Q1 2021 Rayonier Inc Earnings Call
Mode. During the question and answer session. Please press star one on your telephone Keypad. Today's conference is being recorded if you have any objections you may disconnect at this time.
I will turn the meeting over to Mr. Mark Mchugh, Senior Vice President and Chief Financial Officer.
Yeah.
Thank you and good morning, welcome to Rayonier as Investor teleconference, covering first quarter earnings our earnings statements and financial supplement were released yesterday afternoon and are available on our website at range of your Dot com.
I'd like to remind you that and these presentations. We include forward looking statements made pursuant to the safe Harbor provisions of Federal Securities laws, Our earnings release and form 10-K filed with the SEC list. Some of the factors that may cause actual results to differ materially from the forward looking statements. We may make they are also referenced on page two of our financial supplement.
Throughout these presentations, we will also discuss non-GAAP financial measures, which are defined and reconciled to the nearest GAAP measure and our earnings release and supplemental materials with that let's start of teleconference with opening comments from David Nunez, President and CEO David.
Yeah.
Thanks, Mark and good morning, everyone first of all make some high level comments before turning it back over to Mark to review our consolidated financial results. Then we'll ask Doug long, our senior Vice President of Forest resources to comment on our U S and New Zealand timber results and following the review of our timber results Mark will discuss our real.
State results as well as our outlook for the balance of 2021.
We started 2021 with encouraging momentum across all our businesses are testament to the strength and diversity of our timber markets and the positioning of our real estate portfolio and the first quarter, we generated adjusted EBITDA of $70 million and pro forma EPS of <unk> <unk> per.
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Adjusted EBITDA exceeded the prior year quarter by 47% as favorable results and the New Zealand timber Pacific northwest timber and real estate segments more than offset a modest decline and adjusted EBITDA from our southern timber segment.
As we reflect on the first quarter, we're pleased with how our team worked collaboratively to capitalize on strong domestic markets.
Improving real estate market trends and growing demand for logs from China.
Drilling down to our different operating segments, our southern timber segment generated adjusted EBITDA of $32 million for the quarter, which was 5% below the prior year first quarter of <unk>.
7% increase and net stumpage prices and stronger non timber sales were more than offset by 18% lower harvest volumes due to the frontloaded timing of 2020 harvest activity as well as weather related disruptions experienced earlier this year.
And our Pacific Northwest timber segment, we achieved adjusted EBITDA of $18 million and improvement of 81% versus the prior year quarter.
This strong result is attributable to a sharp increase and log pricing given strong domestic demand and robust lumber markets as well as higher volumes from the acquisition of Pope resources.
And our New Zealand and timber segment first quarter adjusted EBITDA more than doubled to $21 million. This year over year increase and adjusted EBITDA was due to significantly higher harvest volumes and soft timber prices as the first quarter of 2020 was severely impacted by COVID-19 related headwinds.
Lastly, and our real estate segment, we generated adjusted EBITDA of $5 million. This year over year improvement was driven by an increase and acres sold excluding the large disposition in 2020 amid growing buyer demand as well as of 9% increase and weighted average prices.
Improved versus the prior year quarter, we anticipated coming into into the year Q1 real estate activity was relatively light and the context of our full year expectations due to the timing of closings with that let me turn it back over to Mark for more details on our first quarter financial results.
Thanks, Dave let's start on page five with our financial highlights sales for the quarter totaled $191 million, while pro forma sales totaled $180 million operating income was $29 million and net income attributable to rayonier was $11 million or <unk> <unk> per share <unk>.
Adjusting for the operating income attributable to the Noncontrolling interest and our timber funds segment pro forma operating income was $27 million.
First quarter adjusted EBITDA of $70 million was above the prior year quarter as higher results and our New Zealand timber Pacific northwest timber and real estate segments more than offset of modestly lower contribution from our southern timber segment.
On the bottom of page five we provide an overview of our capital resources and liquidity at quarter end as well as a comparison to year and our cash available for distribution force.
