- US pulp and paper producers will experience some uplift as the economy improves, but exports will remain challenged due to strong dollar.
Industry consumption remains strong and if US GDP growth improves, the pulp and paper industry will have a good year. However, the maintained strength of the US dollar will continue to hamper exports. There will be an expanded pulp capacity in Latin America—roughly 4 million metric tons will need to find a home, and the US will be one of them.
- Domestic long fiber (conifer) supply will remain tight, keeping prices elevated.
US demand for packaging, fluff pulp, tissue and consumer-oriented paper products will remain strong as they are tied to GDP. As such, demand for the raw material used to make these products will remain strong. Generally, chip supply will increase as sawmills produce more byproducts, but demand for pine and conifer pulpwood will be strong in 2017. New demand for biomaterials in Scandinavian markets will also keep pressure on conifer pulpwood in this region, making imports from Russia, the Baltics and even Norway more important.
- Expect Canadian lumber imports to remain robust, challenging Pacific Northwest (PNW) producers and moderately affecting US South producers.
We don’t foresee a quick, permanent resolution to the current lumber trade issue after the Softwood Lumber Agreement (SLA) sunsetted in October. Expect lumber imports from Canada to continue, and possibly grow in proportion to US demand. Canadian imports are directly competitive with both the PNW and the US South markets, however, the proximity to the PNW and demand for regional log exports makes the issue ever more acute in the PNW region.
- Domestic lumber markets will show signs of life, but the housing recovery (1.1-1.3 MM starts) will continue to be muted as millennial buying behavior fundamentally changes the market structure.
Millennial buying behavior has proven to be a primary issue impeding a robust housing recovery, rather than GDP or access to credit. While there are a number of reasons behind this change, Millennials are forming households and having (fewer) children later in life, and many are not settling in suburban markets where new housing starts occur. We predict that housing starts will improve in 2017, but not to anywhere near a historical run rate—again, owing to millennial buying patterns.
- Pellet investment in the US will slow to a crawl.
Unless there is new EU guidance or a bitterly cold winter in northern Europe, new investment in pellet manufacturing projects will be non-existent. The financials of existing independent pellet plants without long-term offtake agreements are challenged now, and we expect that to continue into 2017—with bankruptcies and restructurings likely.
- Brazil’s economy improves and the domestic forest products industry rebounds. Exports of pulp and plywood remain strong.
Brazil’s economic performance has improved. While the negative GDP growth over the past two years has reversed, quarter-over-quarter GDP is still flat. We expect that GDP will turn positive and Brazil’s forest products economy will improve in 2017. Since Brazil is a net exporter of forest products, it will seek to aggressively export as much pulp and panels as possible and, due to the strong US dollar, Southern US producers will feel the impact.
- Sawmill consolidation continues in Sweden as Swedish operators try to remain competitive worldwide. A strong US Dollar will allow them to reach East Coast markets profitably.
EU year-over-year growth will be in the 1 percent range, and Middle Eastern and North African markets are still in shambles. Swedish sawmills are consolidating and, in the process, they will be more competitive on a global level. They are keen on a Canadian lumber quota, which, given their new-found cost reduction and the strong US dollar, will allow them to reach US markets in 2017 with a high-quality lumber product. The Baltic countries are right in line behind the Swedes.
- Biofuels, biochemical and domestic biomass projects are stymied – until the new administration weighs in.
Movement to develop new biochemical and advanced biobased products derived from wood will hit a brick wall. While there is a great deal of uncertainty surrounding many policies associated with the new administration, it has indicated a preference for traditionally-sourced (fossil) energy. It is therefore likely that there will be less emphasis placed on decarbonizing the US energy system and expanding the energy portfolio than there has been in recent years. But it’s still too early to tell anything for certain at this point.
- The Charlotte Hornets will lose to the Cleveland Cavaliers in the NBA Eastern Conference Finals
The Charlotte Hornets, on the back of Nick Batum and Kemba Walker and assisted by wily veteran Marvin Richardson, will take Cleveland deep into the sixth game of the conference championship. This will mark a turning point for the Hornet franchise and its ascension to a perennial NBA competitor.