Wood Fiber Costs for Pulp Mills Fall in North America, Latin America

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Wood fiber prices trended downward in the local currencies in many of the key pulp-producing countries of the world in the fourth quarter of 2012. However, as a result of the weakening U.S. dollar, wood fiber prices actually increased in U.S. dollar terms in a number of countries and the Softwood Wood Fiber Price Index (SFPI) was up slightly (+0.1%) in the fourth quarter to $100.13 per oven dry metric ton (ODMT). The biggest increases from the third quarter to the fourth quarter occurred in Eastern Canada, Finland, France, and New Zealand, according to the Wood Resource Quarterly, Seattle, Wash., USA.

Price declines in local currencies were mainly the result of an increased supply of softwood fiber in regions with extensive lumber production. In the U.S. Northwest, chip prices fell as much as 27% during 2012 and pulp mills in the region had some of the lowest softwood fiber costs in the world in the fourth quarter. Additional volumes of residual chips from increased lumber production, reductions in pulp production and pulp mill outages, and large supplies of pulp logs were all factors that contributed to the dramatic turnaround in fiber costs during 2012. A similar trend was seen in Western Canada, where prices in the fourth quarter of 2012 were down 22% from late 2011, reaching their lowest levels in three years.

Hardwood fiber price movements were mixed, with hardwood pulp log prices generally trending downward in many of the key hardwood pulp-producing regions in both local currencies and in U.S. dollar terms. This resulted in a decline in the Hardwood Wood Fiber Price Index (HFPI) to $104.80/ODMT in the fourth quarter. This was down 1.5% from the previous quarter and 7.8% from the fourth quarter of 2011. The biggest decline in hardwood fiber prices occurred in Brazil where Eucalyptus log prices have fallen continuously for more than a year from early 2011, when they were at their all-time highs. In the fourth quarter of 2012, prices in U.S. dollar terms were back down to the same levels as where they were in early 2009. Few regions in the world currently have lower hardwood costs than Brazil.