Wood Resources International LLC

Worldwide trade of wood chips fell in 2012 and prices for pulplogs and wood chips were down in most regions of the world. But change is ahead. Global demand for wood fiber for both pulp manufacturing and renewable energy is expected to increase during 2013 and 2014.

Demand for imported softwood logs in China increased in the second half of 2012 after declining during the first six months of the year. Total imports in the 2H/12 were up nine percent, but the increase was not equally distributed between supplying countries. Shipments from New Zealand and the US were up 29 percent and 20 percent, respectively, while Russian exports to China fell nine percent in the 2H/12 as compared to the 1H/12, reports in the Wood Resource Quarterly (www.woodprices.com).

Seattle, USA. The pulp industry in Spain has turned its focus to increasingly rely on domestic wood fiber sources rather than imported wood fiber the past year. Importation of wood chips importation was down as much as 58 percent the first ten months of 2012 as compared to the same period in 2011, and there has not been a single chip vessel that has entered a Spanish port since May of 2012, as reported in the Wood Resource Quarterly (www.woodprices.com). This is a remarkable turn-around in wood fiber sourcing. As late as 2011, Spain imported 675,000 tons of Eucalyptus chips, 87 percent from Uruguay and the rest from Congo and Chile.

In late 2011, Brazil and Chile sent the first chip vessels to pulp mills in China in over five years. In the past, Japan had been the major destination for Latin American Eucalyptus chips. With Japanese pulp mills paying considerably more than Chinese pulp mills for chips, it is likely that a majority of Eucalyptus chips from Latin America will continue to be shipped to Japan.

Wood costs have fallen the past year for many sawmills in the major lumber-producing countries worldwide. The Global Sawlog Price Index was US$82.90 per cubic meter in the 2Q/12, which was 11.5% lower than in the 2Q/11, according to the Wood Resource Quarterly. Sawlog prices have declined the most in Europe the past year.

Softwood chip prices fell in a number of key regions in North America during the 2Q/12 from the previous quarter. The biggest declines were seen in the US North West, Lake States and Eastern Canada, while prices were unchanged or just slightly higher in the US South, US Northeast, British Columbia and Alberta, according to the North American Wood Fiber Review.

Timber harvests in British Columbia plunged by over 40 percent between 2005 and 2009, but have since recovered and were close to the 25-year average in 2011. As a consequence of the infestation of the mountain pine beetle, long-term log supply is estimated to be about 20 percent below historical levels unless different management regimes are implemented.

Wood fiber costs, which can account for up to 70 percent of the production costs for a pulpmill, fell in many markets during the 1Q/12, according to the Wood Resource Quarterly. The biggest declines were seen in Western Canada, Europe and Brazil, while Chile, Australia and New Zealand experienced some minor price increases for pulplogs and chips during the quarter.

Exports of wood pellets from North America to Europe reached a record of over two million tons in 2011, according to analysis reported in the North American Wood Fiber Review. Canada has long been the main exporter of pellets but in the second half of 2011, the US caught up and exported an equal volume to Canada.

Wood costs for pulp mills and sawmills in Brazil have gone up over the past few years, reaching their highest levels in over 20 years in 2011, according to the Wood Resource Quarterly. However, towards the end of the year, Eucalyptus and pine log prices fell, mainly because of the strengthening US dollar.