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Wood fibre costs for pulp mills fall rapidly in U.S. Northwest

Jul. 17, 2017 – Wood fibre costs for pulp mills in the U.S. Northwest have fallen faster than in other region of the U.S. the past year, resulting in a more competitive industry sector, reports the North American Wood Fiber Review. Despite the recent price reductions in Washington and Oregon, pulp manufacturers in the southern states continued to have lower wood fibre costs than pulp mills in the Northwest, Northeast and the Lake States in the 1Q/17.

“Volatile” could best describe many of the North American regional market conditions in the first quarter of 2017. The volatility came in many different areas; adverse weather events, operation breakdowns, plant explosions, and idling, as well as uncertainties over looming trade policy decisions, according to the North American Wood Fiber Review (NAWFR). Wood flows across Canada and the U.S. northern tier of states as well as through the Pacific Northwest were impacted by weather–either too much snow (leading to transportation difficulties), or mild temperatures followed by early breakup.

The declining price trend for chips and pulp logs in the Northwest that occurred during 2015 and 2016 came to a halt in early 2017 because of uncertainty about fibre availability as a result of slowdowns in harvest operations. Over the past two years, fibre costs have declined by 13 per cent in the Northwest and pulp mills in the region have become more competitive. In the 1Q/17, pulp mills had only slightly higher wood fibre costs than pulp mills in the historically low-cost U.S. South. Pulp mills in the Lake States and the Northeastern states continue to have the highest wood costs in the U.S.

Wood fibre costs for pulpmills in the U.S. South have also fallen over the past year, with average softwood pulplog prices being five per cent lower in the 1Q/17 than in the 2Q/16. Prices for both softwood and hardwood pulplogs have slowly declined over the past four quarters to reach their lowest levels in three years. With several planned pulpmill maintenance outages anticipated in the 2Q/17, fibre demand will remain muted in the coming months. Increased lumber production across the South will continue to generate additional volumes of residual chips resulting in downward price pressure on both chips and pulplogs in late spring and summer.