet spring, but the impact isn't so bad as mills want to keep inventories on the low end going into summer.  The grade lumber companies try to keep log inventories lower in the summer because warm weather causes stain (which degrades the lumber).  Prices are staying pretty stable for red oak.  Hard maple prices took quite a hit in March, but it's doing better.  Soft maple is selling quite well.  Yellow birch is sold out.  Ash is still a dog, but is starting to budge a little.  Basswood prices have come back pretty well since the Chinese are again using more basswood for venetian blinds sent to the US.  (The Chinese used to use a lot of basswood for blinds a few years ago, but switched to a SE Asia species which became in short supply - and local basswood is starting to make up the difference.)  More broadly the Chinese have affected the hardwood grade lumber business.  There used to be considerable amounts of Appalachian hardwoods sent to China, but more recently they have found supplies closer to home.  Now we're seeing the ramped-up Appalachian mills going after the markets typically supplied by Midwest mills.


Hardwood Industrial Lumber (lumber that does not meet grade standards but is suitable for pallets, crates, blocking, etc.)

The industrial lumber business is still slow as it closely parallels the manufacturing economy.  We're seeing a few spurts of activity here and there.  It's generally better than it was two months ago.


Pulp and Paper Sector
 
One company representative says the paper business is as bad as it has been in his 29 years with the company.  Imports from Europe, Korea and Scandinavia have taken 25% of the coated paper business.  Strong value of currency is the primary driver.  Pulp and paper companies are still buying and merging.  Plants are being closed in some parts of the country; probably those with older, slower paper machines more will close yet. The shake out in the industry is going to continue for a while. Don't expect tariffs on paper because many large players in the industry are multi-national.   Ten years from now there will be fewer larger companies and they will have to invest significant dollars into the mills that are left to compete.

Gloomy as it is, pulp (not paper) prices are starting to recover a bit. The second half forecast is predicted to improve, but it remains to be seen.

There are six pulp mills in Michigan that produce virgin fiber.


Softwood Lumber

Most softwood lumber is used to make lumber for construction (2x4s, 2x6s, etc.), decks and landscape timbers.  The main species are red pine, jack pine and spruce.   Lesser species include white pine, fir, cedar and tamarack.

The price for softwood lumber really dropped when the Canadians dumped one billion board feet of lumber into the US during the grace period just before the tariffs kicked in May 22 to 27.2%.  It will take a month or two for the slug of Canadian lumber to clear. Improvement is expected by late summer.  In the meantime, our mills are still buying logs and milling lumber, albeit at hardly any profit.


Specialty Products Sector

The utility pole business is holding its own. Markets and supply are decent, but prices are down.  There is general over-capacity in the industry causing the southern producers to make inroads into the Midwest. Southern yellow pine can overcome the freight disadvantage because it is stronger than red pine, allowing for the use of smaller poles which takes less chemical to treat and they can out more poles on a rail car.  The EPA ruling on CCA will not affect utility poles.

Log Homes: The mid-level log home business is suffering as those middle-class second home customers are deferring their purchases or switching to less expensive structures.  High-end log homes are still doing well.


Logging Sector

Conditions for loggers are more challenging than ever.  Some of the smaller logging companies are suffering along with those larger loggers who have all their eggs in one basket (supplying only one customer).

Jack Pilon
Michigan DNR-FMFMD
Just call me the midget doctor.
Forestry Forum Founder and Chief Cook and Bottle Washer.

Commercial circle sawmill sawyer in a past life.
Ezekiel 22:30

Offline Ron Wenrich

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Re: Michigan DNR Timber Market Reports
« Reply #4 on: June 03, 2002, 06:24:00 PM »
We had a lumber buyer stop by last week and needed 1.75 MMbf of ash for the Canadian markets.  He already had 1 million lined up and was hot to fill up the balance.  

Of course, we already had our ash promised to another source.
Never under estimate the power of stupid people in large groups.

Offline Tom

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Re: Michigan DNR Timber Market Reports
« Reply #5 on: June 03, 2002, 06:39:18 PM »
I enjoyed your report, Jack. Pulp recovering may help us too if it reaches us down in the South East before all the mills close.
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