Wood Costs for Global Pulp Industry Continued Falling in 2Q/12

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Uncertainty in demand for pulp, lower pulp and paper prices, reduced market pulp production, and a healthy supply of sawmill residuals were all factors that put downward pressure on wood fiber prices this spring and early summer. The Softwood Wood Fiber Price Index (SFPI) fell by 4.1% from the 1Q/12 to $100.54 per oven-dry metric ton (odmt). This was the biggest quarter-to-quarter drop since 2008. The biggest price declines for hardwood fiber from the 1Q/12 to 2Q/12 occurred in Brazil, the U.S. Northwest, Australia, and Eastern Canada.

Hardwood fiber prices have fallen even more than softwood fiber prices this year. The Hardwood Wood Fiber Price Index (HFPI) was down 4.4% to $104.88/odmt from the previous quarter. The HFPI has now fallen for three consecutive quarters since the all-time high in the 3Q/11, and in the 2Q/12 was at the lowest level in two years. The largest price reductions from the 1Q/12 occurred in Brazil, Russia, and Australia.

Although Brazilian pulp log prices have not changed much in the local currency, they have fallen dramatically in U.S. dollar terms as the Brazilian real has weakened over the past year. Eucalyptus pulp log prices in the 2Q/12 were down 28% from the same quarter in 2011, while pine pulp log prices declined 26% from a year ago. The recent dramatic price reductions of pulp logs have resulted in Brazilian pulp mills enjoying among the lowest wood costs of all regions tracked by the WRQ, despite being above the global average as recent as 12 months ago.

Wood fiber costs were also down throughout Europe in the 2Q, with the smallest declines (in U.S. dollars) in Finland (-1.3%) and Norway (-3.6%) and the biggest reductions in Spain (-15%) and France (-7.7%). In most markets, wood fiber prices have come back down to where they were in 2010.

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