Aside from a runup in timber companies' stock prices, the earthquake and tsunami that devastated northern Japan are more likely to have a long-term than a short-term influence on the price and availability of North American lumber, a number of experts tell ProSales.
One of the unknowns is when a devastated Japan will be able to get back into a position to rebuild, they say. Another is whether Japan will revise its building codes in ways that will favor North American lumber. And a third involves how timber companies will weigh potential opportunites in Japan against already hot sales in China.
Japan imported $10.4 billion worth of wood products last year, putting it No. 3 on world rankings, Bob Flynn, director, international timber, for the RISI research firm noted earlier this month at a conference in Amsterdam. "Because Japan was already such a large import market for wood products, any jump in demand due to reconstruction efforts will have significant global impacts on the markets," RISI reported. "Although the news media reports today that investors are already flocking to timber stocks because of this anticipated reconstruction effort in Japan, we caution that the timing of market impacts may not be so immediate. Given the scale of the damage to infrastructure in northeast Japan, it will likely take months before any meaningful reconstruction effort can be organized and implemented."
Even when it does recover enough to be able to start rebuilding, Japan's purchase patterns are likely to be slow and limited, the experts said. John Bavester of Progressive Affiliated Lumbermen, a Grand Rapids, Mich.-based co-op, noted that it took several years for rebuilding to take place in areas like south Florida and New Orleans after hurricanes Andrew and Katrina roared through. Some experts figured it will be a year before Japanese buying affects the market, just as it did after the Kobe earthquake in 1995.
Others noted that mills and dealers that handle southern yellow pine and eastern white pine are unlikely to see any impact at all, as virtually all of Japan's North American imports involve West Coast timber in general and wood from British Columbia in particular.
"But, when the reconstruction effort does kick in, which suppliers are most likely to benefit?" RISI asked in its commentary. "Sawmills in Japan (outside of the region of damage) will no doubt try to accelerate production, and this will require increased imports of softwood logs. The United States and Canada accounted for over 70% of Japan's softwood log imports in 2010, and it is logical to assume that suppliers in North America will see the greatest increase in demand from Japanese customers For New Zealand log exporters, Japan was only the fourth largest market in 2010 (trailing China, Korea and India) and Chinese buyers this year are again sucking up most of the available sawlogs in New Zealand. Japanese buyers had already turned away from Russian log suppliers, given the uncertainty and greater cost resulting from the Russian log export tax. While it is possible, given the magnitude of the situation in Japan, that buyers might decide to return to importing more Russian logs, it is most likely that the long-term, reliable log suppliers in North America will see the largest uptick in demand."
RISI also asked rhetorically whether Canada's sawmills will be able to accommodate a surge in demand from Japan given how much wood the Canadians are selling to China. It even asked whether Canadians will want to meet short-term demand from Japan at the expense of long-term sales to China.
Another long-term question concerns whether Japanese building codes and practices will change as a result of the earthquake. Typically, the experts said, every disaster such as an earthquake, tsunami, or hurricane teaches contributes to building science and ultimately leads to adjustments in codes. Some experts speculated that the latest earthquake would make Japanese more amenable to wood construction rather than building with concrete. If that happens, West Coast timber companies definitely would benefit.
