Wood costs for pulp manufacturers worldwide are on the rise
The cost of manufacturing pulp has trended upward in most regions of the
world the past two years. Much of the increase has been the result of higher wood fiber
costs which, depending on pulp grade and region, currently vary between 48 percent and
72 percent of the total variable production costs, according to Fisher International. The
cost of wood is the cost component that often decides a pulp mills’ competitive advantage
in the global market place. Wood fiber costs (in US dollar terms) have gone up because
of high demand due to strong pulp markets, tight supplies of sawmill residues and a
weakening US dollar against most other currencies.
Global pulp markets have bucked the trend forecasted by many analysts a year ago.
Rather than the predicted retraction in market pulp prices this spring, prices stayed strong
and actually increased to record-high levels of over $1000 per ton for softwood market
pulp (NBSK) in the month of April.
The Softwood Wood Fiber Price Index (SFPI) increased 1.9 percent in the 1Q/11,
reaching US$105.60/odmt, the highest level since 3Q/08 just before the financial crises.
The SFPI is a weighted average of delivered wood fiber prices for the pulp industry in all
regions tracked by the publication Wood Resource Quarterly. These regions together
account for 85-90% of the world’s wood-based pulp production capacity. The US
Northwest, Europe, Chile, Australia and New Zealand markets saw the biggest softwood
fiber price increases in the 1Q/11, while there were only modest price changes in the US
South, Canada and Brazil.
The Hardwood Wood Fiber Price Index (HFPI) was also up 1.9 percent from the
4Q/10, and is now close to an all-time high of US$110.33. Fiber prices were up in many
of the same markets as those for softwood fiber, with the highest increases in Europe,
Australia and Chile, and only small upward prices adjustments in Canada and Russia.
Hardwood fiber costs even declined in the US South. Both the SFPI and HFPI were
almost 20 percent higher than two years ago.
During most of the past 23 years since the launching of the wood fiber indices in the
Wood Resource Quarterly in 1988, the softwood price index has been higher than the
hardwood price. This relationship reversed in late 2008, and the hardwood price index is
now 4.5 percent higher than the softwood price index.