Wood Fiber Costs for Pulp Producers Declined in 4Q/2011
Global demand for pulp has declined and pulp prices fell during the second half of 2011.
As a consequence, prices for wood fiber, the highest cost component when producing
pulp, were down throughout the world.
Feb. 21, 2012 - Global pulp prices fell by about 20 percent from July to December in 2011, said Wood Resources International (WRI) in its Wood Resource Quarterly (WRQ) report.
According to WRI, weakening demand for pulp and lower product prices squeezed pulp company
profit margins, so many companies tried to reduce their costs for wood fiber, which represents the largest cost component when manufacturing pulp.
There has been a long-term trend in the pulp industry of wood costs increasing as a
percentage of the total production costs. In the 3Q/2011, this share had reached 63.5
percent on a worldwide basis, up from only 53 percent in 2005, according to Fisher
International. However, this share can vary substantially, from a current low of 52
percent in Eastern Canada to as high as 73 percent in China. For this reason, tracking
wood fiber prices over time has become more important when comparing
competitiveness of different regions worldwide.
In the 4Q/2011, the US dollar continued to strengthen against the local currencies of all of
the countries covered by WRQ, except Japan. This
development, together with the downward price pressure on pulplog and wood chips in
local currencies in practically all of the 18 regions in the world covered by WRQ
resulted in a decline of both global wood fiber indices. The "Softwood Wood Fiber Price
Index" fell for the second straight quarter to US$105.30 per oven-dry tons (odmt) in the
4Q/11. This was down 3.3 percent from the previous quarter, but 1.6 percent higher than
4Q/10. The biggest price declines took place in Western Canada, Brazil, Spain, Germany
and Finland, WRQ reported.
The "Hardwood Wood Fiber Price Index" fell by 3.6 percent from the 3Q/11 to
US$113.69/odmt. Despite this drop, this was still 5.0 percent higher than during the
4Q/10 and the third highest level ever recorded. The biggest 3rd and 4th quarter price
reductions occurred in Spain, Finland, Brazil and Chile.
Wood fiber costs are likely to continue downward in a number of markets in 1Q/2012,
particularly in the Nordic countries, Western Canada and the US as pulp prices continue
to be substantially below the record-high levels from last summer, WRI concluded.
SOURCE: Wood Resources International LLC