Wood Fiber Costs for Pulp Industry Reach New Highs in 2011

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Wood fiber costs continued to go up for the global pulp industry in the second quarter of this year, having trended upward since early 2009, according to the Wood Resource Quarterly (WRQ), Seattle, Wash., USA. The Softwood Wood Fiber Price Index (SFPI) reached $109.52 per oven-dry metric ton (odmt) in the second quarter, a 3.7% increase from the previous quarter and 23% higher than two years ago.

In local currencies, wood chip and pulp log prices have increased the most in the U.S. Northwest, Western Canada, Russia, and Finland. The weakening U.S. dollar against most global currencies in the second quarter resulted in higher fiber prices in all 18 regions covered by the WRQ.

The Hardwood Wood Fiber Price Index (HFPI) reached a new all-time-high in the second quarter at $116.44/odmt, which was 5.5% higher than in the first quarter of this year, and almost 27% higher than in early 2009. Recently, hardwood prices have gone up the most in Indonesia, Finland, Russia, and Brazil.

Wood fiber prices, which currently are at or close to record highs, have fluctuated quite substantially the past 24 years the WRQ has tracked global forest industry markets. Prices trended downward during most of the 1990s and early 2000s when they were 60% below current levels. This was followed by a substantial increase from 2002 to 2008, with wood costs reaching record levels in early 2008, only to plummet almost 20% in late 2008, with the onset of the global recession. In 2009 and 2010, wood fiber markets have strengthened as a result of higher prices for market pulp, limited availability of wood chips from sawmills worldwide, and a weakening U.S. dollar against most currencies, WRQ explains.

It is interesting to note, WRQ says, that the SFPI index has been higher for most of the past 24 years. It was not until 2009 that the hardwood price index surpassed the SFPI. In the second quarter of this year, the global hardwood fiber price was 6.3 % higher than the softwood fiber price, as reported by the WRQ.

Wood costs have gone up not only in real terms but also as a percentage of the total production costs when manufacturing pulp, WRQ continues. The global average wood cost share of the total cash cost has increased from 52% in 2005 to 60.9% in the first quarter of this year, according to Fisher International. The wood cost percentage varies from around 50% in New Zealand and Canada to more than 70% in China, Indonesia, and Brazil.

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