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Hurricane Ian Threatens Stressed Timber Supply Basin

September 27, 2022
Author: John Greene

Hurricane Ian is slated to build significant momentum in the coming days as it crosses the western side of Cuba and barrels towards the west coast of Florida. By mid-week, Ian will likely become a Category 4 hurricane packing sustained winds between 130 and 156 mph, which are capable of causing catastrophic damage in combination with flooding rains and storm surge.

As of this writing, the silver lining is that Ian is forecast to lose strength quickly before approaching the Florida panhandle as a Category 1 or Category 2 hurricane. While diminished, a storm of this strength can still cause widespread devastation not only to coastal communities, but also to valuable timberland holdings across the region.

NOAA_Sept_2022Source: NOAA National Hurricane Center

This particular wood basin has experienced a great deal of supply- and demand-side pressures over the last five years, and Ian could further impact those challenges in the near term.


Hurricane Michael

Hurricane Ian is now on a similar track to Hurricane Michael, which made landfall near Mexico Beach, Florida on October 2018 as a category 4 storm. Over 3.5 million acres of timberland were directly affected by Michael – roughly half of which were impacted severely or catastrophically, meaning there was a 75% (severe damage) to 95% (catastrophic damage) total timber loss in these areas. The remaining acres were damaged moderately, sustaining roughly 15% total damage. The colored study area in the map below shows the three damage categories in the panhandle of Florida where Michael made landfall.


The damage impact in these counties was enormous: nearly 4,300 square miles, or over 2.7 million acres. Timberland inventory damage at the county level ranged from a high of 84% in Calhoun County to a low of 5% in Washington County. Overall, 39% of the timberland inventory in the total study area was damaged.


Overall, the damaged timber inventory in the study area represented about a 12-year equivalent of current annual removals and over a 15-year equivalent in the more significantly damaged categories (severe and catastrophic). This drastic impact to Panhandle timberland increased pressure in the basin, as regional wood products companies were forced to expand their procurement zones. This impacted procurement costs as affected organizations were forced to reach further and further for timber, which increased market competition and prices.

This created additional pressure in the wood basin towards the East, resulting in an increase in demand and price volatility.


Strong Demand for Pine Resources

The south Georgia/north Florida area has long been a vibrant timber market, and it is home to a diverse group of wood products manufacturing facilities. However, strong demand for the regional pine resource over the last two years has resulted in intense market pressure in part due to 1) Georgia-Pacific’s (GP) Albany, GA mill that came online in 2020 producing 300 MMBF/year, and 2) Austria-based Binderholz Group restarting the Live Oak lumber mill in March 2021.


When the GP and Live Oak mills came online at high rates of capacity, the new demand drove stumpage prices higher in the immediate procurement zone, which caused a chain reaction that has impacted pulpwood- and small log- consuming mills throughout the region – from east to west. With the lingering impacts of Hurricane Michael and an additional 2 million tons/year of log consumption impacting the region, area timberland owners, investors and wood products manufacturers are all keeping a very close eye on events in the basin.


Trends to Watch & Questions to Ask

Strong demand for pulpwood in the area has already caused many small-log consumers to reach into CNS-sized material when procuring fiber, which has bolstered demand for small logs and driven prices higher in the basin. This shift in the market has also influenced traditional sawlog prices, which has made this market one of the highest-priced areas in the US South.

With another major hurricane now taking aim at the Panhandle, there could be even more uncertainty surrounding supply and price in what is already a price-sensitive region.

In the wake of a natural disaster, forest industry participants operating in the affected area must analyze the total timberland damage, which will impact the entire supply chain for years to come. Landowners must assess current standing inventory and timber losses, harvesting crews and wood dealers must immediately begin scheduling and marketing salvage harvests, and mill facilities must be prepared to redefine their procurement zones based on the level of damage in their respective backyards.

Regional wood products manufacturers now need to be asking several questions, including:

  • What is the total volume of my target timber resources in the basin?
  • What is the makeup of those timber resources by type and age class?
  • What is the growth rate and removal ratio of those timber resources?
  • What is the current and projected competitive demand for these resources?
  • What is the current and future sustainability of supply of these resources?
  • What is the current and historical demand and price for my target materials?
  • What is the forecast price for the target materials based on projected availability and demand by all consumers?
  • How can I best prepare for a series of potential outcomes based on these developments?

For forward-looking consumers of wood fiber in this hurricane-prone market, Forest2Market can help answer these questions. While the analysis above was performed on a total damage basis, using Forest2Market’s tools available in SilvaStat360  platform - including the powerful Stumage360 database - can help you better understand the impacts of a natural disaster in your wood basin, and on your specific supply chain.

As a neutral, third-party advisor, Forest2Market does not buy or sell timberland, timber or wood fiber of any kind; it does not manage timberland or provide credit wraps. Forest2Market is an independent source of wood and fiber supply chain expertise, and our extensive relationships and experience within the wood products industry provide us with unique insights into this market and many others across the globe.

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