Wood Costs Up for Pulp Mills Worldwide in 2Q '08

Aug. 27, 2008 - Wood fiber costs, the major cost component when producing wood pulp, increased in practically all major pulp-producing regions around the world in the 2Q/08, according to the market report Wood Resource Quarterly (WRQ). This was both a result of a continued weakening of the US dollar against most major currencies and because of higher transport costs for both pulpwood and wood chips, the report's publisher Wood Resources International said.

The wood costs, which typically account for almost 50% of the production costs for a pulpmill, often determine a region’s or company’s competitiveness. The average global conifer wood price reached a new all-time-high of US$112.53/odmt (oven-dry metric ton) in the 2Q/08. This was up 11% from 2007 and 26% higher than two years ago.

The only exception to this price trend was in North America, where softwood pulplog prices fell between 1-6% from the previous quarter, depending on region. The decrease occurred secondary to increases in log supply combined with slightly lower demand for wood.

The largest price increases came in Europe, Brazil, Russia and Australia, where supply of both roundwood and chips became tighter. With the slump in the lumber markets in North America and Europe, the supply of residual chips from sawmills continued to decline, resulting in increased competition and higher reliance on the more expensive wood fiber from roundwood.

The average non-conifer wood fiber costs were also up in the 2Q, reaching a record-high of US$108.77/odmt, which was up 16% from a year ago and 23% higher than in 2006. Some of the largest increases have occurred in Brazil where costs for pulpwood traded in the open market have increased over 300 % in five years in US dollar terms, and more than 200 % as measured in the Brazilian Reais.

The Global Average Wood Fiber Price is a weighted average of delivered wood fiber prices for the pulp industry in 17 regions tracked by WRQ. These regions together account for 85-90% of the world’s wood-based pulp production capacity.

The higher cost of producing pulp the past few years has to a large extent been passed on to wood pulp consumers. Market pulp prices have almost doubled since 2003 and are currently at the highest level in 13 years, WRQ said.

Global pulpwood and sawlog market updates are included in the 50-page publication Wood Resource Quarterly ( www.woodprices.com )

SOURCE: Wood Resources International

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