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Demand, supplies help drive timber prices up
MISSISSIPPI STATE -- After three years of depressed timber markets, prices are increasing because of strong demand for forest products and low inventories of logs following the year’s wettest months.
David Jones, assistant forest products professor with the Mississippi State University Extension Service, said the first half of 2010 showed a marked increase in demand for a number of forest products and price increases in most timber product categories.
“Many of the lumber and paper mills did not have enough logs to meet projected timber needs, let alone to respond to any increase in demand from improvements in the U.S. economy and the residential construction industry,” Jones said.
April and May provided drier conditions, allowing for increased timber harvesting. Jones said timber prices will decline as summer conditions improve timber availability.
“Mills usually keep a small surplus of products to allow for fluctuations in the market,” he said. “Because these inventories have been low to nonexistent, many of the hardwood mills have orders that they are unable to fill. This will lead to an increase in production for the near future and possibly into the third quarter of 2010.”
Jones said the recent price gains may continue as reduced logging capacity is still a major problem for hardwood sawmill owners and operators.
“Logging firms that have survived the recent market downturns are focusing on pine sawtimber and pulpwood harvests, as delivered prices for these product categories are comparatively high,” he said.
Jones said an added twist to the problems faced by mill owners and operators is the lack of trucks to deliver finished material to buyers. The general downturn in the economy has reduced the number of truck drivers, and tight credit is reducing the number of new drivers entering the profession.
“A lack in hauling force has caused some mills to quote the prices at the mill only, not the standard delivered price,” Jones said.
James Henderson, assistant Extension forestry professor, said standing prices for hardwood sawtimber in the first quarter of 2010 increased 12 percent over the fourth quarter of 2009. Standing pulpwood prices increased 21 percent for pine and 59 percent for hardwood pulpwood over the fourth quarter of 2009.
“Pine sawtimber and chip-n-saw prices have not demonstrated much sustained improvement as demand for these timber products has not rebounded much from the housing bubble collapse and recent economic recession,” Henderson said. “However, recent improvements in the U.S. housing market may indicate an increase in pine sawtimber prices to come. Softwood lumber indices have indicated increasing lumber prices since the beginning of 2010.”
Henderson said long-term improvement in Mississippi’s timber markets depends on growth in the national economy and the U.S. housing market.
“The U.S. economy has demonstrated sustained improvement over the last three quarters, starting with the third quarter of 2009,” he said. “Historically, growth in the national economy results in increased demand for pulp and paper products. A growing economy also benefits the U.S. housing market and ultimately the Mississippi timber market.”
Henderson said he expects the housing market to make a slow recovery from the collapse of 2006, and he noted that home construction numbers for March were up 20 percent from a year ago.
“If the economy and housing continues on the current track of recovery, the forest and forest products industry will follow,” Henderson said. “It appears that we are now finally seeing a resurgence from the recession of recent years.”