Weaker Pulp Markets Drive Down Softwood Fiber Prices

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The declining prices for softwood pulp during much of 2012 have forced many pulp mills to try to cut wood fiber costs to remain profitable. As a consequence, the wood fiber price index (SFPI) has continuously declined the past year and, during the 3Q/12 was at its lowest level since 2010, according to the Wood Resource Quarterly (WRQ), Seattle, Wash., USA.

Prices for softwood market pulp (NBSK—northern bleached softwood kraft)) have trended downward for more than a year from their record highs of over $1,000 per ton in the summer of 2011. In the 3Q/12, prices had fallen to between $750 and $800/ton in Europe and were about 50 dollars higher in the U.S.

This relatively long-lasting price decline seems to have come to an end this fall, as there are now pulp producers negotiating higher prices again. List prices for December are in the range of $820 - $870/ton, depending on if the deliveries are to Europe or North America. The lower pulp prices have resulted in downward price pressure on wood fiber prices in many high wood cost regions around the world as pulp companies have seen product prices approach production costs. When profit margins for pulp mills are being squeezed, one of the first steps taken to improve profitability is often to try to reduce the wood costs, since those costs typically account for 60% - 70% of the production costs when manufacturing pulp.

Prices for pulplogs and wood chips fell in the local currencies in most of the key regions worldwide in the 3Q/12, according to the WRQ. However, because the U.S. dollar weakened against most currencies, wood prices in U.S. dollar terms did not decline as much in the third quarter. The Softwood Wood Fiber Price Index (SFPI), which is based on U.S. dollars, was down another 0.5% from the 2Q/12 to $100.05 per oven-dry metric ton (odmt). This was the fifth consecutive quarterly decline, and the index has now fallen 8.7% since early 2010. The biggest price declines were seen in the Northwestern U.S., Germany, Spain, and Russia.

Hardwood fiber prices started to increase in some regions around the world in the 3Q/12, which resulted in the first increase of the Hardwood Wood Fiber Price Index (HFPI) in over a year, as reported by the WRQ. The Index increased by $1.56/odmt from the 2Q/12 to $106.44/odmt in the 3Q/12. Hardwood fiber prices increased the most in Russia, Eastern Canada, and Brazil. The price outlook for wood prices in the fourth quarter is mixed, with a stabilizing of prices in most softwood pulp-producing countries but also continued price declines in a few regions.

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