Rain Hurts Pulpwood Markets in Southeast Texas

September 19, 2007; Charlotte, NC

The persistent rainfall that drenched southeast Texas for more than eight months is keeping pine pulpwood prices above historical norms as mills fight to maintain their inventories, an industry expert said Wednesday.

Pulp producing mills have struggled to build supply because wet weather has kept loggers out of the woods for long periods of time, said Scott Twillmann, senior analyst for Charlotte, N.C.-based Forest2Market, a data service provider that studies markets throughout the South and Pacific Northwest. The rain and flooding has caused an increase in the price of pulpwood – timber grown to make products such as paper.

The area experienced July rainfall amounts that were 200 percent above normal, and Tropical Storm Erin clobbered the region in August, causing more flooding. By September, some areas of southeast Texas had recorded rainfall amounts for the year that were already 16 inches above normal, according to the National Weather Service.

The rain has driven prices to climb to almost $3 per ton above historical averages.

“Mills have never been able to catch up on their inventories, going back to the end of last year,” Twillmann said.

And pulp mills in the area have been hit with a double whammy, he said.

“Sawmills have offered little help with the residual chip supply due to the decline in the housing market,” Twillmann said. “Reacting to market conditions, they have significantly scaled back production, cutting off a major chip supply source for pulp mills. This sector will continue to suffer until residential construction markets recover.”

Forest2Market has developed sophisticated analytical tools to accurately forecast timber prices.