For the quarter was $47 million compared to $27 million and the prior year quarter, primarily due to higher adjusted EBITDA and lower capital expenditures, partially offset by higher cash taxes and interest are reconciliation of CAE to cash provided by operating activities and other GAAP measures is provided on page seven of the <unk>.
<unk> supplement.
Consistent with our nimble approach to capital allocation, we raised $37 million through our aftermarket or ATM equity offering program during the first quarter and an average price of $33 31 per share as previously discussed we view the ATM program as a cost effective tool to opportunistically raise capital strengthen our balance sheet and.
<unk> fund bolt on acquisitions and.
And some we closed the quarter with $78 million of cash and $1 $3 billion of debt, both of which exclude cash and debt attributable to the timber funds segment, which is non recourse to rate and here. Our net debt of $1 2 billion represented 21% of our enterprise value based on our closing stock price at the end of the first quarter I'll now turn the call over to Doug.
And to provide a more detailed review of our first quarter timber results.
Thank you Mark good morning.
Let's start on page eight with our southern timber segment.
And EBITDA and the first quarter of $32 million was $2 million below the prior year quarter.
The decline relative to the prior year quarter was largely driven by and 18% decrease and harvest volumes due to the frontloaded timing of 2020 activity as well as weather related disruptions and Curt earlier this year.
Specifically winter snow storms, and the Gulf region, and wet ground conditions, and Georgia resulted in lost production days compared to the first quarter of 2020.
The decline in volumes during the first quarter was partially offset by higher net stumpage prices and non timber income.
And specifically average saw log of stumpage pricing was roughly $20 per ton and 3% increase compared to the prior year quarter.
It's all on pricing is gradually improving as we are successfully leveraging continued lumber market strength and the higher selling prices and certain yourself markets.
And more increased pricing attention is the growing demand for export grade logs.
More visible and our coastal markets.
However, pricing trends continue to vary considerably by region underscoring the importance of local timber market dynamics.
Pulpwood pricing climbed 7% from the prior year quarter, reflecting the weather conditions that constricted supply during the first quarter as well as a favorable mix shift towards our coastal Atlantic markets.
Overall weighted average pine stumpage prices were up 8% versus the prior year quarter based on higher soft timber and pulpwood prices as well as and more favorable mix and saw timber.
First quarter, non timber sales of $8 million or $2 million above the prior year quarter.
A large pipeline easement sales drove the increase as compared to the prior year quarter.
Moving to our Pacific Northwest timber segment on page nine.
Adjusted EBITDA of $18 million was $8 million above the prior year quarter.
As of year over year improvement was largely attributable to robust domestic lumber markets driving significantly improved pricing.
First quarter of harvest volume was 13% above the prior year quarter.
The year over year increase was largely driven by the incremental volume from last year's acquisition of Pope resources.
At $91 per ton, our average delivered solid price during the first quarter was up 21% from the prior year quarter.
Strong pricing was sustained throughout the quarter, even as domestic mills and the region maintained ample log inventories.
And while pulpwood pricing fell 23% from the first quarter relative to the prior year quarter.
All of residuals remain plentiful and that increase of lumber production.
Notably the Pacific Northwest is thinking of improved demand from the export market.
Transportation constraints restricting the flow of European spruce salvage logs, coupled with the ban on Australia and log imports into China are <unk>.
Leading into improved demand for exports from the Pacific Northwest.
With domestic log demand already at very healthy levels due to the strength and domestic lumber market.
And believe stronger export market demand will create additional pricing support particularly for wood species.
I'd also like to offer a few brief comments on the impact of last year's wildfires in Pacific Northwest and.
As a reminder, none of our fee timber properties were directly impacted by the fires, although roughly 10000 acres of timberland properties sustained some fire damage.
Consistent with the update we provided in February our operations and the region have not been materially impacted and the salvage efforts conducted by others there've been some localized hauling cost increases and the areas directly impacted by the fires. However.
