Eastern Canadian Pulp Mills Become More Competitive with Declining Wood Costs

Softwood fiber prices in Eastern Canada have been in steady decline for more than four years, and in the 1Q/16 were at their lowest levels in almost 15 years. The shrinking pulp industry in Ontario and Quebec has become more competitive with fiber costs matching many other regions of North America in early 2016, as reported by the North American Wood Fiber Review (NAWFR), Seattle, Wash., USA. In U.S. dollar terms, softwood chips and pulp log costs were down 37% and 27%, respectively, in the 1Q/16 compared with the 1Q/12.

 

Although much of the decline can be attributed to a stronger U.S. dollar, wood chip prices have also fallen substantially in Canadian dollar terms. Softwood chip prices in Canadian dollars were 16% below 2012 levels, and they are actually at their lowest levels since NAWFR started tracking wood fiber prices in Eastern Canada in 1988.

 

Chip prices in Quebec and Eastern Ontario are currently on par with prices in Western Canada and the U.S. South, and they are substantially lower than in the U.S. Northwest, the Lake States, and the U.S. Northeast. This has been quite a remarkable turn-around from four years ago when the region’s pulp mills had some of the highest wood fiber costs in North America.    

 

Pulpwood prices (in Canadian dollar terms) in the Maritime Provinces fell in the 1Q/16 for the second consecutive quarter, according to NAWFR. The primary reasons for the recent price declines were full fiber inventories at the region’s pulp mills, and good access to the forests, which resulted in a healthy flow of logs to the manufacturing plants. The collapse of the softwood log market in neighboring Maine has also had an impact on fiber prices in Eastern Canada during the past six months.

 

The hardwood pulp log price eased modestly in early 2016 due to healthy fiber inventories. Despite the fact that there has been a plentiful supply of logs over the past winter, hardwood log prices have not come down as much as have softwood logs, and are still near their highest levels in 20 years (in Canadian dollar terms).