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Pulp chip prices falling

Wood chip prices fell throughout the US and Canada in the second quarter of 2012, as the US South continues to have the lowest chip prices and eastern Canada the highest, reports the North American Wood Fiber Review.

Prices for softwood chips have trended downward in both the US and Canada during the first six months of 2012. The biggest declines came in British Columbia and Alberta because of lower market pulp prices. Chip prices in the US South, the Lake States and the Northeast experienced only minor price adjustments during the first half of this year.

High wood fiber inventories, plenty of sawmill chips and pulp logs, and maintenance shutdowns by a number of pulp mills were the main reasons wood chip prices fell by almost seven percent in the 2Q in the US Northwest. Current chip prices are the lowest they have been in over a year, but still well over the 25-year average.

In the US South, softwood chip prices have stayed remarkably stable for almost two years. This is a testament to the well-functioning market dynamics that can balance the fiber supply and demand in an efficient manner despite recent droughts, wildfires and flooding. Chip prices in the US South are currently the lowest in North America, and are slightly below the historical trend.

Over the past six months, wood chip prices in British Columbia have fallen 16 per cent, the second biggest price decline in North America the past two quarters behind Alberta. Temporary pulp mill shutdowns have led to lower wood fiber demand and sharply reduced prices for market pulp, resulting in the biggest price decline for chips since 2008.

Sawmill shutdowns

Just when many sawmills were marginally increasing their lumber production across eastern Canada, several had to temporarily curtail their operations due to an excess of residual chips that they were unable to move. Pulpmill fiber buyers initially attempted to fulfill their fiber needs by purchasing residual chips from all sawmills, but as the quarter progressed, they protected their own company-integrated sawmills rather than independent sawmills.

Softwood chips prices declined by about ten percent in eastern Ontario and Quebec in the second quarter from the fall of 2011, but were still among the highest in North America.

The North American Wood Fiber Review has tracked wood fiber markets in the US and Canada for over 20 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, wood pellets and wood chips. Visit www.woodprices.com for more info.

August 3, 2012  By Hakan Ekstrom

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