Wood Fiber Prices In the US Fell in Q1 '09
April 13, 2009 - Wood fiber costs have diminished in all regions of the US this year as the decline in fiber
demand by the pulp industry has been greater than the reduction of residual chip supply
from the sawmilling sector. The past six months, pulpwood costs have fallen about 10%
in the US South and 20% in the US Northwest, according to the North American Wood
Fiber Review published by Wood Resources International.
Pulp mills and sawmills took a great deal of market-related downtime in the 4Q/08 and
1Q/09 with no region of North America being immune to the deteriorating markets for
most forest products. Market pulp production in North America was 29% lower in
December 2008 than in the same month in 2007. The operating rate was a record-low
69% in December, which can be compared to 87% in Europe and 85% worldwide.
Lumber production, and residual chip supply, was also much lower this winter than last
year. In the 4Q/08, lumber production was down 23% in the US as compared to the same
quarter in 2007. Production continued down in 2009, and sawmills in western US
reported 35% lower output in January 2009 than in 2008.
With both market pulp producers and integrated pulp and paper companies curtailing
production, demand for wood fiber has fallen considerably this winter. The good news
for pulp manufacturers is that wood costs, which typically account for about 45% of the
manufacturing costs, have fallen substantially since last fall.
Wood chip and pulpwood prices were lower in all regions of the US in the 1Q/09. The
biggest declines occurred in the US Northwest and the US Northeast where prices have
fallen 20% for softwood and 42% for hardwood, respectively in the past six months. In
the states of Maine, pulplog prices have fallen substantially but despite the recent decline,
hardwood fiber costs are still the highest in North America. The high wood costs have
caused a majority of the pulp mills in that state to reduce production this winter.
In the US South, wood costs have been surprisingly stable the past few years but even in
this region, prices for wood chips and pulpwood started to slide in the 1Q. In the South
Central states, roundwood costs fell 10% to the lowest level in over a year as wood fiber
demand was in decline. The major pulp producers were all taking downtime or have
planned reduced operating rates later in the spring which will further reduce the demand
for wood chips and pulpwood in the second quarter.
SOURCE: Wood Resources International