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Wood fibre costs up in North America in 2017 and 2018

December 21, 2018
By Wood Resources International LLC
Dec. 21, 2018 – Wood fibre costs for pulp mills in North America remained generally unchanged from Q2 2018 to Q3 2018, but were higher than in Q3 2017, according to the latest issue of the North American Wood Fibre Review. The biggest increases year-over-year came in British Columbia and the western U.S., where prices for wood chips (the major fibre source for the two regions’ pulp industry) increased by 25 per cent and 23 per cent, respectively.

U.S. South
Prices for hardwood chips and pulp logs in the South Central sub-region were up about five per cent quarter-over-quarter in Q3 2018, while the price increases were more modest in the Southeastern region. Low inventories and reduced harvests of hardwood stands have contributed to record high hardwood chip prices and hardwood pulp log prices being close to their highest levels in two years.

Softwood chip prices have remained practically unchanged for more than a year throughout the South due to increasing supply of residuals from the region’s sawmills. Prices for sawmill chips in both South Central and Southeast are currently among the lowest in North America.

U.S. Northwest
There was an uptick in the price of Douglas-fir and hardwood pulp logs in Q3 2018 in coastal Washington and Oregon, with the price for Douglas-fir reaching a high last seen in Q1 2012. The current price equals the price of hemlock/fir, which was unchanged from Q2 2018.

There was a noticeable decrease in residual chip prices quarter-over-quarter due to multiple factors, including plentiful residual supplies at the region’s sawmills, log buyers building sawlog and pulp log inventories because the forests remained opened in spite of the wildfire threat, and more logs becoming available for domestic mills due to U.S.-China trade tensions. The average softwood chip price in Q3 2018 was up 25 per cent from the same quarter in 2017.

U.S. Lake States
Dry summer weather resulted in log contractors maintaining full production schedules and a robust supply of fibre for the region’s pulp mills. In Q3 2018, softwood and hardwood roundwood prices were unchanged from the previous quarter.

Although there remains an oversupply of softwood logs, prices have remained stable throughout most of 2017 and 2018, while prices for hardwood logs have inched downward.

Sawmill chips were plentiful, but suppliers reported little to no difficulty in moving their residuals. However, this plentiful supply did result in the price of softwood chips dipping slightly from their Q2 2018 levels.

U.S. Northeast
There was no change in softwood pulp log prices from the second to the third quarter, marking the third consecutive quarter with steady pricing. Hardwood roundwood prices edged downward slightly due to the cessation of a temporary price increase which was in place for the first half of the year. Although hardwood-consuming pulp mills in Maine reported low fibre inventories during the summer, by late August, the inventory levels had recovered.

Canada West
The price for chips rose across all regions of British Columbia in Q3 2018. In the Northern Interior, residual chip pricing increased significantly based on increases of the NBSK pulp prices to which they are linked. Prices in Canadian dollar terms have gone up for four consecutive quarters to reach their highest levels since Q1 1996.

Sourcing fibre to meet demand remains a concern for most of British Columbia, particularly for the Coastal region. High prices continued due to the imbalance between supply and demand. Lack of wood supply on the coast resulted in fibre buyers reaching into the Interior of the province or sourcing fibre from the U.S, Northwest to supplement their fibre inventories.

Alberta saw a slight increase in residual chip prices in Q3 2018, a continuation of an upward trend that started in Q2 2017.

Canada East
In Eastern Canada, growing lumber production has created ample supplies of residual chips while demand for the fibre has stagnated. The imbalance, building over the past 18 months, resulted in significant price declines when 2018 annual price negotiations were concluded earlier this year. Eastern Ontario and Quebec now have the lowest softwood chip prices in North America. In contrast to the plunge in softwood residual chip pricing, hardwood roundwood pricing in Eastern Ontario/Quebec has remained flat for all of 2018.

Hardwood and softwood pulp log prices in the Maritime provinces were unchanged in Q3 2018 at levels similar to price levels seen earlier in 2018.