Stage Set for Possible Reduction in Southern U.S. Pulp Mill Fiber Cost

 

Wood fiber costs for pulp mills in the Western U.S. have increased substantially over the past year while other regions in the U.S. have experienced only modest increases. Wood fiber costs for pulp mills in the U.S. South were substantially lower than the costs for pulp companies in the rest of the U.S. in the 1Q/15. Prices for softwood residual chips in the Southern states were more than 30% lower than in the Northeast, Lake States, and the Northwest, according the latest issue of the North American Wood Fiber Review (NAWFR), Seattle, Wash., USA.

 

Pulp log and wood chip prices have held steady in the South for the past 12 months at prices nearing 10-year highs. Sufficient supply of pulp logs and residual chips and steady production levels at the region’s pulp mills have contributed to a healthy fiber supply and demand balance. 

 

With pulp mills generally able to build healthy wood inventories in the 1Q/15 and with a number of maintenance outages scheduled for the second quarter, the stage is set for a possible reduction in pulpwood pricing in some southern states in the near future.

 

Heavy snowfalls across the Northeast, excluding the northern half of Maine, have created challenges for forest access and transportation during the 1Q/15. Fiber inventories, particularly those of hardwood, remained short, resulting in concerns over having sufficient supplies on hand to carry through the spring, when road weight limitations and mud season greatly diminish harvest levels. Pulp log prices in this region were slightly higher in the 1Q/15 compared with the previous quarter.

 

Prices for both logs and chips in the Lake States were up to record high levels, as obtaining adequate fiber supplies remained a serious challenge in the 1Q/15. Prices remained high despite the reasonable snow levels and standard temperatures.

 

In the 1Q/15, wood chip prices in the U.S. Northwest continued an upward trend that started in late 2013, reaching the highest levels in almost three years. In only the past 12 months, softwood chips prices have gone up 21%. With the recent increases, this region had some of the highest wood chip prices in North America, the NAWFR reports. With additional residual chips generated by increased lumber production in the coming months, it is likely that chip prices will decline later in 2015.