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Blog

Forest Resource Assessments Provide Project Confidence in Periods of Uncertainty

October 11, 2022
Author: John Greene

Capital allocation decisions across the global forest products supply chain often take years of strategic planning. As forest industry demand trends and resource competition continue to accelerate and evolve, the only way to hedge against uncertainty with any degree of confidence is with reliable historical data, transaction-based raw material price forecasts, and the industry experience to connect the relevant dots and provide meaningful insights.

Producing valuable, bankable resource assessments and forecasts requires a deep understanding of the wood fiber supply chain—especially as competition for wood fiber intensifies in local supply areas. The onus is on project developers to achieve a comprehensive knowledge of supply chain and other operational issues that affect project viability and, ultimately, project success.

Whether you are financing a project or acquisition, constructing a new facility, or expanding an existing one, a long-term cost and sustainability resource assessment from Forest2Market can help you answer these critical business questions:

  • What will the price of raw materials be over the life of the asset?
  • Will demand from other new or expanded facilities affect market price?
  • What is the long-term outlook for the sustainability of supply?
  • Is there sufficient available supply to support this facility over the life of the asset?

Forest2Market regularly performs due diligence assignments and custom resource assessments on behalf of buyers, sellers and financial institutions operating within the global forest products and pulp and paper industries. We use our proprietary transaction data, many years of supply chain expertise, and in-depth knowledge of global wood-consuming industries to assist clients with a range of capital allocation decisions including mergers, acquisitions and dispositions, and new project initiation and financing.

Forest2Market is an independent third-party source of assessments and advice. We do not buy, sell, grow, manufacture or manage timber resources, solid wood products, pulp or paper, energy or carbon. As a result, our advice is objective and free from conflicts of interest.

Forest2Market resource assessments provide a full-spectrum view of the supply and demand dynamics in specific wood basins:

  1. Custom Area(s)
    • Detailed, basin-specific analysis of current forest characteristics
      • Timberland acres by species
      • Timberland inventory by age class and product type
      • Major landowners and suppliers in the basin

 

ResourceStudy_Map_2

ResourceStudy_Inventory.jpg

  1. Market Structure
    • Accurate view of current demand for product(s)
    • Competitors in the basin
  2. Market Prices
    • Historical pricing from our transaction database including delivered and component costs by product type
  3. Forecast Projections
    • Future demand by product type using macro inputs
      • Housing starts driving sawtimber demand
      • US GDP growth as a driver for pulp and paper demand
      • Diesel price index, inflation index and other related indices
    • Future demand using micro level inputs specifically related to wood procurement
      • Inventories and volumes
      • Removals and costs
      • Propriety basin knowledge, i.e., production increases, machine conversions, facility closures, etc.

ResourceStudy_forecast

    • Sustainability of resource
      • Growth to removal ratios (GRR) and age class data by species and product type
ResourceStudy_GRR

Because our resource assessments and price forecasts are based on actual transactional sales data and do not rely on the interpretation of qualitative research, customers are guaranteed to receive reliable and transparent information on the price movements occurring within their markets. In addition to the market transparency these studies provide, companies can also use our benchmarking capabilities once the project is off the ground to better understand the competitiveness of their purchasing and sourcing strategy as well. This can drive insight into increased performance, opportunities for negotiations regarding base price, transportation, and other strategic advantages.

These custom studies enable participants in the forest supply chains to respond confidently to market changes while assuming a comfortable level of risk. Using a forecast model that can maximize return and minimize risk is simply smart business, especially during times of market stress and uncertainty. Before you move forward with a new facility, expansion or purchase, talk to us about custom resource assessment options that will inform the kind of confident decision-making needed to ensure your next project is a success.

sustainability of a working forest case study

 

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