Wood fiber costs reach new highs

Wood fiber costs reach new highsSeattle--Wood fiber costs continued to go up for the global pulp industry in the 2Q/11, having trended upward since early 2009, according to the market report Wood Resource Quarterly (WRQ). The Softwood Wood Fiber Price Index (SFPI) reached US$109.52 per oven-dry metric ton (odmt) in the 2Q/11, a 3.7 percent increase from the previous quarter and 23 percent higher than two years ago. In local currencies, wood chip and pulplog prices have increased the most in the US Northwest, Western Canada, Russia and Finland. The weakening US dollar against most global currencies in the 2Q resulted in higher fiber prices in all 18 regions covered by the WRQ.

The Hardwood Wood Fiber Price Index (HFPI) reached a new all-time-high in the 2Q at $116.44/odmt, which was 5.5 percent higher than 1Q/11 and almost 27 percent higher than in early 2009. Recently, hardwood prices have gone up the most in Indonesia, Finland, Russia and Brazil.

Wood fiber prices, which currently are at or close to record highs, have fluctuated quite substantially the past 24 years the WRQ has tracked global forest industry markets. Prices trended downward during most of the 1990’s and early 2000 when they were 60 percent below current levels. This was followed by a substantial increase from 2002 to 2008 with wood costs reaching record levels in early 2008, only to plummet almost 20 percent in late 2008 with the onset of the global recession. In 2009 and 2010, wood fiber markets have strengthened as a result of higher prices for market pulp, limited availability of wood chips from sawmills worldwide and a weakening US dollar against most currencies.

It is interesting to note that the SFPI index has been higher for most of the past 24 years; it was not until 2009 that the hardwood price index surpassed the SFPI. In the 2Q/11, the global hardwood fiber price was 6.3 percent higher than the softwood fiber price as reported in the WRQ.

Wood costs have gone up not only in real terms but also as a percentage of the total production costs when manufacturing pulp. The global average wood cost share of the total cash cost has increased from 52 percent in 2005 to 60.9 percent in the 1Q/2011, according to Fisher International. The wood cost percentage varies from a around 50 percent in New Zealand and Canada to over 70 percent in China, Indonesia and Brazil.

SOURCE: Wood Resources International

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