Forestry investments show resilience in 2020 despite global market fluctuations
TORONTO, ON / ACCESSWIRE / October 6, 2020 / Gold and silver are typically the top performing commodities in times of economic uncertainty. However, the top performing commodity so far this year has actually been wood. Lumber futures have doubled since April and material costs show no signs of slowing down as demand is surging and building supplies are becoming increasingly limited and more expensive. In the words of Jen Skerritt from Bloomberg News, "Move over gold. Wood is the shelter of choice in the pandemic."
With construction deemed an essential service across North America, commercial projects are continuing as planned. Meanwhile, lockdowns and more time spent at home are creating more demand for residential home construction projects. The cost of building a new home in Canada has now increased approximately $10,000 on average due to surging wood costs.
Timber has long been praised as a steady, safe investment. As a hard asset, it holds intrinsic value that does not change with market fluctuations. Investing in forestry translates into owning consistently growing assets, as forests naturally mature over time. This is the "biological hedge" of forestry investments, which has contributed to their resilience over time.
The strength of forestry investments has been proven despite recent trade disputes, with the US adding duties and tariffs to Canadian lumber. Despite shipping delays with limited rail, road and sea transport capacity, demand for wood has continued to increase as consumers are unphased with price increases. And savvy investors are following suit.
As with all commodities, the price of wood is subject to market shifts and once production returns to previous outputs there may be a correction to be seen. However, the forestry sector is showing no signs of slowing down.
Enhanced global popularity of building tall buildings with wood has seen both public and private sectors take advantage of the quality of wood construction, as well as the environmental benefits. Typically, wood buildings offset the Carbon for the life of the construction period, with forestry capturing Carbon and acting as a natural air filtration system for the environment.
Meanwhile, increased demand for paper packaging was factored into Techavios prediction that the global forestry market will balloon by $3.5 Billion between 2020-2024.
In the case that demand falls with a market correction, timber harvesting can be halted until prices stabilize. In the meantime, trees mature and their biological hedge allows investors to be patient, and for forestry investment companies to begin harvesting again once demand returns.
EcoForests is a boutique forestry investment management company that manages high-end tropical timber species on behalf of their global private and institutional investors, maximizing returns through a commitment to quality, technique, sustainability and security. Headquartered in Toronto, EcoForests has forestry operations in Central and South America with regional offices in Hong Kong, USA, Israel and Northern Ireland.
Ecoforests COVID-19 Update
EcoForests' sawmills have been in partial operation since June and are at full capacity since late September. International ports in Central and South America have now re-opened, however it remains uncertain if they will remain open as countries are coping with the re-surgence of COVID-19 at departure and destination ports world-wide. Management and planting operations have continued without interruption, a total of 500 hectares have been planted in 2020. Our harvesting operations are currently per-order basis only.
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SOURCE: Ecoforests Asset Management
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