However, the location of our timberlands and solid demand for green logs from many of our customers and.
And steady business, we have been able to provide to our logging crews and the region and resulted in minimal impact to operations.
Overall, we remain well positioned to capitalize on the solid domestic demand trends improving export market conditions and favorable pricing environment. We currently see and civic northwest, especially following last year's successful integration of Pope resources.
Page 10 shows results and key operating metrics for our New Zealand timber segment.
Adjusted EBITDA and the first quarter of $21 million was more than double the $10 million that we reported and the prior year quarter.
The increase and adjusted EBITDA was driven by much stronger pricing and a more normalized level of harvest activity versus a prior year period constrained by COVID-19 disruptions.
Increased volumes and pricing were partially offset by reduced carbon credit sales with <unk>.
And to defer carbon credit sales during the quarter as we expect that the value of these credits is poised for further price appreciation due to recent changes and New Zealand climate change goals and proposed changes to the country's emissions trading scheme.
Turning to pricing average deliver prices for export saw timber on 28% from the prior year quarter to $120 per ton.
And <unk> improved try and demand as well and escalating trade tensions between China and Australia.
New Zealand log export pricing continues to benefit from the ban on Australia and log imports from China.
As we have previously noted prior to the ban Australia with supply and approximately 10% of the total volume imported by China.
Furthermore.
While there are a bunch of supply of European spruce continues to compete for market share and China availability is at least temporarily been constrained by higher shipping costs and the lack of container availability.
And in turn we have seen tremendous pricing upside in New Zealand on the export front of.
Partially offset by materially higher shipping costs.
We expect these costs remain elevated given the global economic recovery and terrific demand for a wide range of commodities.
Shifting to the New Zealand domestic market average delivered solid prices increased 16% from the prior year period.
$1 per ton.
The increase and U S pricing was driven primarily by foreign exchange rates and New Zealand domestic pricing improved by a more modest 4% and the first quarter versus the prior year quarter.
Average domestic pulpwood pricing kind of 19% as compared to the prior year quarter.
And some despite the recent increase and shipping costs. We believe our New Zealand operations are well positioned to capitalize on further strengthening of the Chinese economy, and any prolonged reduction and log imports from Australia as well as continued healthy domestic demand.
I'll now briefly discuss the results from our timber funds segment.
Highlighted on page 11 of timber funds segment generated consolidated EBITDA of $7 million and the first quarter on harvest volume of 145000 tons.
Adjusted EBITDA, which reflects the look through contribution from timber funds was $1 million.
Lastly, and our trading segment, we reported $200000 of adjusted EBITDA and the first quarter.
As a reminder, our trading activities typically generate low margins and are primarily designed to provide additional economies of scale of our fee timber export business.
I'll now turn it back over to Mark to cover our real estate results.
Thanks, Doug as detailed on page 12 real estate closings were relatively light during the first quarter, which was which was consistent with our expectations and guidance. We provided earlier. This year, specifically sales totaled just over $10 million on roughly 2400 acres sold at an average price of nearly $4200 per <unk>.
Acre real.
Real estate of adjusted EBITDA was $5 million and the first quarter the.
The bulk of first quarter sales were in the rural category Rural sales totaled roughly $2400 of 2400 acres and average price of nearly $4100 per acre overall, we've seen of meaningful uptick in demand for rural land as of space privacy and recreational opportunities offered by these properties are attracting buyers. We expect this positive momentum.
Mentum to continue and we remain focused on achieving price realizations well above timberland values.
Sales and the improved development category totaled roughly $250000 and consisted of three residential lots and our wildlife development project North of Jacksonville, Florida for an average price of $84000 per lot of $406000 per acre while development closings were limited in the quarter. We are very encouraged by the pipeline that we built for the balance of 2000 and.
'twenty one.
