In June 2020, we wrote a piece covering the sale of the shuttered Klausner Lumber One facility in Live Oak, FL in which we noted that the region’s intense forest industry activity was likely to result in some fierce competition… and very high prices. At the time, there were three events coalescing in the south Georgia/north Florida wood basket that we believed to be predictive of a coming supply squeeze:
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. It’s no surprise that the first two events resulted in unavoidable pressures on fiber supply within the regional wood basket. However, timber prices have skyrocketed to near inconceivable levels since the third event came to pass in 2Q2021.
Austria-based Binderholz Group purchased the Klausner Live Oak mill in 3Q2020, and the facility became operational in March 2021. As production ramped up, the weighted average price for all pine products in the region surged 33% quarter-over-quarter (QoQ) to a new high in 3Q.
A more detailed view illustrates individual pine product performance, which is largely driven by demand for small logs in this particular wood basket. Intense demand for pulpwood in the region has caused many pulpwood consumers to reach up into CNS-sized material when procuring fiber, which has pushed prices to record highs. In 3Q2021, pine pulpwood prices were up 71% QoQ, and CNS prices were up 41%. Year-over-year (YoY) increases were even more extreme; pine pulpwood prices were up 105%, and CNS prices were up 57% YoY.
Strong, consistent demand driven by evolving customer preferences and changing end-use products has made pine pulpwood and small pine logs a desirable raw material throughout the South. Additionally, there are a few unique dynamics at work in the south Georgia/north Florida region that have intensified competition for fiber and pushed this market to the highest-priced area in the US South.
Some of these influences will be temporary, i.e., precipitation patterns and lumber prices will always fluctuate. However, low pine pulpwood GRR in combination with additional demand in the area suggest there are some longer-term, structural changes to watch very carefully. Questions that regional manufacturers must address include:
For forward-looking consumers of wood fiber in the south Georgia/north Florida wood basket, Forest2Market can answer these questions.