- The relationship between precipitation and delivered price seems to be delayed.
- On a quarterly southwide basis, the impacts of precipitation on stumpage price are not outside historic norms.
Two questions remain:
- How do local timber basins respond in the wake of severe weather events?
- How long does it take local industry to recover?
These questions will be explored in a series of blog posts using South Carolina’s historic rainfall and flooding event in October 2015 as a case study. Part 1 covers impacts to wood supply and shifting procurement patterns. Part 2 will analyze the impacts of supply changes on mill inventories and delivered South Carolina timber prices. Part 3 will look at the relationship between haul distances and supplier margins.
Hurricane Joaquin and South Carolina
In early October 2015, large portions of South Carolina experienced record rainfall and flooding as Hurricane Joaquin and other weather patterns[i] combined to create a system that dropped consistent heavy rain over most of the state for several days. Historic rainfall set daily, monthly and/or seasonal records at weather stations across the state[ii]; caused at least 16 dams to break or breach[iii]; and resulted in 541 road closures[iv] including a 19-mile stretch of Interstate 95.[v]
Economists have estimated the damage at over $12 billion[vi] statewide—at least as bad as 1989’s Hurricane Hugo, and the South Carolina Forestry Commission estimates the loss to the forest products industry to total over $100 million.[vii]
Because Forest2Market collects detailed scale-ticket data that includes county of origin and destination facility for delivered wood, we are uniquely capable of quantifying the impacts of this storm and similar events on the industry. This analysis describes the weekly impacts on roundwood (pine pulpwood, pine sawtimber and hardwood pulpwood[viii]) procured from South Carolina counties in late 2015 by area of precipitation intensity, as shown on the following map.
Primary precipitation fell during Weeks 39 (Sep. 27-Oct. 3) and 40 (Oct. 4-10) of 2015. In order to evaluate the impacts of this precipitation, data have been aggregated on a weekly basis based on the originating area for Week 30 through Week 52 of 2015 and 2014. For each area, tons of delivered wood have been indexed to 2014 Week 30 consumption levels.
“Where Have All the Tons Gone?”: Immediate and Sustained Supply Impacts
There were immediate effects to roundwood consumption during the precipitation event (Weeks 39 and 40) in all areas as suppliers scattered to find dry ground (Figure 1). In Areas 5, 4 and, to a lesser extent, Area 2, roundwood consumption was down in 2015 relative to 2014 during and following this precipitation event. During Week 40, consumed tons were down 76% YoY in Area 5, 58% YoY in Area 4 and 34% YoY in Area 2. By contrast, roundwood consumption was up 57% YoY in Area 1 during Week 40 while roundwood consumption in Area 3 was virtually unchanged (-1% YoY). In all areas, there is evidence that suppliers increased activity to meet mill demand during the holiday weeks of Thanksgiving (Week 47), Christmas (Week 51) and New Year’s (Week 52).
In terms of total precipitation, Area 5 was hardest hit (Figure 2). Prior to the precipitation event, this area had been consuming an average of 15% more tons weekly in 2015 than in 2014. In Week 39 (Sep. 27-Oct. 3), delivered tons were down by 21% YoY. This jumped to an 81% YoY deficit in Week 40 (Oct. 4-10). This YoY deficit persisted through Week 46 (the week before Thanksgiving) and continued again in Weeks 48-50. Following the storm event, the only weeks where 2015 tonnage outpaced 2014 tonnage were the holiday weeks (47, 51 and 52).
Area 4 was similarly hard-hit, with YoY tonnage down consistently beginning in Week 39 all the way through the end of the year, after averaging 32% more tons weekly in Weeks 30-38 (Figure 3). Delivered tons from this area were down 58% YoY in Week 40, 69% in Week 45 and 52% in Week 50.
In Area 3, weekly delivered tons were up an average of 4% YoY from Week 30 to Week 38, but this increased to 38% on average following the storm event (Figure 4). Demand from Areas 4 and 5 shifted into this area as loggers sought higher, dryer ground. Like Area 5, loggers here made greater use of their holiday weeks (47, 51 and 52) than they did in 2014, which resulted in YoY increases of 68-93% in these weeks.
The demand shift is even more pronounced in Area 1 where YoY weekly delivered roundwood tons were up 153% in Week 41 and 188% in Week 42 (Figure 5). Year-over-year delivered tons were up 64% on average during Weeks 39-52.
The impacts in Area 2 were more mixed (Figure 6). During weeks 30-38, delivered tons sourced from this area were down 22% weekly on average compared to 2014. However, during Weeks 39-52, tonnage was only down 13% weekly on average. This provides some indication that mills sought additional volume from this area, especially during Weeks 41-42 and 46-47.
Implications for the Forest Products Industry
2015’s record precipitation and flooding event in South Carolina provided a unique opportunity to demonstrate the impacts of significant, widespread precipitation events on the forest products industry and its supply chain. There were several notable findings:
- Areas hit hardest by rain will experience both short (1-2 weeks) and possibly also long-term (in this case, 12+ weeks) decreases in supply.
- Supply shortages will lead suppliers to stretch for wood in areas that have had less storm impact.
The impacts of precipitation events on delivered cost will be covered in Part 2 of this series.
[i] https://www.ncdc.noaa.gov/sotc/synoptic/201510. Retrieved 03/03/2016.
[iv] http://www.live5news.com/story/30299186/scdot-road-closures-from-flooding-down-66-percent. Retrieved 03/03/2016.
[v] https://weather.com/news/news/south-carolina-floods-news. Retrieved 03/03/2016.
[vi] http://www.thestate.com/news/local/article47471060.html. Retrieved 03/03/2016.
[vii] http://www.state.sc.us/forest/releases/FloodDamageEstimate100Mfinal.pdf. Retrieved 03/03/2016.
[viii] Forest2Market does not collect delivered hardwood sawtimber data in the U.S. South.