Overall, the team is capitalizing on growing demand for rural land as well as residential lots and commercial parcels and our development projects. We remain optimistic that a combination of demographic trends historically low mortgage rates and an increased need for space will benefit our various real estate sales categories.
Relative to the first quarter, we expect a significant increase and the EBITDA contribution from our real estate segment over the next few quarters.
Specifically on the development front. There is currently healthy demand from homebuilders for lot and entitled Infrastructure served land and February we were excited to announce that publix of popular supermarket chain based in Florida is set to anchor our new shopping center and wildlife. We believe that as this community continues to get more established interest.
Builders will continue to grow we're also encouraged by the pipeline of opportunities for our properties and Richmond Hill, Georgia, and the West Puget Sound area of Washington.
Now moving on to our outlook for the year.
Just on our solid start to 2021, and our expectation that there'll be a significant pickup and real estate closings as of year progresses. We believe we are on track to achieve full year adjusted EBITDA towards the upper end of our prior guidance range of 285 to 350 $15 million.
And our southern timber segment, we expect to achieve our full year volume guidance of six two to $6 4 million tons as we anticipate that demand from lumber mills will remain strong and that select U S. South markets will continue to benefit from improving export demand. Further we continue to expect a modest improvement and weighted average pricing relative to the <unk>.
Higher year with quarterly fluctuations largely driven by geographic mix.
And our Pacific Northwest timber segment, we expect to achieve our full year volume guidance of $1 70 to $1 8 million tons. However, given we pulled forward some volume into the first quarter to capture favorable demand and pricing, we anticipate lower quarterly harvest volumes for the balance of the year we.
We further expect that strong domestic lumber markets and a pick up and export demand will hold pricing at or above first quarter average prices through the rest of the year.
And our New Zealand and timber segment, we expect to achieve our full year volume guidance of two six to $2 8 million tonnes with increased quarterly harvest volumes for the balance of the year.
We expect continued strong export and domestic demand and we further expect that the restriction on Australia and log imports into China will constrained competing log supplies we.
This positive operating momentum will translate into log prices remaining near or above levels realized in the first quarter, which will be partially offset by elevated shipping costs.
Our real estate segment, we expect of significant pickup and closings over the balance of the year based on our current pipeline of opportunities. Our pipeline has grown substantially as we progress through 2021 driving are increasingly optimistic sales outlook for residential and commercial properties within our real estate development projects, while first quarter closings were.
<unk> light as expected we remain confident that we will achieve or exceed our prior full year adjusted EBITDA guidance on.
I'll now turn the call back to day for closing comments.
Thanks, Mark as we approach the one year anniversary of the Pope resources acquisition, which closed last may we remain very pleased with the integration process and the benefits realized from this transaction and the addition of these high quality assets and the integration of Pope's personnel into the range of your family has.
Meaningfully increased our operational flexibility and market reach within the Pacific Northwest we've.
We've leveraged these improvements to our team and our portfolio as market conditions continued to improve over the past year.
Alongside of the Pope integration. We've also continued to focus on other opportunities to grow and improve our portfolio to this and we closed on $30 million of negotiated bolt on timber acquisitions across the U S south to start 2021.
We also published our inaugural carbon report in March. This report detailed the $5 7 million metric tons of net carbon sequestered by our forest operations and 2019 and demonstrates the important role that working force play and fighting climate change.
And <unk> business model provides a natural climate change solutions, our trees remove carbon from the atmosphere during their growth cycle and after harvesting a significant portion of this carbon remains stored for an extended period of time within downstream wood products.
Building on our inaugural carbon report, we plan to release a comprehensive sustainability report. This summer we believe our mission of providing industry, leading returns financial returns to our shareholders, while serving as a responsible steward of our lands is well aligned with a holistic approach and bodies.
And by greater adherence to ESG principles, and we're proud of the progress we've made to date on enhancing our ESG disclosures.
We look forward to further engagement on these important topics with our shareholders and other stakeholders going forward and.
