Matthew McKellar: Okay. That’s helpful. Maybe next, just wondering if you could just provide a bit of commentary on maybe what the latest you’re seeing is on the market for Timberland acquisitions. Any significant changes in tone or sentiment in that market or any other comments you can offer on what you’ve seen to start 2024?
Devin Stockfish: Sure. Our expectation at this point is it’s going to be a pretty typical year, somewhere in the $2 billion to $2.5 billion range for total transactions. We haven’t seen a lot of big transactions hit the market this year. There is a larger package, I think, up in Northern Washington, Northwest Washington right now, I think that’s on the market. But I do think you’re still seeing a strong interest in the asset class, particularly for moderate to high-quality Timberland packages. The only thing that we’ve really seen, and this was true towards the end of late last year as well, maybe a little bit of less aggression on lower-quality packages. We’ve seen a few no sale transactions here of late. But nevertheless, I think for quality packages, you’re still seeing a lot of interest and pricing has been very strong.
Matthew McKellar: Great. Thanks. That’s all for me. I’ll turn it back.
Devin Stockfish: Thanks.
Operator: Our next question is from Mike Roxland with Truist Securities. Please proceed with your question.
Mike Roxland : Thank you, Devin and Davie, Andy taking my questions. I just wanted to follow-up with you on the EWP operating rate. You mentioned it was in the high 70s in 1Q. That’s down from the low 80s in 4Q. So just wondering, did you take increased downtime in EWP? I’m just trying to reconcile the operating rate comment or the rate itself with your earlier comment that you shipped greater EWP volumes in 4Q after being on allocation for most of the year. So help me just try to reconcile what happened in the operating rate and why do you bring it down in 1Q relative to 4Q.
Devin Stockfish: Yes. You’re talking about really only a percentage or two of difference. It wasn’t intentional. It was really — we had some weather events in the January time frame that caused us to lose a little production. We had one mill that had reliability challenges for a brief moment in time. But wasn’t anything intentional. It was really just some operational things. But as I said, plan to move that up as we get into Q2.
Mike Roxland : Got you. And where do you think it will be in 2Q? Are you looking at bringing it back to low 80s or even accelerating that beyond the low 80s given what you pointed out as better single-family demand?
Devin Stockfish: Yes, it should be in the mid- to low 80s is kind of where we’re targeting.
Mike Roxland : Got it. And then just one quick follow-up on EWP. One of the things I’ve heard in terms of why EWP is gaining demand — gain share against lumber over the last few years. Just in terms of either construction making — especially within the tight labor market. But when you look at EWP volumes, look at some of your peers in EWP volumes relative to single-family starts, single — versus 2019, single-family starts are actually up, call it, 6% to 7% versus 2019 — in 2019. And in that time, solid section volumes are down 4% and I-joist volumes are down close to 20%. So if I try to get a sense of if EWP is really gaining share against some lumber, why are the volumes down in EWP when single-family starts are up.
Devin Stockfish: Yes. I mean, without looking at the numbers next year, that’s kind of hard to pinpoint the specific numbers. But what I would say is directionally, when you look at what was happening during the pandemic, really couldn’t get solid section or I-joist with a certain level of building activity really once it went over 1.5 million housing starts, there just wasn’t enough EWP available. And so it put homebuilders in the position where to keep building homes, they had to find alternatives. And so whether that was using lumber instead of solid section or using open web instead of Engineered Wood Solutions, people did what they had to do. And so I do think all things being equal, most builders would prefer to have Engineered Wood Products.
And so as that becomes available, and obviously, there’s a cost component. Lumber prices have been a little bit lower, making some of those alternatives, a slightly better cost decision. But that being said, as lumber prices ultimately materialize. I do feel very good about the ability to build market share in EWP.
Mike Roxland : Thank you. Good luck in the quarter.
Devin Stockfish: Thank you.
Operator: Our next question is from Buck Horne with Raymond James. Please proceed with your question.
Buck Horne: Hey, thanks. Good morning. Just a quick follow-up on — I appreciate the comments on the Timberland M&A markets. Just wondering if you could give a little extra color on valuations across the regions that you’re seeing right now in terms of just directionally. And I guess I’m also curious if you think directionally carbon optionality continues to be an increasingly important driver of valuations? Or does that theme kind of moderated in more recent months?
Devin Stockfish: Yes. I mean for quality packages, you’re seeing very strong pricing. Anything in that Washington, Oregon, area, at least kind of in the key manufacturing regions within those two states, very, very strong pricing. I think in the South, we’re continuing to see good strong pricing again in markets where you have the decent supply/demand dynamic with mill availability. I do think you’re still seeing people try to get their arms around how to underwrite carbon, but there’s no question that, that is playing a part in how people value Timberlands really in most key regions. And I think that will continue to be the case. I think it’s important to note, as you think about underwriting that carbon optionality, we’re still kind of in the early stages of pinpointing what those numbers are going to look like.
If you think about the carbon sale that we did just here back in Q4 of last year at $29 a ton, I think that strong pricing. Our view is we’re going to see pricing improve in the years to come. But you almost need more data points for people to really bake that hard into their underwriting process. So I think we’ll continue to see that be a part of how people underwrite deals today, but probably more so into the future when you have more data points on how to price those carbon offsets.
Buck Horne: Got you. Appreciate that. Yes. It’s actually a good segue to my next question. I was going to ask you about the forest carbon credits and 100,000 credits you guys are expecting this year? And if you think I mean, should pricing for that be similar to the $29 a ton, you achieved earlier? Or is that improving? Or is that — what’s the trend in kind of that voluntary market?
Devin Stockfish: Yes, trends in the voluntary market are a little challenging because there’s such a differential in terms of the quality of those projects that are coming to market, and it’s still, to a large extent based off of individual transactions. So insight into pricing can be a bit challenging. That all being said, we continue to believe that we’re going to get good solid premiums for the product that we’re bringing to market. And we do think that as the demand continues to grow for these high-quality projects, pricing will go up over time. Each individual project, there are going to be puts and takes depending on what’s going on in the market. But directionally, we feel good about the trajectory of carbon prices over the course of this year and over the next several years.
Buck Horne: Okay. Thanks. Good luck.
Devin Stockfish: Thank you.
Operator: There are no further questions at this time. I’d like to turn the floor back over to Devin Stockfish for closing comments.
Devin Stockfish: Okay. Well, thank you, everyone, for joining us this morning, and thank you for your continued interest in Weyerhaeuser. Have a great day.
Operator: This concludes today’s teleconference. You may disconnect your lines at this time, and we thank you for your participation.
