Bob Flynn, Director, International Timber, RISI
May 31, 2010
There has been a lot of speculation lately about the Russian log export tax and how China's search for alternative log sources will soon mean greatly increased volumes of softwood log exports from the US West Coast to that market. Exports of logs from the Pacific Northwest (PNW) to China have increased rapidly over the past year, and log export activity has spread to more ports in the PNW than at any time in the past decade. However, China is still only the third largest market for log exports from this region, and total volumes through first quarter 2010 are only marginally higher due to continued weakness in the Korean and Japanese markets. Despite the relatively lackluster performance so far, we do expect that log export volumes from the Pacific Northwest will hit their highest level in at least 10 years in 2010.
In the 1980s and early 1990s, logs were exported from a dozen different ports in Oregon and Washington. But as export volumes reduced over the years, log export activity has been concentrated mostly in the Ports of Longview and Tacoma, at least for bulk shipments. This trend has reversed in the past year, as Weyerhaeuser moved its export operations from the Port of Tacoma to the Port of Olympia (while two other companies maintained log exports through the Port of Tacoma). Also, DKORAM opened up a log yard at the Port of Grays Harbor, loading the first full log vessel in a decade at that port in early 2010. Merrill & Ring has loaded at least two full log vessels at the Port of Port Angeles (again, the first in about a decade), and finally Westerlund is opening up a new log export yard at the Port of Astoria, where logs have not been exported since 1997. Inland transport costs have limited the economic supply area for log exporters, so with six ports now available for bulk shipments of logs, the supply area is considerably greater than it has been for the past 10 years.
To date, the volume of log exports from the Pacific Northwest has not really responded in any significant way. Softwood log export volumes from the US Pacific Northwest (Oregon and Washington) did increase 35% in first quarter 2010, compared with the same quarter in 2009. However, trade volumes for almost every commodity hit abnormally low levels in early 2009, so a better comparison is with the more "normal" first quarter in 2008. Log exports from this region to Korea were 13% lower in first quarter 2010 than in the same quarter in 2008, while shipments to Japan fell by 20% on the same basis. However, total log exports from the Pacific Northwest increased by 5% over this period, because exports to China in first quarter 2010 were 1,354% higher than in the first quarter of 2008. Market focus has certainly shifted among log exporters in the PNW. In the first quarter of 2008, only 2% of the log exports from this region went to China, compared with 40% to Korea and 59% to Japan. But in the first quarter of 2010, the share of log exports going to China increased to 23% of total log export volume, compared with 32% to Korea and 45% to Japan.
Viewpoint by Bob Flynn, Director, International Timber. Bob will be discussing the Pacific Rim log markets at RISI's North American Forest Products Conference, October 6-8, 2010, in Boston. (For details on the conference, go to http://www.risiinfo.com/events/asia_conf/)
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