George Staphos: Appreciate the thoughts on that, Devin and certainly, we’ll look to mark the progress. My other question, again, is on the lumber side but in this case, EWP and Engineered Product. So can you talk about why you’re seeing, I guess, realization is flat to down? I don’t want to paraphrase poorly but that was my take on your commentary, looking out into 1Q. I realize it’s a regional market, you get sometimes some imbalances but what’s your view on the year relative to supply-demand, your operating stance and how that will translate overall into commercial realizations?
Devin Stockfish: Sure, George. On the realization side, as we look at the EWP market, unlike OSB and lumber which price minute to minute, EWP pricing actions typically have a lag. And so as much as anything, Q1, the commentary on realizations is just over the course of 2023, as that market was rebalancing, there were a variety of different price actions in different geographies. And so Q1 is really when those are hitting in full. The EWP market as a whole, I think, is still pretty solid. Pricing overall, if you look back on a historical basis, is still very strong. As we look into ’24, we’re getting some pretty strong optimistic signals from our builder customers. And so we’re expecting steady demand. Pricing is always just a reflection in each individual market of what the supply-demand dynamic looks like.
But in a stronger housing environment with what we expect to be mortgage rates continuing to come down, we think the setup for EWP is good. And to the extent that, that market really develops and picks up, we’ll be in good shape from an EWP standpoint.
Operator: Our next question comes from Anthony Pettinari with Citi.
Anthony Pettinari: Looking at the market for Timberlands, when you look back at 2023, can you talk about maybe what kind of price appreciation trends you saw in the market maybe on average for good quality Southern Timberlands and the volume of transactions that you saw? And then as we start out the year here, any kind of further comments on just how you see the market in terms of availability of timberlands, who you’re competing with for some of these transactions? Or has there been any sort of change there?
Devin Stockfish: Sure. Well, when we look back at 2023, I think the year as a whole is pretty typical in terms of transaction volume, somewhere in that $2.5 billion mark. Last year was a little bit more heavily weighted to the back half of the year. We saw more activity as we got towards the end of 2023. In terms of the overall appreciation, you can look back just really over the last several years. It wasn’t that long ago were $2,000 an acre for good timberlands in the South was pretty typical. Those values have increased pretty substantially. We’ve seen examples of really high-quality timberlands in the South going as much as $4,000 an acre and it’s not atypical to see above-average properties going in the high-two’s [ph].
So we’ve seen a pretty strong value appreciation in U.S. Southern Timberlands prices. Same thing for the West, I would say, just as an example. As we think about 2024, still very early in the year. There aren’t a whole lot of transactions in the market right now. That’s not unusual in January. But as we think about the year as a whole, we’re expecting a pretty typical year, anywhere between $2 billion and $3 billion of transaction value for the year. I would expect those deals to continue to be very competitive. Still seems to be a lot of interest in this asset class. And in terms of who we’re going to be competing for deals, it’s going to, I’m sure, be the same cast of characters. The TMOs will be active, the timber REITs, I assume, will be into some of those deals, maybe not quite as much, given some of the announcements from some of our competitors but I suspect they’ll still be having their toe in the water to some extent.
But then I think you’re also going to continue to see some of these new entrants, some of the alternative entities that are looking for carbon values or others that haven’t historically been active. So we’re expecting it to continue to be competitive. We’ll be very active as we have been over a number of years. We’ll continue to look for opportunities to improve the value of our asset but at the same time being disciplined to make sure that we pay the right price for those assets.
Anthony Pettinari: Okay, that’s helpful. And then just shifting gears to Wood Products. In the Pacific Northwest, I think recently, you had a competitor that closed a sawmill in Oregon. And they expressed concerns around potentially restricted policies on harvests on state forest. And I’m just curious, I mean, does that have any impact on the market or your business maybe not directly but just in terms of availability of contractors, competitive dynamics? I’m just curious if there’s any read-through there.
Devin Stockfish: Sure. Well, the reference there from that mill closure was with respect to some new regulations in Oregon that came into full implementation on January 1 of this year. And the reality is Oregon was already a very tensioned wood basket and with these new regulations which I’ll say just by the way, these regulations are really just bringing Oregon closer to the regulations in Washington. So it’s — we’ve done business in Washington for a long time under those regulations and we’ll be just fine under these new regulations. But the reality is it’s going to make Oregon somewhat more tensioned than it already was. And so fiber supply will be challenged for certain participants depending on the geography. For Weyerhaeuser, we’re in a beneficial position in that we have our own fee timberlands.
And so I don’t anticipate any issues with fiber availability for our mills. But it may ultimately push the price of logs up in that market as there’s less timber supply across the stable manufacturing base.
Operator: Our next question comes from Kurt Yinger with D.A. Davidson.
Kurt Yinger: I just had 1 question. Can you maybe talk a little bit more about what you’re seeing in terms of European lumber imports over the second half of the year? And in addition to that, we’ve heard at least that there’s been a growing amount of imported LVL showing up as well. How are you thinking about that potentially impacting the EWP market in ’24 and longer term, I guess, the potential that European competitors could try to, I guess, become bigger participants in the domestic market here?
Devin Stockfish: Well, with respect to your first question on European lumber, we certainly saw that come down over the back half of 2023. I think that’s a reflection of primarily lumber prices and just the all-in cost to get lumber from Europe to the U.S. relative to the pricing dynamic. It just didn’t make a lot of sense. So that certainly came down over the course of ’23. On a go-forward basis, as we think about lumber, European lumber coming into the market, a couple of things I would point out. First of all, one of the things that was making that trip a little easier is with all of the salvage activity in Central Europe from the beetle infestation, they were getting very, very cheap logs. That salvage activity is starting to wind down.
