Wood Fiber Costs in 3rd Quarter for Global Pulp Industry Near Two-year High

Nov. 16, 2010 (Press Release) - After a temporary drop in the 2Q, the Softwood Wood Fiber Price Index (SFPI) increased again in the 3Q to the highest level seen during the financial crises, according the Wood Resource Quarterly (WRQ).

The SFPI was US$99.80/odmt in the 3Q, up $1.51/odmt from the previous quarter and $6.68/odmt from the same quarter in 2009.

Prices did not go up only because of a weakening US dollar against most other currencies, but also because prices in the local currencies were up in Europe, Western US and Western Canada.

Wood chip prices in Western Canada increased again in the 3Q, because of their linkage to pulp prices. However, they did not go up as dramatically on a quarter-by-quarter basis as they did from the 1Q to the 2Q earlier this year. The latest uptick to $104/odmt has resulted in prices at levels not seen in 14 years. Pulp mills in the region now have some of the highest chip prices in North America, as reported in the North American Wood Fiber Review.

Global hardwood fiber prices also trended upward, both in local currencies and US dollar terms in most regions covered by the WRQ. The biggest increases occurred in Europe, where prices were up 5-10 percent from the previous quarter. In France, Finland, Germany and Spain, hardwood pulplog prices were up in the local currency because of higher demand from the pulp industry, which was running at higher operating rates this fall.

Only the US South and Eastern Canada had lower hardwood fiber prices this quarter as compared to the previous quarter. As a result of higher fiber prices in most regions worldwide, the Hardwood Wood Fiber Price Index (HFPI) was up $1.51/odmt to $104.88/odmt. In the 3Q the Index was 5.8 percent higher than a year ago.

Over the past two years, wood fiber costs for the global pulp industry have grown faster than other production costs, including energy, chemical and labor costs, according to data compiled by Fisher International. In the 2Q/10, wood fiber costs accounted for 59 percent of the total variable production costs as compared to 55 percent in the same quarter of 2008. Wood fiber costs continue to be the most volatile cost component for pulp manufacturers worldwide.

SOURCE: Wood Resource Quarterly