• Bloomberg


Longshoremen at ports in Washington state and Vancouver, British Columbia, are set to load more timber and lumber onto vessels bound for Japan as it rebuilds from the Great East Japan Earthquake.

The March 11 quake and tsunami will require the biggest importation of logs, timber and plywood since 2008, according to Wood Resources International LLC., a forest-industry consulting firm based in Bothell, Washington.

Increased Asian demand may be the lone bright spot for dry-bulk shippers, including Hyundai Merchant Marine Co. and Mitsui O.S.K. Lines Ltd., that are suffering from a glut of new ships that is pushing down charter rates.

For timber companies such as Weyerhaeuser Co. and Rayonier Inc., it’s a source of strength at a time when the U.S. housing market is floundering.

“Demand will start to pick up in the second half and it will probably last for a year or two,” said Hakan Ekstrom, president of Wood Resources International. “Weyerhaeuser, since they are a huge company and they have long, long relations with Japanese companies, will benefit.”

A revival in exports to rebuild parts of Japan this year and in 2012 will complement the 43 percent increase in the volume of lumber that moved through Port Metro Vancouver in the first five months of this year.

The fourth-largest port in North America by tonnage saw a 22 percent increase in 2010 in the volume of lumber shipments to Japan versus the prior year.

Lumber exports to China jumped 39 percent and deliveries to Taiwan were up 32 percent.

“It’s going to benefit the dry-bulk trade in the form of timber,” said Greg Lewis, a New York-based analyst at Credit Suisse.

He said the rebuilding effort in Japan will probably also give a boost to tankers that transport oil and containerships that move finished products. He recommends Textainer Group Holdings Ltd., a San Francisco-based company that leases dry-freight containers.

Seattle, Tacoma and Olympia are among Washington state ports that may be loading greater tonnages of timber aboard ships destined for Japan after cleanup of debris is complete and infrastructure rebuilding gets under way.

Weyerhaeuser, based in Federal Way, Washington, may stand to gain the most compared with other U.S. logging companies because of the type of timber used by Japanese home builders, the Douglas fir.

Japan “will shift now to longer-term production of permanent housing and that should benefit West Coast markets for lumber,” Daniel Fulton, the company’s president and chief executive officer, said during a conference call last week. “Our large, long-term export market has been and will continue to be Japan.”

Japan intends to complete reconstruction in the next 10 years, with most of the rebuilding finished in five years, Finance Minister Yoshihiko Noda said July 26. The government plans to spend ¥19 trillion over that period, according to a draft government proposal.

At the same time, the shift from cleanup to rebuilding is taking longer than initially anticipated. Efforts are still focused on emergency housing, with regular home construction expected to commence before the end of the year.

“Yes, there will be a shift because of Japanese demand,” Lynn Wilson, vice president of U.S. forest resources at Rayonier, said July 26.

Exports to Japan from the port of Seattle increased 31 percent during the first five months of the year, compared with the same period in 2010, said Emma Griffith, a director at Fitch Ratings in New York who specializes in U.S. seaports.

Wood exports are up 16 percent. Paper and paperboard, transported in dry-freight containers, are up 25 percent, she said.

The port of Tacoma’s exports to Japan, the port’s second-biggest trading partner, increased 15 percent during the first five months of the year.

Two-way trade with Japan totaled $8.45 billion last year, said Tara Mattina, a port spokeswoman.

Dry-bulk shipping companies such as Hyundai Merchant and Mitsui O.S.K. have been hurt by a glut of new ships that has pushed down charter rates. Reconstruction in Japan “will just make it less bad” for firms in that field, said Lewis of Credit Suisse.

The global fleet of dry-bulk carriers will also grow 13 percent this year, outpacing a 4 percent increase in traffic, according to Clarkson Research Services Ltd., a unit of the world’s largest ship broker.

Rick Holley, president and chief executive officer of Plum Creek Co., said during a July 25 conference call with investors that Asian demand is helping offset weakness in the U.S. market.

“We sold more volume from our coastal Washington timberlands into attractively priced Asian log markets,” Lee Thomas, chairman and CEO of Rayonier, said in a July 28 statement after the company reported second-quarter earnings.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.