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NA report: Sawmill slowdown translates to higher fibre costs for pulp mills

Wood costs have increase for many pulp and paper plants in Canada as a result of reduced availability of relat…

Wood costs have increase for many pulp and paper plants in Canada as a result of reduced availability of relatively inexpensive sawmill residuals, according to the North American Wood Fibre Review. Wood fibre supply to Canadian pulp mills has shifted from lower-cost residual chips from local sawmills to higher-cost wood chips manufactured from roundwood, the report notes. Low operating rates for many sawmills have decreased the availability of residual chips, which has caused many pulp mills to either reduce production or to furnish their mills with higher-cost fibre.

This reliance on higher-cost fibre was cited by West Fraser Timber as a factor in the recent decision to close the Eurocan mill in Kitimat, B.C.

The North American Wood Fibre Review notes that residual chip prices, in Canadian dollars, have remained practically unchanged for the past three quarters.

According to this report, pulp mills in Eastern Canada have been at a disadvantage the past few years, partly because of having substantially higher wood fibre costs. In the third quarter of 2009, pulp mills in Eastern Canada had approximately 70% higher conifer fibre costs than the low-cost region of North America, the U.S. South. As a result, many pulp and paper mills in Ontario, Quebec, and the Atlantic provinces have reduced production more than other regions of North America in the past 12 months.

The North American Wood Fibre Review is produced by Wood Resources International LLC.