Radiata Pine shortage crimps U.S. domestic market

By  Sam Sherrill, Deputy Editor, Crow's, RISI

PORTLAND, OR, Sept. 28, 2009 (RISI) - Few people within the industry five years ago would have thought there would be any possibility of a Pine shortage in U.S. markets. But few people would have believed housing was on the brink of an implosion, either. The last five years have brought about dramatic changes in both production levels and demand volumes that have totally redefined Pine availability for U.S. remanufacturers.

Radiata Pine first entered the U.S. market in the early 1990s, as a substitute and complement for Ponderosa Pine. At that time, U.S. remanufacturers were convinced that domestic supplies of Ponderosa would be rendered unavailable by federal restrictions on timber harvest on government lands. Radiata would supplement domestic species and provide ample volume for the moulding and millwork industries of North America.

Since then, and up until the housing collapse, Radiata Pine from New Zealand and Chile, and Southern Pine produced primarily in Brazil and Argentina, went through a period of market expansion, market saturation, price compression and market collapse that totally redefined the place of imports in U.S. markets.

In addition, producers of Pine mouldings from New Zealand and South America also entered the U.S. market, seeking to exploit what was at that time a clearly value-added segment of the wood products market. Oversupply of finished mouldings and millwork, however, caused such price compression that "value added" was quickly replaced by "commodity," so common had finished mouldings become.

Now, on the brink of a housing recovery, both Ponderosa and Radiata Pine markets have dwindled in demand, as have all wood products. But supplies of these essential raw materials have also diminished, so that remanufacturers once again have serious concerns about future supplies.

New Zealand has largely withdrawn from the U.S. market, finding much better returns from the demand in Asia, especially from China. Once, China was content to import only low grade logs and lumber, converting to various finished products which it sent abroad. Now, however, China is buying both high-grade logs and lumber from New Zealand, paying premium prices for these raw materials. In the process, China is squeezing off the supply to the U.S.

Chile is also much reduced in its volumes of both lumber and finished mouldings it exports to the U.S. Finding U.S. prices too low, it has found alternative destinations for much of its production, or it has found alternative products into which to put the Radiata fiber.

In the same way, Brazil has cut off much of its supply of finished mouldings to the U.S., facing both a negative market and adverse currency rates as it deals with the U.S.

Thus, the supply wheel seems to have come full circle. When demand does accelerate in the U.S., and it will, those who have endured the worst of times will, for a short time, have the best of times.

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Issued by:  RISI

Author: Sam Sherrill

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Issue date: September 29, 2009

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