US timberland prices gain, despite lumber slowdown

Timberland in the US accelerated its price growth, despite some lumber market concerns centred on China and the domestic market, which prompted one of the top forestry groups to warn on profits.

US timberland prices were 7.2% higher in the April-to-June quarter than a year before, nudging 0.2 points higher than the rate of annual appreciation recorded for the January-to-March period, the National Council for Real Estate Investment Fiduciaries (Ncreif) said.

Factoring in income of 2.6%, the total return from forestry land over the year was 9.9%, the highest figure in nearly six years, although still behind the 17.2% achieved from farmland.

The performance "reflects a combination of strong export demand from China for logs and lumber and a healthy domestic demand in the US for timber products", said Mary Ellen Aronow, chair of the Ncreif timberland committee.

'Some hurdles'

However, Ms Aronow, a senior forest economist at Hancock Timber Resource Group, acknowledged some challenges to these factors, saying noting "some hurdles still facing the recovering US housing market, and a cloudy outlook for Chinese demand".

Earlier this week, Plum Creek Timber, which controls 6.7m acres of US forestry, cut its forecast for full-year earnings to $1.05-1.25 a share, from $1.30-1.50 a share, citing a market recovery in 2014 which "has been more muted than we and other industry participants initially expected".

The group said it was cutting its harvest volumes this year to the "low end" of a range of 20m-21m tonnes to push more lumber into "future periods when we expect prices to be better".

Citing patchy domestic demand, the group, whose shares fell 6.3% at one point on Tuesday, cut to 1.03m, from 1.1m, its estimate for US housing starts this year.

'Temporary blip'

Wood Resources International reported earlier this month that US lumber markets began falling in the spring, with "lumber prices falling over 10% so far this year", with "weaker log export markets in Asia" a big factor.

"Demand for wood in China has declined somewhat because of a slowing in the construction sector, which has increase log inventories in the ports and on vessels waiting to unload logs," Hakan Ekstrom, principal of Wood Resources International, told

However, he added: "I see this as a temporary blip on the long-term upward trend in demand for wood raw-material - logs, lumber and wood chips."

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