Ketan Mamtora: Got it. That’s very helpful. And just on solar, are you looking at mostly to lease land? Or are you also looking at outright sale? And this is just specific to solar.
Douglas Long: Yes, specific to solar, we’re particularly looking at the leasing opportunity. We believe that’s the best option for us from a financial standpoint as well as we find, a lot of our customers also find that favorable not to put that high capital upfront. So it’s worked out to be a good solution for most of our customers.
Ketan Mamtora: Understood. And then just switching to just China. You talked about sort of offtake, it’s a little bit slower. Curious kind of to see in terms of just activity level, have you seen things pick up at all? Is it sort of pretty similar? Any more color there?
Douglas Long: Sure. This is Doug again. I’ll grab on that one also. So yes, the economies come out of the Lunar New Year, it’s grown relatively strong. That hasn’t really spread in the property sector yet, but we have seen with that GDP running over 5%. We’re seeing strength in areas like the infrastructure and manufacturing and exports are recovering also, which is really positive for the packaging industry as well as the furniture exports. We’ve seen those increase by over 25% year-over-year in the first quarter. So we’re seeing growth in a lot of areas. And these trends tend to favor Radiata particularly from New Zealand, due the wood quality there. So it’s a very versatile product. And while we saw relatively strong pricing at the start of the year, that was due to low port stocks that came into there.
And so we’re pleased with that. But then the Chinese New Year came along and we saw that kind of build back up. So going into the year, we were at an inventory-to-demand ratio below 1.5 months, which historically yields on strong pricing, and we saw that. But through the Lunar New Year, built up to over four million cubic meters at the ports. And we’re happy to say, though, that at the end of April, it’s dropped down below 3.9 million cubic meters. And where we’re seeing offtakes in the 40,000 to 60,000 cubic meters per day kind of over the first quarter of the year, we’re now seeing that offtake up to 70,000 to 80,000 recently in the last couple of weeks. And so that inventory demand ratio has fallen back below two months, which again historically has led to that upward pressure on prices.
And we’re seeing a lot of increase in shipping costs from the rest of the world. We don’t talk about that too much, but most people understand that, particularly from Europe. And so we think that both log and lumber supply will be constrained over the coming months. So that’s why our comments we believe that we’ve kind of seen the buildup, but that’s drawing down, and we’re seeing increased offtake with less input coming in. So we have seen that inventory ratio drop below two. So we believe that will lead to some improved pricing and demand going forward, particularly for Radiata pine.
Ketan Mamtora: Got it. No, that’s very helpful. I’ll jump back in the queue. Good luck.
Operator: Thank you. Our next caller is Matthew McKellar with RBC Capital Markets. You may go ahead.
Matthew McKellar: Hi. Good morning. Thanks for taking my questions. Does weak Southern Yellow Pine lumber pricing represent a potential risk to your outlook for harvest volumes in the U.S. South this year?
Douglas Long: Yes, this is Doug again. I’ll cover that. Yes, it’s always hard to predict exactly how things are going to work out with respect to that. But what we’ve seen is that operating rates for pulpwood customers have really picked up over the year, too. So we have the ability to flex between this. We did last year, we flexed more towards lumber and sawlogs. And this year, we’re seeing a lot of demand basically on the pulp side as well as still continued demand on our log side. So we’re pleased to see that the operating rates for pulp customers have moved from the mid-70s up in the low 90s now. So we’re really seeing increased demand there. It seems like most of that the closures and economic downtime that followed that post COVID inventory stocking cycle are over.
And that we’ve seen the increases in pricing. So we’re still seeing strong demand on the pulp side. And while we have seen some weakness in the lumber side, overall, we’re still — the mills are still running, and we see that demand. So it’s — it’s hard to say exactly how that would look. We have the ability to flex between those 2. So we still believe we’re comfortable as we put in our outlook on our removals.
Mark McHugh: Matthew, I think we also believe that, that price divergence that we’ve seen is likely going to tighten. I mean we just haven’t — it’s pretty unprecedented that disconnect that we’re seeing right now between SYP and SPF lumber prices. And so our expectation is that will start to converge as the year progresses.
Douglas Long: Yes, absolutely. One thing we’ve seen is that particularly in the repair remodel, there’s been some weakness for there’s higher grade sawlogs. They are destined usually for trading facilities, and that’s where we’ve seen some of the weakness to date. But overall, we’re still seeing reasonable demand.
Matthew McKellar: Great. That’s helpful. Next, I was wondering if you could just provide a bit more color on how you’re thinking about your evaluation of strategic options for the New Zealand business at this point. I think you talked about that process potentially taking a little while due to the JV governance structure. So my question would be is how you proceed with that process or evaluate your options there contingent on the outcomes of the Washington State sale and any potential sales processes you might run on the 100,000-plus acres you’ve identified as suitable for disposition in the U.S. South?
Mark McHugh: Yes. I guess the way that we’re approaching that Matthew is that we’re really looking at structuring a number of different options that would ultimately get us to that $1 billion disposition target. We haven’t sort of laid out one specific path that gets us there, but really assessing a number of different options, various combinations of which could ultimately get us to that $1 billion target. As it relates to New Zealand specifically, as we’ve noted in our — in the release, we’ve engaged a financial adviser to assist with an evaluation of strategic alternatives there. As part of that process, one of the alternatives that we will consider is exiting our position in New Zealand. I can’t really comment beyond that at this point. But again, we are we have entered into that process in earnest, and we expect that we’ll have further updates in the next couple of quarters.
Matthew McKellar: Okay. And then last one for me, just on carbon credit prices in New Zealand. It sounds like you’ve tempered your expectations there slightly with prices trending lower over the past couple of months. Could you talk about what you think has driven prices lower and what your expectations would be for prices for the balance of the year?
