Pulp fibre costs fall in 2nd quarter 2010

Sept. 20,
2010, Seattle, WA – Wood fibre cost, which is the largest cost component in
manufacturing wood pulp, declined for many pulp producers worldwide in the
second quarter of 2010 in U.S. dollar terms. Hardwood fibre prices fell in the
United States, Australia, and most countries in Europe. As a result, the
Hardwood Fibre Price Index (HFPI) was down 2.3% from the previous quarter to
USD $103.37/oven-dry tonne (odt), but it was still 9% higher than 12 months
ago.

The
Softwood Fibre Price Index (SFPI) fell in the second quarter for the first time
since early 2009. The SFPI was USD $98.29/odt, which was down 1.2% from the
previous quarter, but 9.1% higher than in the second quarter of 2009. Softwood
fibre prices fell the most in the United States, eastern Canada, Germany,
Spain, and the Nordic countries, whereas prices were higher
quarter-over-quarter in western Canada, Russia, and New Zealand.

The
declining wood fibre indices were mostly the result of a strengthening U.S.
dollar against most other currencies in the second quarter. In local
currencies, prices of both wood chips and pulpwood actually increased in a
majority of the 17 regions tracked by the Wood Resource
Quarterly.

With
higher pulp production in western Canada, demand for wood fibre has increased.
This has not had a direct effect on fibre costs because wood chip prices are
often based on a formula linked to the market pulp price. In the second quarter
of 2010, wood chip prices jumped by 20% from the previous quarter to their highest
levels in two years, according to Wood Resources Quarterly. Despite the
increase, British Columbia and Alberta wood chip prices are still the lowest in
Canada, although the price discrepancy relative to the eastern provinces is
lower than it has been in a long time.

In the
U.S. South, which is the largest consumer of softwood fibre for pulp production
in the world, late winter rains caused forest access problems, subsequent wood
shortages, and price increases in the first quarter of 2010. However, just as
quickly as prices spiked, they dropped in the second quarter when the logging
conditions improved. The average price for softwood chips was down by more than
6% from its all-time high in the first quarter of 2010.