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Wood fibre costs decline for softwood, hardwood pulp in 2019, early 2020

Wood fibre costs fell for many hardwood pulp-producing countries worldwide in Q1 2020.

The biggest declines (in U.S. dollar terms) were seen in the U.S. South, Russia and Latin America, where hardwood pulp log prices were down between five and 10 per cent from Q4 2019.

In the U.S. South, hardwood prices fell for the second consecutive quarter in Q1 2020 after having reached an all-time high in Q2 2019. The relatively steep decline took prices in the U.S. South down to their lowest levels in almost three years.

The major driver of declining pulp log prices was the reduction in log demand from regional paper mills towards the end of the quarter as the result of the COVID-19 pandemic.

The early 2020 price declines in Latin America were largely the result of currencies weakening against the U.S. dollar.

From the Q4 2019 to Q1 2020, the Brazilian real and the Chilean peso fell 8.2 per cent and 6.2 per cent against the U.S. dollar, respectively.

As a consequence of falling wood fibre prices in the key markets worldwide, the Hardwood Fiber Price Index (HFPI) dropped 4.2 per cent quarter-over-quarter in Q1 2020. This was the fourth consecutive quarter-over-quarter decline, bringing the average price to the lowest it has been in four years. As a percentage, it has fallen 9.2 per cent since Q1 2019.

The Softwood Fiber Price Index (SFPI) also declined last year, although not as severely as the HFPI. In Q1 2020, the index was 5.6 per cent lower than in the same quarter in 2019.

The biggest price declines came in Central Europe, Latin America and Oceania, while on the contrary there were actually small increases in prices for softwood fibre in the U.S. South, Eastern Canada and Sweden.

Pulp mills in Austria, Germany, and France have seen their wood fibre costs decline quite substantially in the past year. Wood fibre is dropping in price both due to an increased supply of lower-cost residuals from the region’s sawmills and to substantially lowed costs for pulp logs, which have been plentiful as a result of the large supply of beetle-killed logs in Central Europe.

Softwood pulp log prices in Germany have been particularly hard hit during 2019, with average prices falling 28 per cent from the Q1 2019 to Q1 2020. Spot prices have been reported to have plunged to the low to mid $30s in early 2020, levels that barely cover the logging and hauling costs.

The historically low log prices in Germany are expected to stay at their current levels assuming there continues to be a surplus of logs in the domestic market, as well as weak demand for market pulp and selected paper grades.

Wood Resource Quarterly (WRQ) is a 56-page report, established in 1988 and with subscribers in over 30 countries, tracks prices for sawlog, pulpwood, lumber & pellets worldwide. The WRQ also reports on trade and wood market developments in most key regions around the world. For more insights on the latest international forest product market trends, please go to www.WoodPrices.com.