Northwest U.S. wood fibre prices fall

Apr. 16, 2010, Seattle, WA – The balance between wood fibre demand and supply varied
throughout the United States in the first quarter of 2010, reports the North
American Wood Fiber Review. The fibre market in the South has become much tighter as
a consequence of high fibre demand coupled with historically low sawmill
residual supply. Many pulpmills producing market pulp have been running close
to full capacity through the first months of the year because they wanted to
take advantage of record high prices for both northern bleached softwood kraft
and hardwood bleached kraft market pulp.

The
South experienced an unusually wet first quarter, making forest access
extremely difficult. Many logging companies were forced to search further from
consuming mills for harvestable areas. Shipments of Eucalyptus chips from
Brazil were brought into the region to supplement domestic hardwood fibre
sources. As a result of the improved pulp markets and difficult logging
conditions, fibre prices have risen dramatically, particularly in the
South-central states, where fibre prices were up 12% for softwood and 16% for
hardwood from one year ago.

For
over five years, pulp mills in the U.S. South have had lower wood fibre costs
than most plants in the Northwest, the other major U.S. pulp-producing region.
This changed in the first quarter of 2010 when wood costs in the South-central
region were similar to those in the Northwest. It is conceivable that pulp
mills in the West may have lower wood fibre costs than plants in the South
later this year.

The
closure of two large pulp mills in Oregon and Montana is expected to reduce the
demand for wood fibre by almost 15% in the Northwest. As a result of the
closures, a number of pulp mills will be less reliant on chips manufactured
from roundwood and will consume a larger share of less expensive residual
chips. The weighted average Douglas-fir fibre prices for the Northwest fell by
9% in the first quarter of 2010, according to the North American Wood Fiber
Review.
Wood fibre costs have trended downward for almost two years and are currently
almost 40% lower than in 2008.

In
the Lake States, softwood prices were moving up in the first quarter of 2010,
whereas hardwood prices have remained flat for the past 12 months. Pulp mills
in the region have passed through the winter with a stable supply and no
dramatic changes in fibre demand. Softwood fibre prices, which have generally
been more volatile than hardwood prices, have gone up in the past year and are
currently the highest in the United States.