Higher pellet export prices helping offset increased fibre costs in BC: WRQ
October 1, 2019
By Wood Resources International LLC
Many pellet manufacturers in North America have had to increase the usage of logs for their feedstock in 2019 because of reduced availability of lower-cost sawmill residues. This has resulted in higher total wood fibre costs and increases in the pellet feedstock price indices for both Canada and the U.S. in the 1H/19, according to North American Wood Fiber Review (NAWFR).
In late 2018, higher demand and tighter supply of low-cost sawmill residues pushed wood fibre costs higher for pellet producers in both Canada and the U.S. WRI’s feedstock price indices increased during the fall of 2018 and in early 2019 to reach their highest levels in two years, according to NAWFR. The price increase in the U.S. was mainly due to the wet logging conditions in the southern states that began in late 2018 and intensified in the 1Q/19, which negatively affected harvesting operations and increased costs for roundwood. In the 2Q/19, the Pellet Feedstock Price Index for the U.S. (PFPI-US) fell 2.3 per cent q-o-q, mainly due to slightly higher usage of residual chips instead of costlier logs.
Over the past five years, pellet producers in the U.S. South have shifted their wood fibre mixes away from costlier logs and towards lower-cost wood chips and sawdust. This has led to a considerable reduction in the total wood fibre costs for the expanding industry sector (see chart).
The Pellet Feedstock Price Index for Canada (PFPI-Can) increased by almost 12 per cent q-o-q in the 2Q/19. The substantial fibre price increases in Canada reflected the continuing change in fibre availability in British Columbia, where most of the Canadian pellet facilities are located. Due to the temporary and permanent closures of sawmills in British Columbia, supplies of sawdust and shavings have diminished. Although the increased volume of fibre from both forest biomass grinding and chipping is making up the difference, this material is significantly costlier than sawmill residuals.
The current higher price for exported pellets is allowing the British Columbia sector to handle the increase in fibre costs for now. However, it is likely that over the remainder of the year, fibre availability will become a concern, with the prospect of a higher PFPI-Can index in the coming winter season.
The newly revamped market report has tracked wood fibre markets in the U.S. and Canada for over 35 years and it is the only publication that includes prices for sawlogs, pulpwood, wood chips and biomass for all major regions of North America. The 36-page quarterly report includes wood market updates for 15 regions on the continent in addition to the latest export statistics for sawlogs, lumber, wood pellets and wood chips. To learn more about the NAWFR, please go to www.WoodPrices.com.
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