Global forest industry update for 1Q/2011

May 19, 2011 – The Wood Resource Quarterly provides an excerpt on forest-product and
biomass markets from its first quarter 2011 issue.

Global biomass markets

While the
U.S. and Canadian domestic pellet industry struggled through another year of
weak domestic market demand and overcapacity, pellet export shipments to Europe
continued to rise, up 21% in 2010. Prices for wood pellets in the three major
markets in Europe, i.e., Sweden, Germany, and Austria, have increased in the
past two years.

Global pulp markets

Global pulp
markets have not quite developed as many analysts forecasted a year ago. Rather
than the predicted retraction in market pulp prices this spring, prices stayed
strong and actually increased to record-high levels in April 2011. The NBSK
price in Europe in early May was US$1008/ton, according to FOEX. During the
first two months of 2011, production of market pulp was up 5% compared to 2010.
The biggest increase was in Western Europe, which produced 9% more pulp in 2011
than in 2010.

Global pulpwood price

Wood fibre
costs for pulp mills worldwide rose for the third consecutive quarter in the
first quarter of 2011. The Softwood Wood Fibre Price Index (SFPI) increased
1.9% in the first quarter, reaching US$105.60/oven-dry tonne (odt), the highest
level since the third quarter of 2008. The U.S. Northwest, European markets,
Chile, Australia, and New Zealand saw the biggest wood fibre price increases
this quarter. The Hardwood Wood Fibre Price Index (HFPI) was also up 1.9% from
the fourth quarter of 2010 and is now close to an all-time high of
US$110.33/odt. Fibre prices were up in most markets, with the largest increases
in Europe, Australia, and Chile. Canada and Russia saw smaller price increases,
and hardwood fibre costs declined in the U.S. South.

Global
timber markets

Higher
lumber production, increased log trade, and a weak U.S. dollar were three
factors that pushed sawlog prices up in dollar terms worldwide in the first
quarter of 2011. In many regions, prices reached their highest levels since Wood
Resource Quarterly
started tracking log prices in 1995. The Global Sawlog Price Index (GSPI)
increased for the eighth consecutive quarter to an all-time high of US$88.14/cubic-metre.
In two years, the GSPI has gone up by 33%, which is substantially more than the
increase in global pulpwood prices.

Global
lumber markets

Global
demand for softwood lumber increased by about 18% in 2010. This came after a
year when wood consumption worldwide was the lowest it had been in almost 50
years. This upward trend in consumption has continued thus far in 2011, with
the total volume consumed being around 20% higher than the same period in early
2010. Not surprisingly, China has been the major driver in the higher demand
for lumber. Its sawmills are far from being able to meet the increased demand,
so there has been a substantial increase in import volumes the past five year.
Lumber imports to Japan were up 21% in the first quarter as compared to the
same quarter in 2010. The biggest increases were in shipments from Sweden,
Finland, and Russia.

During the
first two months of 2011, lumber production was up in most provinces of
Canada.
Ontario (28%), Alberta (16%), and southern British Columbia (16%) saw the
greatest increases.

The housing
market in the U.S. South has fared relatively better than in the rest of that
country, with higher lumber consumption than in other regions of the United
States. The weak building and construction market in Europe in late 2010
resulted in lower lumber demand and lower lumber prices.