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INDUSTRIAL | Manufacturing / Paper & Paper Product Manufacturing

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Acquired | Acquired

About Timberland Assets

Timberland Assets was a Industrial/Manufacturing/Paper & Paper Product Manufacturing company. Timberland Assets was acquired in 2005.

Timberland Assets Headquarter Location

02210,

United States

Latest Timberland Assets News

Lumber prices to remain above long-term historical average due to strong housing starts

Aug 23, 2021

The overall housing starts have averaged a 1.577 million-unit pace in the first half of 2021, making this the strongest year for housing starts since 2006. As long as housing starts remain strong and newer industries such as mass timber and bioenergy continue to expand and compete for raw material, lumber prices will likely remain above the long-term historical average. Jack Izard, Vice President of Investments and Timberland Assets at Domain Timber Advisors, and Taylor Echols, Investment Associate at Domain, spoke to Lesprom Network about what will happen with prices and demand for wood in the near future, and highlighted the challenges faced by loggers and lumber producers. Lumber prices to remain above long-term historical average due to strong housing starts 12:03 / August 23, 2021 Photo: New home construction site / Depositphotos, Feverpitch The overall housing starts have averaged a 1.577 million-unit pace in the first half of 2021, making this the strongest year for housing starts since 2006. As long as housing starts remain strong and newer industries such as mass timber and bioenergy continue to expand and compete for raw material, lumber prices will likely remain above the long-term historical average. Jack Izard, Vice President of Investments and Timberland Assets at Domain Timber Advisors , and Taylor Echols, Investment Associate at Domain, spoke to Lesprom Network about what will happen with prices and demand for wood in the near future, and highlighted the challenges faced by loggers and lumber producers. Lesprom Network: How has the economic recovery played into the timberland market so far this year? Jack Izard: Despite the on-going COVID-19 pandemic, we have seen the demand for rural land remain surprisingly strong. Buyers continue to aggressively pursue smaller, retail timberland tracts for traditional recreational purposes as well as rural escapes from urban COVID-19 hotspots. In Domain’s opinion, the combination of low interest rates and increased consumer buying power has fueled this ongoing trend, and surges in COVID-19 cases or future “shelter in place” orders would likely increase demand for rural land as more buyers seek to relocate from metropolitan areas. We believe the stability of investment grade timberland valuations during the pandemic can be partially attributed to increased demand for lumber and other forest products. In many respects, we feel the increase in demand can be attributed to an increase in home renovations and DIY projects as more people transition to a work-from-home environment, a surge in housing starts as the millennial generation reaches homeownership age, and an increase in wood fiber packaging and shipping materials as e-commerce drives the COVID consumer market. We expect the demand for forest products to continue to grow. This will be due to an increase in the number of new houses, the development of wood and biomass production, as well as an enhancing production capacity. Lesprom Network: How do you assess the domestic demand for logs in the United States, what is currently affecting the price and what are your expectations moving forward given that the housing market has returned to pre-pandemic levels? Jack Izard: Increased demand for lumber has resulted in considerable investment in the U.S. South as producers are expanding mill capacities, developing new mills, and restarting previously idled mills – all of which contribute to increased demand for raw wood products. However, the U.S. South, broadly speaking, is currently in a position of oversupply. In Domain’s opinion, the combination of mass reforestation in the 1980s and 1990s under federal and state government funded initiatives, such as the Conservation Reserve Program, and the delay of final harvesting following the 2008 Great Recession has resulted in a growth-to-drain imbalance of wood products. Even though lumber prices have reached historic levels and mills are running at full capacity, the large amount of standing sawtimber is constraining meaningful stumpage price appreciation. The additional mill capacity coming online is expected to ease the oversupply of raw materials over the next few years and strengthen the correlation between lumber and stumpage prices. In the meantime, we expect to see continued variability amongst local micro markets and pricing volatility driven by temporary shifts in the supply chain. For example, excessive rains over the summer have reduced the amount of loggable ground in some markets and increased the demand, and therefore stumpage prices, for standing timber located on dry ground. We believe that future surges in COVID-19 cases will likely cause increased lumber demand as people continue to modify homes to allow for work-from-home lifestyle. Further, we would expect home building to increase as urban dwellers seek single family residences over high-density apartment complexes. Lesprom Network: How do wildfires affect the market and price? Taylor Echols: Across the Pacific Northwest, markets have remained relatively stable with operators reporting that supply and demand are balanced. In the short-term, supply has kept up with demand as damaged in wildfires wood has flooded the mills. However, depending on the extent of wildfire damage, PNW mills may be forced to increase stumpage prices if the supply of logs is materially reduced. The continuation of strong housing starts (maintaining high demand for lumber) will be key for future PNW stumpage price appreciation. Beyond the PNW, the wildfires have contributed to the extensive capital investment in the U.S. South by northwestern and Canadian wood product manufacturers. Recent wildfires have also affected the underwriting of insurance providers, specifically regarding standing timber fire insurance. We have not yet seen any direct effects of this change on timberland values, but an increase in expense or inability to acquire fire insurance could possibly have a negative effect on the value of timberland in the region. Lesprom Network: In recent weeks, demand for lumber has been recovering. What, in your opinion, will further affect the price? Taylor Echols: There are several factors that could influence lumber prices moving forward. Current demographic trends, specifically with respect to the Millennial generation, and an aging housing stock suggest that demand for new housing should remain high for the foreseeable future, which would bolster the demand for lumber. On the other hand, lumber supply is expected to increase through mill capacity expansions, particularly across the U.S. South. As additional mill capacity comes online, lumber prices should begin to stabilize. That said, as long as housing starts remain strong and newer industries such as mass timber and bioenergy continue to expand and compete for raw material, we believe that lumber prices will likely remain above the long-term historical average. Lesprom Network: What are the main challenges facing lumber producers and loggers in the United States right now? Taylor Echols: Lumber producers are subject to high capital requirements. Expanding an existing mill or building from the ground up can cost hundreds of millions of dollars. Additionally, technological advancements in the industry have further added to mill construction and maintenance costs. Lumber producers are also limited by the ability of loggers to provide wood to the mill. In many markets, the logging and trucking sectors have become the bottleneck in the supply chain due to the many challenges that they face. One of the major challenges affecting loggers over the last few years has been labor shortages. IBISWorld reports that total U.S. employment in the sector has declined 0.8% per year from 2015 to 2020 despite demand for raw material increasing over the same period. Some of the contributing factors of this decline include high capital requirements, slim profit margins, and the COVID-19 outbreak. Another significant challenge that loggers face is weather. This year has been an exceptionally wet year across the U.S. South, and many loggers have been limited in their ability to harvest timber due to the ground being too wet to operate. Other weather-related challenges include natural disasters such as hurricanes, tornados, and forest fires. These events reduce the quantity and quality of merchantable timber while also subjecting loggers to the higher operational costs of harvesting timber on damaged properties. With profit margins already tight, increasing prices of petroleum products present an additional challenge for loggers. This challenge extends beyond the harvesting operations to the trucking of timber from the forests to the mill.

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