Features Financial Reports & Markets Pulp
Wood costs decreased for Eastern pulp mills

Pulp mills in Eastern Canada may have become more competitive following sharply declining wood costs the past four years. Wood costs reached their lowest levels in 15 years in the first quarter of 2016, according to the North American Wood Fiber Review.

NAWFR says wood costs for pulp mills in Eastern Canada have fallen dramatically the past four years, and the region has some of the lowest wood fiber costs in North America. In contrast, in 2012, pulp mills in Ontario and Quebec had some of the highest wood fiber costs on the continent.

The organization reports that the shrinking pulp industry in Ontario and Quebec has become more competitive with fiber costs matching many other regions of North America in early 2016. In US dollar terms, softwood chips and pulp log costs were down 37 per cent and 27 per cent, respectively, in Q1/2016 as compared to Q1/2012.

Although much of the decline can be contributed to a stronger US dollar, wood chip prices have also fallen substantially in Canadian dollar terms. Softwood chip prices in Canadian dollars were 16 per centbelow 2012 levels, and they are actually at their lowest levels since NAWFR started tracking wood fiber prices in Eastern Canada in 1988.

Chip prices in Quebec and Eastern Ontario are currently on par with prices in Western Canada and the U.S. South, and they are substantially lower than in the US Northwest, the Lake States and the US Northeast.

Pulpwood prices (in Canadian dollar terms) in the Maritime provinces fell in Q1/2016 for the second consecutive quarter, according to the NAWFR. The primary reasons for the recent price declines were full fiber inventories at the region’s pulp mills, and good access to the forests which resulted in a healthy flow of logs to the manufacturing plants. The collapse of the softwood log market in neighboring Maine has also had an impact on fiber prices in Eastern Canada over the past six months.

The hardwood pulplog price eased modestly in early 2016 due to healthy fiber inventories. Despite the fact that there has been a plentiful supply of logs over the past winter, hardwood log prices have not come down as much as have softwood logs, and are still near their highest levels in 20 years (in Canadian dollar terms).

The North American Wood Fiber Review produces a 32-page quarterly report that includes wood market updates for 15 regions in North America in addition to the latest export statistics for sawlogs, lumber, wood pellets and wood chips.