In summary, we are benefiting from strengthening end markets and continuing to make progress on several important strategic priorities I'm very proud of the accomplishments of our people and their unwavering commitment to building long term value for our shareholders. Despite the unprecedented challenges encountered over the past year our teams.
Working hard to better position the company for long term success.
And this concludes our prepared remarks, I'll now turn the call back over to the operator for questions.
Thank you and at this time to ask your questions. Please press star one on your telephone keypad to withdraw your request. Please press star two.
My first question is from Mark <unk> from BMO capital markets. Sir Your line is open.
Hi, This is Jesse barone on for Mark Good morning, guys.
Good morning, good morning.
To start can you kind of just dive a little deeper into of what Youre seeing in China, both kind of on the demand side and what inventory is kind of look like there.
And if you guys have any outlook for how long this log ban on Australia and imports could last.
Sure. This is Doug I'll take that question.
Yes. So currently we are seeing softwood inventories around $4 5 million cubic meters at the end of last week.
And Thats down significantly from there were over 6 million back in Q1, so after the Chinese lunar new year, So we're seeing them.
Good demand there.
As we talked about before we track and inventory and men ratio and we're seeing that and about $1 seven months. So thats on a very healthy healthy zone force so were seeing favorable opportunities there.
And the weekly Consumptions running about 665000 cubic meters, which is also very healthy it was and.
And a little bit higher than that.
Earlier early in the year kind of in March and April, but still very strong right. Now so we're still seeing them. Good demand. There. So another thing thats been pleasing to see is that the amount of spruce has really dropped off there is six less personnel and inventory and there was of the Chinese lunar new year. So we're seeing a real restriction and build of that spirit to make it over high shipping costs low container availability.
And different things like that so on increased demand for our New Zealand operations and Youll find operations.
In terms of the part of the question around duration of the Australia and dispute our senses that debt.
That's likely to last.
A few years anyway, we don't we don't see that going away anytime soon.
And so.
And we're making we're making.
We're making plans really too.
Based on that and.
And then I think it also sort of a testament to the diversity that we have between the various market share between India.
Korea, and China being the primary ones.
Great and then just a quick follow up.
You kind of dive a little deeper into the U S. South exports kind of just the magnitude of the increase you guys are seeing there and.
Just kind of the overall demand picture from that.
Thanks, and I'll turn it over.
Sure. This is Doug and I'll be happy to answer that.
Yes, given that snick, it slowdown I mentioned and European spruce, and MRO and South American loans of slowdown significantly and of that shipping cost and just port congestion and things like that.
And we're really seeing significant growth and demand for southern yellow pine logs.
Volume shipped in the second half of last year, and and the first quarter of this year and more than double what they were pre COVID-19 volumes. So we're seeing a lot of growth there.
And based on demand from our customers. It appears that actual demand would be at least double that again, but.
Shipping logistics are constrained and amount of volume that we can actually get exported.
I guess the good news on that side of that with constraint and supply we are seeing prices increase to record levels with on this.
And also constrained that ability to get that volume move right now.
Given our position as one of the largest of container ports on the U S. The port of Savannah accounts for about two thirds of the southern yellow pine exports and our land basis is very well positioned for savanna and so we're leveraging our new Zealand expertise.
The director of export out of Savannah, and give us significant market share and that area. So I'm really seeing a large increase and Q1 of 2020, obviously COVID-19 was impacting China.
Volumes are down significantly, but we have seen a sixfold increase went into Q1 of 2021 and.
And China is the lion's share of demand out of all of a sudden you.
And Youll find right now and of India was growing but COVID-19 really impacted and we've seen that kind of taper back off some of them and they go through the strategy. They are experiencing right now.
But we were getting many inbound request from India for large part of the pandemic, but we're looking forward to turning back around and.
And these <unk> customers took advantage of that Australia, and China Trade War arbitrage opportunity and so they were seeking laws and getting those loans that were supposed to go to China and India.
