Red Alder; Market Reasons for Optimism!

Larry Mason University of Washington College of Forest Resources Rural Technology Initiative

Washington Hardwoods Commission Annual Meeting, June 14, 2006

5/06 price in 2004 $ Red Alder: $699 Douglas-fir: $620

Puget Sound Region.

Source: Log Lines (1989-2004, 2006), Forest Product Price Report (1959-1990), Timber Management Plus (current), U. S. Dept of Labor

7.35%

8.40%

2004

Net Present Value (NPV)

$0

$200

$400

$600

$800

$1,000

$1,200

Douglas-fir 45 year rotation Red Alder 35 year rotation

$/A

cre

2004; 5% rate of return

Price Indexes for Hardwood Lumber, 1965 - 2002

Average increase/year since 1965 of 4.9%

More stable than softwood lumber

Source: U.S. Forest Service

Western producers produce < 5% of hardwood lumber

U.S. Hardwood Exports1986-2002

500

1000

1500

2000

2500

3000

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Logs & Chips Value-Added

$ Million

Source: American Hardwood Export Council

Source: USDA Foreign Agriculture Service

Top Five Hardwood Lumber Species Exported to China in 2004

$0

$5

$10

$15

$20

$25

$30

$35

Alder Red Oak Yellow Poplar Maple White Oak

Mil

lio

n $

Source: USDA Foreign Agriculture Service

Value of Alder Lumber Exports for Total World and Top Markets: 2001-2004

$0

$20

$40

$60

$80

$100

$120

2001 2002 2003 2004

Mill

ion

$

World China EU-25 Canada

Source: USDA Foreign Agriculture Service

2005 $121 Million Total Sales

Alder lumber export statistics for Jan-May of 2004 and 2005.

Source: Hardwood Review (2005) and USDA Foreign Agricultural Service (2005).

Alder LBR Exports by Country

Jan-May 2004 Vol. (m3)

Jan-May 2005 Vol. (m3)

Change 05 vs. 04

Jan-May 2004 Value (1000 $)

Jan-May 2005 Value (1000 $)

Change 05 vs. 04

China 47,397 65,349 +37.9% $12,897 $19,620 +52.1% Canada 13,467 18,515 +37.5% $3,751 $4,283 +14.2% Mexico 11,740 12,380 +5.5% $4,065 $4,552 +12.0% Italy 7,990 8,774 +9.9% $5,125 $6,517 +27.2% Germany 3,031 6,657 +119.6% $2,506 $5,433 +116.8% Spain 5,483 4,961 -9.5% $3,479 $3,601 +3.5% EU-25 21,398 25,725 +20.2% $14,261 $18,831 +32.1% Taiwan 5,504 4,049 -26.4% $1,548 $1,209 -21.9% Philippines 1,388 2,617 +88.5% $617 $1,365 +121.2% Vietnam 855 1,907 +123.0% $313 $746 +138.2% Portugal 1,762 1,501 -14.8% $952 $829 -12.9% World Total 107,159 135,315 +26.3% $40,304 $52,589 +30.5%

Source: Roos, J., G. Donovan, D. Nicholls. How does species name affect consumer choice? An analysis and implications for PNW cabinet door marketers. Forest Products Journal. 55(5). Pp. 21-26.

How Do Domestic Markets Respond to Alder?

560 respondents in Anchorage 900 respondents in Seattle

Cabinet Door Species Preference

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Alder(HeavyStain)

Alder(Moderate

Stain)

Alder(Unstained)

Cherry Maple Red Oak Hickory

Pe

rce

nta

ge

of

tim

e c

ho

se

n a

s a

fa

vo

rite

Name No Name

Cabinet Door Species Preference

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

All Alder Cherry Maple Red Oak Hickory

Pe

rce

nta

ge

of

tim

e c

ho

se

n a

s a

fa

vo

rite Name No Name

Combined alder preferences dominate selections!

Huge opportunity for consumer education!

C - ?

#1 - $2.20

#2 - $1.70

C - $1.40

#1 - $1.00

#2 - $0.60

But can Alder price get too high?

C - $1.50

#1 - $1.20

#2 - $0.70

Poplar

C - $3.75

#1 - $2.50

#2 - $1.50

CherryMaple Alder

http://www.innernet.net/galleryofwood/pricelist.htm

Working Properties for Selected Com m ercial Hardwoods

M achining

Nailing

Scre w ing

Gluing

Finis hing

Red alder American cherry Hard maple Soft maplePOOR GOOD

One reason for alder popularity among manufacturers is its workability

Source: American Hardwood Export Council

South West Rustic Furniture

???????????????

4/4 Premium Frame$825/MBF

4/4 Standard and #3 Shop

$550/MBF

Source: Bill Redman, North Pacific Lumber

Alder is the only wood approved for grocery pallets by the West coast food industry.

But > $300/MBF?

Source: Hardwood Lumber Review and Bill Redmond

What about the pulp price?

The west produces < 3% of U.S. hardwood chips

Source: USDA Forest Service

Look into the crystal ball

Red Alder is not a tropical hardwood.

Planting Red Alder will diversify commercial forestland investments.

As prices rise more plantations are established.

Red Alder logs are likely to become increasingly scarce because present plantations are few.

Increases in research in intensive management and genetic improvements will likely result in hardier stock, shorter rotations, higher grades, and greater yields.

Shorter rotations mean quicker return-on-investment and reduced risk.

Rapid growth does not appear to compromise lumber quality.

Red Alder appears well established in Domestic and Export niche markets.

Products markets can be strengthened and expanded through consumer education.

Engineered Wood Products may help with raw material shortages.

200 MMBF in Alaska more in Canada.

CONCLUSION: Red Alder is uniquely positioned among PNW log species

for continued market success.

Available on the web at no charge or on DVD-ROM for $10 (this can only be viewed on a computer with DVD reader).

To order, contact Clara Burnett (clara75 @cfr.washington.edu), or call the RTI office at (206) 543-0827.

Available on the web at http://www.treesearch.fs.fed.us/pubs/22325

Or in hard copy from: Pacific Northwest Research StationP.O. Box 3890Portland, OR 97208

(503) 808-2592

Thank You