Wood Costs for Latin American Pulp Mills, Sawmills among World’s Lowest in 2Q/13

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Wood costs for pulp and lumber producers in the two largest producing countries in Latin America, Brazil and Chile, have fallen during much of 2012 and 2013, and were in the 2Q/13 at the lowest levels in more than two years, according to the Wood Resource Quarterly (WRQ), Seattle, Wash., USA. The two countries currently have some of the lowest wood raw-material costs in the world, and since these costs account for 55%-65% of the production costs when manufacturing pulp and lumber, it makes the industry quite competitive in the export market, WRQ noted.

In Brazil, prices for both saw logs and pulp logs have come down substantially in U.S. dollar terms during the past few years. The average pine saw log price is currently more than 20% below the record high levels reached in 2011. This sharp price decline is more a reflection of a weakening Brazilian Real than any dramatic price changes in the local currency, WRQ said. The current saw log costs, which were about 30% below the global saw log index GSPI, makes Brazilian sawmills very competitive.

Although Brazil is a minor player in the global lumber export market, the country has expanded sales to the U.S., which is by far the largest consumer of Brazilian softwood lumber this year, with shipments in the 3Q/13 reaching their highest levels in more than two years.

Prices for pulpwood in Brazil have followed a similar trend to those of saw logs, with sharp declines in U.S. dollar terms but only modest declines in the Brazilian Real the past year. Current pulp log price levels have not been seen in almost five years, and the Brazilian pulp industry has become much more competitive compared with a few years ago.

Prices for pine saw logs in Chile have been surprisingly stable in 2012 and 2013 despite higher log demand from sawmills the past year, both because of a stronger domestic market and increased exports. Chile is about the tenth largest exporter of softwood lumber in the world and shipments to China, Japan, and the U.S. were all up the first half of 2013 compared with the same period in 2012.

Pulp log prices in Chile have also fallen, with 2Q/13 prices being about 8% lower than in the 2Q/12. The average cost for eucalyptus fiber in Chile is currently the lowest in all countries tracked by WRQ, making the country’s pulp mills some of the world’s lowest cost producers of hardwood market pulp.

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