I recently attended the RISI Forest Products and Timberland Investment conference in New York City and wanted to share some of the conference highlights. The conference was well-attended with over 100 participants from various financial and institutional backgrounds. Approximately 30 presentations were given over the 2-day conference covering the current status of housing and forest product markets and the associated implications for timberland investments. Putting aside the significant detail of the material presented, the overall message was that we’re headed in a positive direction for supply and demand for forest products, with positive implications for timberland investing.
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In some ways the projected recovery is a simple matter of rising demand coupled with decreasing supply. Rising housing starts and increased export demand to China will increase domestic and foreign demand for US forest products. At the same time a large number of mills have folded up shop in the recent downturn (industrial capacity adjusted) and the continuing mountain pine beetle epidemic in the Pacific Northwest threatens the destruction of thousands of additional hectares of softwood (primary supply to China). Some point to the possibility of a “super-cycle” in which demand/supply dynamics support a sustained period of elevated prices. On the other hand, surviving mills are ramping up to meet anticipated demand and there is a glut of timber in some areas that will seek entry into the market when pricing fully recovers – both of which will temper rising prices. Super-cycle unlikely, but pricing recovery looks solid. Rising timber prices should lend support to increasing timberland values. Many timberland sellers holding through the recent downturn are due to cycle out of their ownerships. At the same time, there is significant pent up capital (billions) on the buy-side seeking placement into the timberland asset at scale. The two shall intersect. Regionally strong prices paid across several recent sales (MWV, Hancock and St. Joe’s) are indicative of the thaw underway. Direct investments in US timberland continue to provide strong investment opportunities to those with the time and resources (or service providers) necessary to capture them. |
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This blog was brought to you by Dan Tesini, Project Manager of LandVest’s Timberland Division in Portland, ME. If you are in need of timberland investment services, you can reach Dan via email at dtesini@landvest.com or cell phone at (802) 881-5525.