As I mentioned the managed funds has not been messaging of logistics and we think and he is going to grow back here of their COVID-19 situations.
And then one last thing that gets less talked about but in addition, the Russian government's proposed laws ban starting in 2022 and starting to cause of export customers to seek alternative supply now they don't want wait till 2022 and <unk>.
Export of about 50 million cubic meters of logs last year. So the ban will have a severe impact on the global trade of law and it does limit.
And so we believe the outlook for southern yellow pine exports.
And really strong with lots of room to grow and it's really about logistics getting normalized and and when we get that flow back. So that's that's the biggest constraint right now and all of the demand side demand and pricing of strong but them across the globe is and you've heard and read about them sure. We're just seeing that constraint right now so and Luckily Savannah is that largest container port on the east coast and so we've got of access to that and.
And as a constraint and just shipping right now.
Great. Thanks for all of the details I'll turn it over.
Next question from Anthony Pettinari from Citi Research Your line is open.
Good morning, guys. This is actually Randy tole sitting in for Anthony.
Just had a quick question on and.
Inventories through the chain log decks at the mills and lumber at the dealers can you provide any color.
Maybe on how conversations with your customers are going considering the historic lumber prices of worsening just any color there would be helpful.
Sure.
Understand that I have is the lumber supplier through the supply chain is very low very limited and.
And people are all standard orders are out pretty far out and amongst beyond what they normally used to both and lumber and panels type of thing. So it's a limited.
And then log decks, it's very variable depending on where youre at.
Northwest, they manage and maintain reasonable long debt, because we mentioned, but the demands of strong that just keeps keeps moving so that's the good news there and we're seeing the export on top of that and really start to pickup and in the northwest and the south wet weather has impacted different markets differently and so we have some of those that are and the mouth and others that have adequate supply and but everyone's looking for looking for <unk>.
And of logs all of our customers right now with the demand on the other side.
And is outstripping that of the lead right now so we're seeing a lot of a lot of demand for loans.
Got you on understood and then maybe staying on <unk>.
Pac northwest for a second.
However, realizations trending.
Vs <unk> out of Pac Northwest and maybe New Zealand two while we're while we're here.
Sure.
<unk>.
I think right now looks at northwest, we're seeing strong strong realizations and we're excited about some of the demand for exports. They really ramped up over the last of the last few months really going into the beginning of this year because of it.
As we talked about before and.
So we've seen demand more than double for whitewood exports out of northwest and pricing and up over 30%.
And so we're seeing strength there and so we actually chose to harvest more white woods and sell more of what was picked on a stumpage program and Q1, and so that had a little bit of impact on our overall total composite pricing, but it was the right thing to do with a higher percentage of weight within the market, So and we see strength and there. So we see utilizations on looking good for the remainder of the year right now at least going into next quarter.
Okay understood I'll turn it over thank you.
Okay.
Next question from Buck Horne, Raymond James Your line is open.
Hey, Thanks. Good morning, I was wondering if you put a little more color on the $30 million of bolt on acquisitions, you guys completed and the quarter just any more detail.
Whats the plan.
Maybe are.
Are we seeing more opportunities now for <unk>.
New acreage and M&A transactions and how would you plan on using the ATM going forward to maybe capitalize on that.
Sure I'll take that back.
Yes.
And we closed on three bolt on acquisitions and the first quarter totaling 28000 acres and these were located and the coastal corridor area of.
Florida, and Georgia, we.
We were happy with how these went and I'd say.
Generally we're always in the market for for good bolt on transactions. We have found that we've had a reasonable success.
Going after negotiated deals and feel like ultimately we get a better return on those so we're always in the market for those.
Broadly speaking.
The market Hasnt been as strong.
And it has been and typical years I think we're seeing.
Gradually as travel restrictions ease and I think we're seeing more and more.
And more properties come to the market.
But I'd also say that we haven't seen a as.
And as many higher quality properties come from the market and so we tend to be.
