Fibre costs for North American pellet plants trending downward

Wood pellet manufacturers in North America consume wood fibre from a variety of sources with different price levels, trends and cost drivers. The WRI pellet feedstock price indices for Canada and the U.S. (PFPI-US and PFPI-CA), which were launched in 2013, show a quarterly volume-weighted price for the fibre consumed by each country’s pellet sector. Each individual facility’s estimated mix of fibre (roundwood, sawdust, shavings, microchips, etc.) are calculated using local fibre pricing to determine a weighted price, which is further combined with production capacity and operating rate to calculate the final regional index price.

The price indices for both the U.S. and Canada have trended downward the past few years and reached record lows in both countries in the 2Q/17. The PFPI-US has fallen 15 per cent from its peak in the 3Q/13 to the 2Q/17. Slightly declining roundwood prices, plummeting sawdust costs, and a change in the feedstock mix towards lower cost residuals in both the Gulf States and the Atlantic States were the major reasons behind the decline in the PFPI-US Index the past year.

A snapshot of the various feedstocks currently being used by the U.S. export pellet sector shows 50 per cent was roundwood in the 2Q/17, followed by significant volumes of sawdust and shavings, and an increasing supply of forest microchips.

The Canadian price index, PFPI-CA, which ccombines the larger Western export pellet sector primarily in B.C. with the smaller Eastern sector found in Ontario, Quebec, New Brunswick and Nova Scotia, has fallen more than the U.S. index (in U.S. dollar terms), mostly because of the weaker Canadian dollar. However, wood fibre costs for pellet manufacturers have also fallen slightly in Canadian dollar terms because of lower costs for logs the past few years. From its record high in early 2013 to the 2Q/17, the PFPI-CA declined 26 per cent. The lower indexed price in the 2Q/17 primarily reflected the falling costs of sawdust and shavings and incremental increases in the usage of these feedstock forms over higher cost roundwood.

The North American Wood Fiber Review (NAWFR) has tracked wood fiber markets in the US and Canada for over 30 years and it is the only publication that includes prices for sawlogs, pulpwood, wood chips and biomass in 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.