Global Softwood Fiber Costs Begin Slight Rise after Two Years of Stability

Wood fiber costs, the major cost component when manufacturing wood pulp, have developed quite differently the past few years for pulp mills manufacturing softwood pulp compared with companies producing hardwood-based pulp. Softwood fiber prices remained relatively stable on a global basis during 2012 and early 2013 when the Softwood Fiber Price Index (SFPI) fell to its lowest level in four years, according to the Wood Resource Quarterly (WRQ), Seattle, Wasah., USA. Since the 2Q/13, the SFPI has increased about 3% to slightly more than  $100/oven dried metric ton (odmt) in the 2Q/14.

 

Much of the world’s softwood pulp production occurs in the Northern Hemisphere where residuals from the sawmilling sector commonly account for a fairly large share of the pulp industry’s fiber supply. Strong lumber markets are often good news for the pulp industry in North America and Europe because high lumber production results in an abundance of a relatively inexpensive fiber source.  

 

Wood chip prices have fallen substantially since 2012 in four of the regions of the world where sawmill chips account for a majority of the fiber supply—Japan, Western U.S., Western Canada, and Eastern Canada—resulting in improved competitiveness of the pulp and paper industry in those regions.

 

Contrary to the trend for softwood fiber prices, hardwood fiber prices have fallen dramatically the past three years, with the Hardwood Fiber Price Index (HFPI) coming down from a record high of almost $118/odmt in 2011 to $97.01/odmt in the 1Q/14, followed by an increase of 1.8% in the 2Q/14. Some of the biggest price declines have been for plantation logs in Latin America and Asia.

 

Eucalyptus pulplog prices in Brazil were slightly higher in Real terms in the 2Q compared with the 1Q/14 because of a hike in labor costs (higher minimum wage) and increased demand for wood fiber. Pulp production in May of this year was 7.6% more than in May 2013. As a result of the weakening U.S. dollar in the 2Q/14, Eucalyptus log prices in dollar terms were up almost 10% from the 1Q/14, reports the WRQ. This price increase was the biggest price adjustment in the 2Q/14 of all the WRQ regions producing hardwood pulp.