When we conduct a timber sale, there may be several species and quality of timber products produced, from veneer walnut all the way down to the pulpwood. Every initial meeting with a landowner brings up the questions: what are timber prices and and who buys our timber products?
My timber sale clients sometimes ask me what mill their logs go to when I sell their timber. This is a loaded question these days. Many sawmills and, in fact, most of our logs are headed for the export market regardless of what mill they go to first. Some of the fate of logs depends upon the species and the quality. Most of our high quality red oak logs, for instance, end up in China.
Of our red oak logs, 78% are shipped to China, followed by Vietnam, Canada and Mexico.
Demand is what drives stumpage prices. You may have noticed that, with the invention and increased use of engineered (fake) hardwood floors and the use of the white woods such as maple and hickory for cabinets, red oak with its distinctive grain has fallen out of favor in the U.S. Red oak that I used to sell for $700 per thousand board feet now sells for half that and of those logs, very little of it is even sawn here.
15 years ago, if I had a good stand of red oak and cherry marked, I could have a bid sale and attract mills from all over PA to come and bid on it. Those “good ol days” are long gone. Black cherry, once the king of the Pa hardwoods has fallen off so much that at times, I can’t get anyone interested in bidding on it at all.
Walnut remains an excellent wood that seems to always be in demand. The rich color and high quality of its physical characteristics make it a wood that should always find favor in one market or another. Prices have dropped some recently, but it remains a good income producer. I once sold a 5 acre stand of large walnut trees for $40,000. An unbelievable per-acre sum.
Sugar Maple, on the other hand has remained fairly steady in price with some fluctuations.
Low grade and pulpwood demand is up and down all the time. I find that when manufacturing goes up during and economic upswing, the damand for pallets goes up and so do the prices for low-grad logs. Pulpwood depends on how full the paper mills are. Sometimes, wood gets backed up and loggers get shut off from delivering wood, so the price goes to nothing.
New industries such as gas drilling and home heating pellet fuel has created further markets for this material. Much of our red oak that lacks the criteria for export quality, is made into machinery pads for gas drilling operations.
When low grade markets go up, logs that used to be sawn into boards goes to well pad timbers, pallets, pellet fuel, etc.
As the composition of our timber stands change, so do the products that entrepreneurial companies come up with the make with the products that are available. One such new product is maple CLT or cross-laminated timber walls. These are super strong wall pieces that can be craned in place and screwed together to create strong and beautiful buildings of any shape and size. These buildings are less than carbon neutral in the sequestration, the manufacture and transportation of the materials.
Another maple product that was being worked on years ago and may come back is glue-laminated bridge beams. These laminated beams could replace steel, eliminating the need for painting and the maintenance of rusting infrastructure.
What Affects Timber Prices (what drives the price of standing timber in PA)
Right now, the economy in China is what is driving our timber market. The economy there has grown rapidly and demand for the finer things in life such as furniture, hardwood floors, wood trim, bowling allies, manufactured products has been going up. The sad fact is that we send our trees all the way to China to be made into products that we use here. Ship the materials half way around the world, make stuff and ship it back to sell to people where the raw materials came from. This is a paradigm that needs to change if we truly want to reduce fossil fuel use and create lower and middle class manufacturing jobs here.
Tarrif Wars
According to my sources, tariffs on oak are slated to go up in March, but probably won’t. There is a lot of bluffing and bluster where President Trump raises tariffs, then China raises tariffs on imports then they change their mind. Right now, we are on the losing end of the trade war but China needs our raw materials badly since they used up all of their timber in their own country. So, most likely the President will win the argument in the end.
The factors that have a bearing on demand are:
- tariff uncertainty
- full warehouses – with the uncertainty of the future, manufacturers have stocked up on raw materials and reduced demand
- tighter lending practices
- with the above, housing starts are reduced
- china has reduced the value of its currency – something Trump had complained about during his campaign – to make up for increased tariffs
- tightening of environmental regulations – in the past China has all but ignored environmental concerns around manufacturing and it is becoming more expensive to operate factories
The key to a healthy timber market is to have a multitude of products made in the U.S. and be able to ship products made here to emerging markets. Why on Earth would anyone think its OK to send raw materials to Asia when we could manufacture products here? Things like wooden spoons, bowls, handles for all sorts of products, furniture, buildings made from laminated boards, flooring, cabinets and even high rise buildings can be made from renewable trees. Check out this video about high rise buildings vs steel. https://youtu.be/cQKYR_MuXUQ