We tend to be fairly discerning as to the things that we will go after so we're always.
We're always pretty active and all three of our timber.
But we're pretty picky on kind of what we what we choose to go after and as it relates to the ATM.
We felt that this was a good use of.
Of.
Proceeds we look at the return and cash flow metrics that we can get off these properties and so and it was nice to be able to.
Tack these bolt ons on without.
And I was stressing the balance sheet unnecessarily following the Pope transaction.
Great I appreciate that.
And looking at just kind of domestic logistics hurdles here given the shortage of truckers that seems to be growing by the day, how are you thinking about trucking.
And trucking and hauling costs and domestically for the rest of the year and how does that.
Play into your thoughts around margins or the EBITDA outlook.
Yes, Youre correct that we are going.
Seeing pressure and then all of industry seeing pressure on trucking and particularly on and transportation of those things and so it's something we're closely watching.
And a lot of our contracts, we have in place and <unk>.
And for extended periods of time, but them.
Something we have to be careful about luckily to date right now as we've seen.
Pricing on the product has also gone up as we go forward with it and so being able to to work with it and of those costs are incurred and part of our customers are also seeing net increase and so they are working to pass that on two to their end products. So it's the supply chain issue that we're all working through to figure out the best way to handle.
Yeah, just on the that mentioned of of how you guys contracts of your truck is how part of those contracts typically go out to kind of lock in some of that debt pricing.
It's really a variable across across the board, but nothing longer than a year. So it's somewhere anywhere from individuals.
Individual sales to a year of type of thing.
I gotcha, Okay, alright, thanks for the color I appreciate it.
And as a reminder to ask a question. Please press star one at this time one moment please.
Okay.
Next question is from John Babcock Bank of America. Your line is open.
Hey, good morning, and thanks for taking my questions.
I did actually just wanted to follow up on that rush of log and might you be able to provide a little bit more color on that and how comprehensive it is.
Yes. So you know what's been announcements proposed hasnt been has and implanted I'll say is that they would they would reduce alder exports of of roundwood.
Ban on trying to increase the amount of processing is done internally on theirs.
Some questions around kind of of the European side, and and would be and used for pulpwood. Both respect of logs primarily used in China right now.
The parents of threat is that there will be no round with logs coming cross of order from Russia, and China. If it goes into effect in 2022, and so that has customers looking at what to do as I mentioned this about.
$15 million.
Cubic meters of logs last year, so it's a significant impact.
I'm not sure of what I'll tell you and Terry and John and John keep in mind that this started back in 2007, when the Russian government put in place and and export tariffs and that was really designed to.
And to encourage more domestic processing and since that time, we've seen a gradual.
Increase in and domestic processing, and therefore, more lumber or partially saw on camps flowing into China from Russia and and <unk>.
Of the time that that tariff was increased and so this is really just the final.
Stage of that where they're shutting it off and so.
Net net.
We think we think both from a New Zealand standpoint, as well as of U S standpoint, you know, we're going to benefit from that.
Thanks, David.
Is that 15 million cubic metres them effectively of the difference between when they shut it off and where demand was say last year or the oil volumes of last year from Russia.
Yes, I mean that 50 million cubic meters of what they what they exported last year and 2020, so it will be a complete reduction of that.
They used to be I don't know the exact numbers, but it used to be much more sensitive, but as David mentioned they'd go into more of some products over time of our last four five years.
Okay, and when does the spigot finally turn off of them.
It's supposed to begin on January of 2022.
And so.
Sure shortly of way and Thats why were seeing a lot of increased interest and demand from the Pacific northwest of them operations, particularly those whitewood, they're good substitutes for a lot of that wood as well of the southern yellow pine. So we're seeing just a lot of demand.
It appears our customers.
If it doesn't go fully in fact, they do believe there's going be some part of it goes into effect and they're scrambling and trying to find from additional supply now.
Got you on how large of the China log market just out of curiosity.
Okay.
