Blog – What is next for the Forestry Sector – May 2023 Summary: With our updated forecast of 1.4MM housing starts for 2023 (900,000 singles and 500,000 multis), we now expect lumber demand from new residential construction to decline by fully 2.9Bbf y/y to ~16.0Bbf. This compares to lumber demand from residential construction of 19.2Bbf in 2021 and 16.8Bbbf in 2020. A shift of 50,000 starts from single-family to multifamily (i.e., the latest tweak to our housing forecast) results in a lumber demand decline of ~460MMbf, roughly the equivalent of two greenfield SYP sawmills. …All else being equal, a steeper decline in lumber demand from new housing will necessitate even more sawmill downtime in 2023. We suspect that most downtime will take place in BC given its position as the highest-cost producing region in North America. BC accounted for 15% of total North American lumber production in 2021 and significant, timely downtime in the region should be enough to keep North American lumber markets somewhat tensioned through 2023. As such, we still expect benchmark lumber prices to hover around BC cash-cost levels next year, and we forecast a 2023 average S-P-F 2×4 price of $510, with SYP 2x4s priced slightly lower (at $495) given accelerated lumber supply growth from the U.S. South. Source - https://treefrogcreative.ca/housing-slowdown-may-mean-addition-downtime-for-bc-lumber/

1. What is happening to
World’s forest?
Paul Young CPA CPA
May 7, 2023

2. Paul Young - Bio
• CPA, CGA (1996)
• Academia (PF1, FA4, FN2, MU1. and MS2)
• SME – Customer Success Management
• SME – ESG and Sustainability Reporting
• SME – Risk Management
• SME – Close, Consolidate and Reporting
• SME – Public Policy
• SME – Emerging Technology
• SME – Business Process Change
• SME – Financial Solutions
• SME – Macro/Micro Indicators
• SME – Supply Chain Management
• SME – Data, AI, Security, and Platform
• SME – Internal Controls and Auditing
Contact information email: paul.young_cga@hotmail.com
LinkedIn: https://www.linkedin.com/in/paul-young-055632b/

3. Agenda
• Lumber Prices
• Housing Costs
• Global Housing
• Key issues facing the forestry sector
• Automation

4. Commodity Prices
Source https://us.spindices.com/indices/commodities/sp-gsci

5. Commodity Price – Lumber
Source - https://www.nasdaq.com/market-activity/commodities/lbs

6. Housing vs Lumber Costs

7. Housing vs Lumber Costs

8. Global Housing Outlook

9. Issue facing Forestry
• Softwood Lumber dispute - https://www.bnnbloomberg.ca/economics/video/overall-impact-of-softwood-lumber-dispute-minimal-for-
canada-economist~1108540 or https://www.globalwoodmarketsinfo.com/canada-has-filed-appeal-against-wtos-april-ruling-in-softwood-
lumber-dispute-with-us/
• Carbon Tax – Carbon tax is added on to the cost of production https://www.bnnbloomberg.ca/commodities/video/applying-carbon-tax-
without-cutting-back-regulations-may-be-costly-jack-mintz~1649746
• High stumpage cost - https://www.timescolonist.com/business/teal-jones-shuts-down-logging-in-honeymoon-bay-citing-high-log-costs-
1.23841024
• Hydro Rates - https://www.drydennow.com/local/rickford-aims-to-cut-costs-for-forestry-sector
• Excessive regulations - http://www.chamber.ca/media/news-releases/Canada-competiveness-ranking-drops-4-spots-in-2-years/
• Small business tax reforms - https://www.bnnbloomberg.ca/economics/video/cfib-concerned-by-potential-tax-hits-to-small-businesses-
in-2019~1560874
• Forestry losses - https://www.wri.org/blog/2020/06/global-tree-cover-loss-data-2019
• PBO / Tree Fund - https://www.570news.com/2021/01/28/liberals-two-billion-trees-promise-to-cost-2-78-billion-more-than-planned-pbo-
says/

