Softwood Chip Prices Fell in North America During 2nd Quarter 2012

Wood chip prices fell throughout the US and Canada in the 2Q/12; the US South continues to have the lowest chip prices and Eastern Canada the highest.

High wood fiber inventories, plenty of sawmill chips and pulplogs, and maintenance shutdowns by a number of pulp mills were the main reasons wood chip prices have declined.

Aug. 6, 2012 - Softwood chip prices fell in a number of key regions in North America during the 2Q/12 from the previous quarter, according to a report published by Wood Resources International LLC (WRI).

The report, North American Wood Fiber Review said the biggest declines were seen in the US North West, Lake States and Eastern Canada, while prices were unchanged or just slightly higher in the US South, US Northeast, British Columbia and Alberta

High wood fiber inventories, plenty of sawmill chips and pulplogs, and maintenance shutdowns by a number of pulp mills were the main reasons wood chip prices fell by almost seven percent in the 2Q in the US Northwest. Current chip prices are the lowest they have been in over a year, but still well over the 25-year average.

In the US South, softwood chip prices have stayed remarkably stable for almost two years. This is a testament to the well-functioning market dynamics that can balance the fiber supply and demand in an efficient manner despite recent droughts, wildfires and flooding. Chip prices in the US South are currently the lowest in North America, and are slightly below the historical trend, the report noted.

Over the past six months, wood chip prices in British Columbia have fallen 16 percent, the second biggest price decline in North America the past two quarters behind Alberta. Temporary pulpmill shutdowns have led to lower wood fiber demand and sharply reduced prices for market pulp, resulting in the biggest price decline for chips since 2008, the report said.

Just when many sawmills were marginally increasing their lumber production across Eastern Canada, several had to temporarily curtail their operations due to an excess of residual chips that they were unable to move. Pulpmill fiber buyers initially attempted to fulfill their fiber needs by purchasing residual chips from all sawmills, but as the quarter progressed, they protected their own company-integrated sawmills rather than independent sawmills.

Softwood chips prices declined by about ten percent in Eastern Ontario and Quebec in the 2Q/12 from the fall of 2011, but were still among the highest in North America, WRI said.

SOURCE: Wood Resources International LLC