Wood Prices Continue to Fall in U.S. South

July 21, 2009 - Weak pulp markets and reduced demand for wood fiber resulted in lower costs for wood chips and pulpwood in practically all regions of North America in the 2Q/09, according to the Wood Resource Quarterly (WRQ).

This is the fourth consecutive quarter that wood fiber prices have fallen, with the biggest reductions occurring in Western U.S. and Western Canada. In the U.S. South, which is the biggest wood fiber consumer in the world, pulpmills have only experienced minor downward price adjustments in recent months, WRQ said.

The wet spring in the U.S. South resulted in reduced logging and many pulpmills have seen their log inventories fall to unusually low levels. Fortunately for timber buyers, demand for logs from sawmills, OSB mills and pulpmills has been lower than usual and there has not been much upward price pressure on logs so far this year. Many sawmills and OSB mills have chosen to reduce production rather than pay more for logs to be able to run at high operating rates. Pine pulpwood fell seven percent in the 2Q as compared to the previous quarter and the average hardwood pulpwood prices were down about 10%..

In the 2Q '09, the Southeastern U.S. (the Atlantic States) had the lowest conifer wood fiber prices in North America. This region has consistently had among the lowest wood costs in North America during the past 15 years. Currently, softwood pulp producers in the states of Georgia, North and South Carolina have some of the lowest wood fiber costs in the world, WRQ said. This is one reason why there have been fewer pulpmill closures and less market related downtime in the Southeast as compared to regions with higher wood costs such as Eastern Canada, the Lake States and the U.S. Northeast.

Softwood fiber prices in Southern U.S. are currently almost 20% lower than the Global Average Softwood Price Index, while hardwood fiber prices are nearly 30% below the Global Average Hardwood Price Index. With no signs of a imminent improvement in the markets for lumber, pulp or paper, it is not expected that wood fiber costs will increase much, if at all, during the remainder of this year.

SOURCE: Wood Resource Quarterly

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