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November-December 2015

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palletcentral.com PalletCentral • November-December 2015 27 period. Limited growth in treating capacity was partly responsible for smaller gains in purchases than in production, according to some sources. That said, several years of crosstie shortages kept treating plants fairly aggressive with purchases and reluctant to lower prices much even as tie availability increased. The industry's overall inventory to sales ratio remains relatively low — at 0.69 in August versus a five-year average of 0.79 — because strong sales have crossties moving out as quickly as they come in. In contrast, many treating plants have excess switchtie inventories and are placing few, if any, new orders. RTA is forecasting a 3.4% increase in crosstie purchases to 24.2 million in 2016, as the strongest Class 1 purchasing in at least five years, and is expected to offset a modest decline in short line purchasing. Crane Mats/Board Road During the second half of 2014, crude oil prices tumbled more than 50% to about $50/barrel, and they've stayed in the $45-55/barrel range during much of 2015. Lower prices curtailed oil exploration and drilling activity and, in turn, demand for crane mats and board road. This, along with rising hardwood production and relatively low flooring industry purchasing, pushed up production of ties, cants and other low- grade products. Board road sales to the oil industry have remained slow into fall. However, increased construction of chemical manufacturing plants in the U.S. and tougher environmental restrictions on coal-fired power plants are benefitting the natural gas industry and increasing its pipeline infrastructure requirements. As such, sales for several crane mat and mat timber producers in the South and southern Appalachia began to strengthen in late-summer, with natural gas producers placing sizeable mat orders and promising even larger orders in early 2016. Contacts in the industry expect these large orders to be a game-changer for low-grade markets due to their potential to moderate tie, cant and flooring-grade lumber production. Notably, sawmills in the North and northern Appalachia have seen little new demand for mat timbers as of yet, largely because their log lengths aren't as conducive to sawing the long timbers used in crane mats. Heavy rains in early fall fur ther reduced supplies in Georgia and the Carolinas and left some pallet manufacturers scrambling for material and paying higher prices.

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