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Wood fibre costs declined in Q4, likely to continue dropping

Global demand for pulp has declined and pulp prices fell during the second half of 2011.

Global demand for pulp has declined and pulp prices fell during the second half of 2011.

As a consequence, prices for wood fibre, the highest cost component when producing

pulp, were down throughout the world, reports the Wood Resource Quarterly. The organization’s Global Wood Fiber Indices for softwood and hardwood fiber declined 3.5% from the third quarter of 2011.

There has been a long-term trend in the pulp industry of wood costs increasing as a percentage of the total production costs. In the third quarter of 2011, this share had reached 63.5% on a worldwide basis, up from only 53% in 2005, according to Fisher International.

However, this share can vary substantially, from a current low of 52% in Eastern Canada to as high as 73% in China. For this reason, tracking wood fibre prices over time has become more important when comparing competitiveness of different regions worldwide, according to Wood Resources International, publishers of the Wood Resource Quarterly.

In the fourth quarter of 2011, the US dollar continued to strengthen against the local currencies of all of the countries covered by the Wood Resource Quarterly (WRQ) except Japan. This development, together with the downward price pressure on pulp log and wood chips in local currencies in practically all of the 18 regions in the world covered by the WRQ resulted in a decline of both global wood fibre indices, explains WRI.

The Softwood Wood Fiber Price Index fell for the second straight quarter to US$105.30 per oven-dry tons (odmt) in the fourth quarter. This was down 3.3% from the previous quarter, but 1.6% higher than the fourth quarter 2010. The biggest price declines took place in Western Canada, Brazil, Spain, Germany and Finland.

The Hardwood Wood Fiber Price Index fell by 3.6% from the third quarter of 2011 to US$113.69/odmt. Despite this drop, this was still 5.0% higher than during the fourth quarter of 2010 and the third highest level ever recorded. The biggest third and fourth quarter price reductions occurred in Spain, Finland, Brazil and Chile.

Wood fiber costs are likely to continue downward in a number of markets in the first quarter of 2012, particularly in the Nordic countries, Western Canada and the US as pulp prices continue to be substantially below the record-high levels from last summer.