Global Hardwood Pulp Producers Face Higher Wood Fiber Costs, Lower Pulp Prices
Profit margins are being squeezed for many hardwood pulp producers worldwide with
higher wood fiber costs and lower product prices. The hardwood wood fiber price index
(HFPI) reached a 24-year high in the 3Q/11 at the same time as hardwood pulp prices
fell by 26% from June through October.
At the same time as pulp prices have fallen, wood costs have increased, which has squeezed the profit margins
for many producers of hardwood pulp.
Nov. 14, 2011 (Press Release) - The global demand for market pulp has been weakening for the past four
months, particularly that of hardwood pulp (BHKP). The market report Pulpwatch reports
that global shipment of BHKP pulp fell from 1.76 million tons in June to 1.41 million
tons during July. Although shipments picked up to 1.57 million tons in August, the
outlook for the next six months is for lower demand and reduced pulp production as
compared the first half of 2011.
Hardwood pulp prices (BHKP) have fallen steadily during the fall and were down by 26
percent from June to the early November, according to FOEX. At the same time as pulp
prices have fallen, the wood costs have increased, which has squeezed the profit margins
for many producers of hardwood pulp. Wood cost as a percentage of the Eucalyptus pulp
(EuBKP) price has gone up steadily for five consecutive quarters, from 23 percent in the
2Q/10 to 32.2 percent in the 3Q/11, as reported in the Wood Resource Quarterly. The
relative wood cost is currently substantially above the twenty–year average of 23 percent.
Pulp mills in Brazil, Indonesia, Japan, China and Chile saw the biggest increases in
hardwood fiber prices the past year, while the rise in wood costs in North America and
Europe have been more modest. The Hardwood Wood Fiber Price Index (HFPI) rose
for the fifth quarter in a row, reaching US$117.91/odmt, an increase of 14 percent since
last summer and an all-time high, according to the Wood Resource Quarterly.
Conversely, the Softwood Wood Fiber Price Index (SFPI) fell by less than one percent
to $108.90/odmt, which was the first decline since the 2Q/10. In addition to the exchange
rate adjustments, wood prices also fell in the local currencies in Russia, France and
The Softwood Wood Fiber Price Index has been higher than HFPI for 21 of the past 24
years; it is only the past three years that HFPI has been sold at a premium, and the 3Q/11
premium of US$9.01/odmt is the greatest to date. This is of note because over the past
few years, some softwood pulp producers had switched to hardwood or invested in
hardwood pulp capacity to take advantage of historically lower hardwood fiber costs and
higher profit margins. In light of these recent price and cost developments, producers
might consider returning to using more softwood pulp in their product mix, whether for
market pulp or in their integrated pulp and paper facilities.
SOURCE: Wood Resources International LLC