Wood Fiber Supply Tight in Western US and Canada, Prices Moved Up in Q1 2018
There were substantial increases in wood costs for pulp mills in Western US and Canada in the 1Q/18, while wood fiber prices fell to record lows in Eastern Canada.
Price movements for wood fiber throughout North America were mixed in the first quarter of 2018 with substantial increases seen in the Western US and Western Canada, while prices for softwood chips fell substantially in Eastern Canada.
June 7, 2018 - Price movements for wood fiber throughout North America were mixed in the first quarter of 2018 with substantial increases seen in the Western US and Western Canada, while prices for softwood chips fell substantially in Eastern Canada, according to the North American Wood Fiber Review (NAWFR) published by Wood Resources International. The only region where wood prices remained practically unchanged was in the US South, where the pulp industry continues to have some of the lowest fiber costs on the continent.
The biggest increases quarter-over-quarter were seen in British Columbia and the Western US, where prices for wood chips, the major fiber source for the two region's pulp mills, increased by 12% and 15% respectively. Tight fiber supply, low fiber inventories, wildfires in the fall, reduced harvest levels and transportation challenges were all factors that contributed to the upward price pressure on both wood chip and pulp logs during the winter season.
In Eastern Canada, growing lumber production has created ample supplies of residual chips while demand for wood fiber has stagnated. This imbalance, building over the past 18 months, finally resulted in significant price declines when the annual price negotiations of 2018 were concluded. Wood chip prices in the 1Q/18 were at their lowest level in over 30 years and the region's pulp mills now has the lowest softwood fiber costs in North America.
Softwood Prices Remained Stable in U.S. South
In the continent's largest forest industry region, the U.S. South, prices for softwood fiber have stayed quite stable for the past 18 months despite increased harvesting activities and a higher supply of sawmill residuals. Prices for pine pulp logs throughout 2017 and early 2018 have been at their lowest levels in five years in both the Southeastern and South Central sub-regions.
While there were ample supplies of softwood fiber throughout the south in the first quarter of 2018, the picture was different for hardwood fiber. The supply/demand balance for hardwood pulpwood, particularly in the Gulf States, was tighter than that of softwood because of continued strong demand for hardwood fiber by both pulp mills and chipping facilities, paired with constrained log supply. The limited supply of both logs and wood chips has resulted in upward prices pressure over the past six months, with average prices in the South Central region reaching their highest levels in almost two years.
Following a notable increase in softwood fiber pricing in the US Northwest in the 4Q/17, prices surged in the first quarter of 2018, according to the NAWFR. Low pulp log inventories and limited opportunities for obtaining additional fiber volumes left fiber buyers scouring the region for pulp logs and scrambling to secure sufficient supplies of residual chips. The increases in fiber prices for both pulp logs and wood chips resulted in the highest price levels seen in the region for six years.
Wood Resources International, publisher of the Wood Resource Quarterly, is an internationally recognized forest industry-consulting firm. For further information visit: www.woodprices.com.
SOURCE: Wood Resources International LLC