Hardwoods Grow to Market Western Hardwoods Market Trends

Washington Hardwoods Commission

Annual Meeting

June 12, 2014

Chehalis, WA

Forest2Market

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Headquartered in Charlotte, NC; offices in Eugene, OR, Appleton, WI and Curitiba, Brazil

©2013 Forest2Market®, Inc. 3

Today’s agenda

• Western hardwoods market share

• Western hardwood timber supply

• Building construction trends

• Housing starts outlook

©2013, Forest2Market, Inc. Slide 4

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1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*

Bil

lio

n B

oa

rd F

eet

Hardwood Lumber Supply Available to the US

Market from All Sources

Imports

Western Production

Eastern Production

Sources: US Census and Hardwood Market Report

Graph: Hardwood Market Report*projected

Western hardwood timber supply

©2013, Forest2Market, Inc. Slide 6

Irrigated Poplar plantation forests east of the Cascade Mountains

• Hybrid row crop plantations

• 12 year harvest rotation

• Irrigated desert lands

• 2/3 plywood and lumber, remainder for pulp chips and biomass

• 35,000 acres +/-

©2013, Forest2Market, Inc. Slide 7

Hardwoods in conifer forests• Mixed species stands in

forests west of Cascade mountains; alder, big leaf maple and others

• Private and state owned forests

• OR+WA = 200 MMBF~ annually; +/-5% of total timber harvest

• Harvest restrictions on federal forests and private lands regulation

• Furniture, cabinets, millwork and pallets

©2013, Forest2Market, Inc. Slide 8

Riparian Reserve Measures

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Managed Alder in Lincoln County, OR

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WA hardwood harvest trends

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1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Hardwoods Total harvest

MMBF volume

Declining federal harvest and increased regulation

Conifer values drive harvest levels

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2008 2009 2010 2011 2012 2013

DF average WA harvest

Washington Red Alder harvest

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20

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2008 2009 2010 2011 2012

alder other hardwoods total harvest

Value comparison: Alder and Douglas fir sawmill logs

©2013 Forest2Market®, Inc. 14Source: F2M Benchmarks

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DF West Domestic Red Alder saw Poly. (DF West Domestic) Poly. (Red Alder saw)

Premium for larger diameter Alder logs

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Red Alder 6-7" Red Alder 8-11" Red Alder 12"+

Hardwood applications: Beauty

©2013, Forest2Market, Inc. Slide 16

Hardwood applications: Functionality

©2013, Forest2Market, Inc. Slide 17

2013 distribution for hardwood lumber

Western hardwoods:

• 70% KD lumber for doors, millwork, cabinets and furniture

• 20-30% pallet stock

©2013, Forest2Market, Inc. Slide 18

43%

5%17%

5%

5%

9%

13%4%

US National Hardwood Consumption

pallets furniture exports millwork

cabinets flooring RR ties mats

PalletsMillwork, flooring and cabinets 19%

Source: Hardwood Market Report

exports

OR-WA Hardwood Lumber Exports

©2013, Forest2Market, Inc. Slide 19

0

20,000

40,000

60,000

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120,000

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2009 2010 2011 2012 2013

$ thousands value

Estimates of Consumption of US Hardwoods

2005 2006 2007 2008 2009 2010 2011 2012 2013

%

Change

2012

%

Change

2005

Pallets 3.8 3.7 3.6 3.5 3.0 3.2 3.26 3.27 3.643 11.4% -4.1%

Furniture 1.2 1.1 1.0 0.7 0.3 0.35 0.29 0.30 0.427 42.3% -64.4%

Exports 1.3 1.3 1.2 0.9 0.8 1.07 1.2 1.32 1.462 10.8% 12.5%

Millwork 1.3 1.2 1.0 0.7 0.4 0.43 0.24 0.26 0.387 48.9% -70.2%

Cabinets 1.6 1.5 1.3 1.2 0.7 0.4 0.34 0.36 0.392 8.9% -75.5%

Flooring 1.5 1.4 1.3 0.8 0.5 0.59 0.51 0.55 0.753 36.9% -49.8%

Railway Ties 0.85 0.96 0.92 0.94 0.89 0.89 0.98 1.04 1.114 7.1% 31.1%

Board Road/Mat

Timbers N/A N/A N/A 0.2 0.05 0.075 0.12 0.16 0.369 130.6% N/A

Total Estimated

Consumption 11.55 11.16 10.32 8.94 6.64 7.01 6.94 7.26 8.55 17.7% -37.1%

© 2014 Hardwood Market Report

Building with wood

©2013 Forest2Market®, Inc. 21

Residential construction value MM $ in place

©2013, Forest2Market, Inc. Slide 22

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

  New single family   New multi-family Residential Improvements

Changing demographics of housing

©2013 Forest2Market®, Inc. 23

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Total starts Single family Poly. (Single family)

Single family=66 % in 2013

1993 87%

Percent of new homes 4 bedrooms +

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Hardwood applications: Style

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Trends in multi-family housing

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10

15

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25

30

35

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45

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

<1000 ft² >1400 ft²

Hardwood applications: Efficiency

©2013, Forest2Market, Inc. Slide 27

Commercial construction MM $ in place

©2013, Forest2Market, Inc. Slide 28

100,000

200,000

300,000

400,000

500,000

600,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Hardwood applications: Utility

©2013, Forest2Market, Inc. Slide 29

Housing: Annual Starts

Slide: 30

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1,200

Tho

usa

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its

Historic

Forecast

• 2014 = 1,045

• 2015 = 1,143

• 2016 = 1,032

Conclusions

• Alder is a valuable fast growing timber resource

• Northwest region is timber supply constrained

• Risk: further riparian acreage set asides

• Hardwoods: variety of products, less vulnerable to housing

• Western hardwoods market share is strong and markets are healthy

• Promising climate for hardwood timber management

©2013, Forest2Market, Inc. Slide 31

Thank you!

©2013, Forest2Market, Inc. Slide 32

Forest2Market: The highest quality wood raw material analysis available

Gordon CulbertsonPNW Region Manager

(541) 302-8010Gordon.culbertson@forest2market.com

Forest2Market®1200 Executive Parkway, Suite 255Eugene, Oregon 97401

www.forest2market.com

©2013 Forest2Market®, Inc. 33