I don't have that number handy on me right now and I would hate to give you a number of top of my head. So I think of a better if we get back to you on that I have one, but I am not confident it.
Got you and I I mean is there.
And thanks to say, it's the biggest it's the biggest market out there.
Yeah, I was just trying to gauge like where that 15 million stands relative to the whole like whether it's 1% of our 5%.
Or some are even argue on that.
No it's more.
It's more on that and the teens percent of of that I would say so but then we can get you that each of that number.
Yeah.
And then the next question you know you were talking on a little bit about timberland properties here.
Could you just talk a little bit more about kind of the interest you're seeing.
And on demand for timber property is in the U S. South and also what valuations are looking like now.
And then I think I think we're still seeing pretty robust.
Man for properties and keep in mind.
Capital tends to flow into the timber for different reasons and and certainly.
You know one of the one of the key investment themes over the last few decades has been as an inflation hedge and so I think youre seeing capital flowing and net capital flowing into the space.
Based on.
Based on that view of of.
Future inflation and then also we tend to see capital flow into timber and the context of a flight to quality and so.
And what that has done is it's kept timber land mark.
It's a pretty competitive and.
And hence.
And the need to be pretty disciplined and targeted around what you look at.
Okay.
And I just found and then sorry I missed it.
Oh, sorry, it's me and I would comment I just found on the 15 million cubic meters.
And my notes of approximately 12% of globally traded roundwood. So it will be will be less of that and trying to work to get that number for you, but its about 12% of the global trade Roundwood and 2020.
Okay. That's helpful.
And then earlier you were talking about southern exports you know just recognizing that like supply constraints on the port of Savannah has been quite backed out from what I've heard of.
And do you have any sense of say you know where those debt well you know what level of those exports might be at if it werent four of those supply constraints.
I only have anecdotal.
And kind of things that people told me, but right.
Right now from anecdotally, what I've heard from sort of saying that they think the ports running at $60 to 70%. So we still have a lot of room to go to get fully up of operational.
And again, that's just from contractors and people who are working at the port, saying that it's better than half of its still long way to go.
John the other thing I'd add is that during the last during the last couple of years, we have leveraged our New Zealand.
<unk> sales force.
And to gradually expand the reach of southern yellow pine and and just like in the U S where you've got a good.
Market for treated products.
And we've grown a treated market and and.
China and so we.
We are improving the demand pull for specifically for southern yellow pine out of this market and so we're very encouraged by that and the <unk>.
Context of.
Clearing up.
Some of the shipping bottlenecks, we feel pretty optimistic about the long term.
Market demand for southern yellow pine and China.
Okay and then just last question from me at least.
Could you just talk about talk a little bit more about the European salvage volumes on where those kind of stand I know you talked a little bit about some of them some kind of bottlenecks when and where that can go.
But if you could just kind of provide a debt.
And more color on on how that store network.
And in general and general the understanding we have and this represents the peak year of flow out of out of Europe, and so while it has grown considerably over the last few years.
And it's going to be a very big number and so essentially youre seeing.
And youre seeing that would flowing throughout global markets and Youre.
Seeing it flow and and lumber form as well as long form we expect that to provide some disruption.
For at least the next few years as that wood continues to find itself find its way to the market, but keep in mind that.
Unlike the mountain pine beetle situation on Western Canada, the the shelf life of this European spruce is much shorter and so theres a lot of our urgency to get them to market quickly and.
And we really from a planning standpoint, we try to look through that and.
Phil that we're very well positioned for once.
That volume is done for basically being able to grow our market share and.
And various global markets and so.
And it's something that we are living with and dealing with right now.
And certainly the shipping the shipping bottlenecks have made that more difficult to get that product and market.
But I think longer term.
And that will it'll be a net opportunity for us.
Okay. Thanks for the help.
We are showing no further questions and I'll turn it back over to Mark.
Sure. Thanks, everybody for joining and please contact us with any follow up questions. Thank you.
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