Pulp mills in the US Northwest continue to have higher wood costs as compared to the US South despite substantial price declines in the 3Q 2008.

Oct. 1, 2008 - Wood chip costs in Western US, which have been some of the highest in North America, declined 13% in the 3Q, but are currently still 25% higher than a year ago, according to the industry report North American Wood Fiber Review.

Another region in the US that has experienced substantial fiber cost changes this year is the Northeast, where hardwood log prices have increased for five consecutive quarters and currently are 45% higher than a year ago. Pulp mills in Maine are struggling to supply their mills with wood fiber, and they now have the highest hardwood log costs in North America. Due to the local fiber shortage, mills are importing logs from neighboring states, Canada and as far away as the Lake States, the report states.

Tight Wood Supply
With the hurricane season more intensive than usual, wood raw-material supply flow for both pulp mills and sawmills in the US South were interrupted in the 3Q. Heavy rainfall that followed the severe winds has drastically reduced both logging activity and the transport of logs.

Late summer and early fall is typically the season when pulp mills build their log inventory for the winter season. Unless logging can be increased when hurricane season is over, wood fiber supply may be tight next spring. There is still time to catch up in terms of inventory building, but much depends on when the weather improves. In addition to better logging conditions, there is also the issue of finding enough loggers and truckers to move the wood. This is becoming an increasing problem in the US South and many wood consumers are worried that this will not only be a problem this fall but also in the coming years. However, the current financial crisis and the increasing unemployment rates could potentially make it easier to recruit personnel to the forestry sector.

Many pulp mills in the hurricane-impacted regions have reached out further to source their logs this fall. Pulpwood stumpage prices were practically unchanged this quarter, so landowners continue to experience lower stumpage prices for both sawtimber and pulpwood in 2008 than last year. Despite the recent price increases, pulp mills in the US South have benefited from fairly stable wood fiber costs the past 15 years. Since 2002, softwood chip prices have gone up by 18% compared to the Wood Resources Quarterly Global Average Conifer Fiber Price, which has gone up almost 40%.

SOURCE: Wood Resources International