Mill Capacity Defines Market Potential
Posted by Brooks Mendell at forisk.com
In our work over the years, we have come to learn that markets, like individuals, have “personalities” and capacities that “change” over time. For example, when fully rested and prepared, I can teach or write all day, but still cannot dunk a basketball. ? A set of logging crews, under clear skies and operating without quotas on flat land, can haul logs to mills that can manufacture product all day long, subject to market demand and technological constraints. The physical limits, whether biological or structural, are what they are, and we improve our work by confirming, verifying and incorporating this knowledge into any analysis.
From this, we have a starting framework for any forest industry investment and strategy: while trees grow and economies cycle, local markets have unique profiles defined by their forest supplies and manufacturing capacities. These capacities, which account for both the maximum ability to use wood raw materials (timber and chips) and the maximum ability to produce forest products (e.g. lumber and panels and pulp), provide operable, verifiable and testable constraints for any market assessment and forecast.