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Wood Costs for Pulp Producers on the Rise

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The cost of manufacturing pulp has trended upward in most regions of the world the past two years, Wood Resources Quarterly (WRQ), Seattle, Wash., USA, reports. Much of this increase has been the result of higher wood fiber costs, which, depending on pulp grade and region, currently vary between 48% and 72% of the total variable production costs, according to Fisher International, .

The cost of wood is the cost component that often decides a pulp mill's competitive advantage in the global market place. Wood fiber costs (in U.S. dollar terms) have gone up because of high demand due to strong pulp markets, tight supplies of sawmill residues, and a weakening U.S. dollar against most other currencies, WRQ explains. Global pulp markets have bucked the trend forecasted by many analysts a year ago, it adds. .

Rather than the predicted retraction in market pulp prices this spring, prices stayed strong and actually increased to record-high levels of more than $1,000 per ton for softwood market pulp (NBSK) in the month of April. The Softwood Wood Fiber Price Index (SFPI) increased 1.9% in the first quarter this year, reaching $105.60/o.d. metric ton, the highest level since the third quarter of 2008, 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 WRQ. These regions together account for 85% -90% of the world's wood-based pulp production capacity. The U.S. Northwest, Europe, Chile, Australia, and New Zealand markets saw the biggest softwood fiber price increases in the first quarter of this year, while there were only modest price changes in the U.S. South, Canada, and Brazil, WRQ notes.

The Hardwood Wood Fiber Price Index (HFPI) was also up 1.9% from the fourth quarter of 2010, and is now close to an all-time high of $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, WRQ reports.

Hardwood fiber costs even declined in the U.S. South. Both the SFPI and HFPI were almost 20% higher than two years ago. During most of the past 23 years since the launching of the wood fiber indices in the WRQ 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% higher than the softwood price index.

More information is available online.


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