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Western U.S. pulpwood costs continue high

July 5, 2011, Seattle, WA – Pulp mills in the Western United States have seen their wood costs go up for four consecutive quarters.


July 5, 2011
By Hakan Ekstrom | Wood Resources International

Topics

July 5, 2011, Seattle, WA – Pulp mills in
the Western United States have seen their wood costs go up for four consecutive
quarters. That region, together with Quebec, had the highest wood fibre costs
in North America in the second quarter of 2011, according to the North
American Wood Fiber Review
(NAWFR).

Douglas fir and hemlock residual chip
prices in the U.S. Northwest were up 42% between the second quarter of 2010 and
the same quarter of 2011, reaching their highest levels since early 2008.
Prices for pulplogs have increased more than those for wood chips, reaching a
16-year high in the second quarter of 2011.

Historically, the region’s pulp industry
has relied on 70–80% sawmill residuals for its fibre furnish; but in 2011,
softwood residuals accounted for approximately 55% of the softwood fibre
receipts, as reported by the Forest Products Association, with the remaining
being chips manufactured from roundwood.

The current price surge in Western United States
has resulted from four primary factors:

  • sawmill lumber production well below
    historical volumes;
  • high pulpmill production due to strong
    product prices;
  • a reopened pulpmill in the state of
    Washington; and
  • strong Chinese demand for logs.

Violent storms in Mississippi and Alabama,
flooding along the Mississippi River, and wildfires primarily in Georgia and
Texas interrupted the regular flow of wood fibre in the U.S. South during the second
quarter. The extreme conditions resulted in curtailments of a few pulpmills and
chipping facilities and temporary reductions in fibre demand. To some extent,
this balanced out the reduction in pulpwood production. Although salvaging is difficult
and more costly than ordinary timber harvesting, the sheer volume of wood that is
under pressure to be brought in before it deteriorates will bring a surge of
supply to the market.

Softwood and hardwood pulpwood prices in
the second quarter were unchanged from the previous quarter, according to
NAWFR, but can be expected to decline in the third quarter as a result of the large
volume of damaged wood in the region. With other North American regions experiencing
significant increases in wood costs in the second quarter, the South’s low,
stable wood prices continue to make the region’s pulp industry very
competitive.


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