10. Technology / Forestry Sector
Source - https://www.woodbusiness.ca/how-technology-is-transforming-bcs-forest-industry-
5248/
• Investment into new technologies is revolutionizing the way Canada’s forest industry does business.
The federal government reports between 2005 and 2015, Canada’s forest industry cut its total energy use
by 31 per cent and reduced its greenhouse gas emissions by 49 per cent by generating bioenergy from
waste products and increasing energy efficiency.
• AI and Forestry - https://www.weforum.org/agenda/2018/09/ai-can-help-us-map-forests-down-to-
each-tree/
• Automation - https://www.woodbusiness.ca/fully-automated-applying-robotic-solutions-to-the-
sawmill/
• Supply Chain/Digital = https://www.poyry.com/news/articles/how-will-digitalisation-boost-
forestry-operations
• Analytics and Forestry Management - https://www.ibmbigdatahub.com/tag/6399

11. Automation
• Using drones to plant trees - https://www.nextbigfuture.com/2020/06/flash-
forest-and-tree-planting-with-
drones.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed
%3A+blogspot%2Fadvancednano+%28nextbigfuture%29
• Innovation / planting - https://www.fastcompany.com/90504789/these-drones-
can-plant-40000-trees-in-a-month-by-2028-theyll-have-planted-1-billion
• Tree Planting / Drones -
https://www.standard.co.uk/news/world/treeplanting-drones-could-help-
restore-world-s-forests-a4116376.html

12. Key Metrics for the Forestry Sector

13. Additional Links
Circular Economy - https://www.slideshare.net/paulyoungcga/what-is-the-circular-economy-and-how-can-data-and-
ai-drive-outcomespptx-257103318
ESG and Sustainability Reporting - https://www.slideshare.net/paulyoungcga/introductory-to-esg-and-sustainability-
reportingpptx
Data Management - https://www.slideshare.net/paulyoungcga/how-to-solve-data-management-isuses-for-both-the-
private-and-public-sectorspptx
Close, consolidate, and reporting - https://www.slideshare.net/paulyoungcga/close-consolidate-and-reporting-
cyclepptx-256864692
Top Reporting Challenges - https://www.slideshare.net/paulyoungcga/top-reporting-challenges-facing-both-the-
private-and-public-sectorpptx
Data and AI - https://www.slideshare.net/paulyoungcga/leveraging-realtime-analytics-as-part-of-driving-data-and-ai-
to-improve-business-outcomespptx

14. What’s next
• Forestry sector will continue to look at ways to better manage forests around the world as part managing pulp, paper,
and wood production.
Blog – What is next for the Forestry Sector – May 2023
Summary:
With our updated forecast of 1.4MM housing starts for 2023 (900,000 singles and 500,000 multis), we
now expect lumber demand from new residential construction to decline by fully 2.9Bbf y/y to ~16.0Bbf.
This compares to lumber demand from residential construction of 19.2Bbf in 2021 and 16.8Bbbf in 2020.
A shift of 50,000 starts from single-family to multifamily (i.e., the latest tweak to our housing forecast)
results in a lumber demand decline of ~460MMbf, roughly the equivalent of two greenfield SYP sawmills.
…All else being equal, a steeper decline in lumber demand from new housing will necessitate even more
sawmill downtime in 2023. We suspect that most downtime will take place in BC given its position as the
highest-cost producing region in North America. BC accounted for 15% of total North American lumber
production in 2021 and significant, timely downtime in the region should be enough to keep North
American lumber markets somewhat tensioned through 2023. As such, we still expect benchmark
lumber prices to hover around BC cash-cost levels next year
, and we forecast a 2023 average S-P-F 2×4
price of $510, with SYP 2x4s priced slightly lower (at $495) given accelerated lumber supply growth from
the U.S. South.
Source - https://treefrogcreative.ca/housing-slowdown-may-mean-addition-downtime-for-bc-lumber/
Links:
Housing starts outlook - https://www.canadianmortgagetrends.com/2023/05/home-prices-wont-revert-
to-pre-pandemic-levels-should-start-rising-again-in-2024-cmhc/
Home improvements spending - https://www.globalwood.org/news/2023/news_20230502a.htm
Lumber production -
https://www.lesprom.com/en/news/Canadian_sawmills_decrease_9_8_lumber_production_in_Februar
y_107606/
Lumber Prices - https://www.woodbusiness.ca/lumber-prices-tick-up-slightly-even-as-demand-remains-
low-madisons/
Affordability - https://www.mpamag.com/ca/mortgage-industry/industry-trends/with-home-prices-set-
to-climb-again-whats-the-outlook-for-first-time-buyers/444384