All time high for Canadian/US woodchip prices

Export Prices for Wood Chips from Canada and the US to Japan Reach 13 Year High in 2008

(Japan/US/Canada) The US wood chip export price for Japan jumped almost $20/BDU to $165/BDU ($151/odmt) in the 1Q/08 as the chip market tightened in the US Northwest and domestic prices rose more than expected.

Seattle, USA, April 3, 2008 -- As reported by North American Wood Fiber Review, 1Q prices for softwood chip exported from western US and Canada to Japan increased 12% and 18%, respectively. With the supply of residual chips becoming more scarce in both the US and Canada, wood costs will be climbing for domestic consumers as well as for pulp manufacturers in Japan later in 2008.

The US wood chip export price for Japan jumped almost $20/BDU to $165/BDU ($151/odmt) in the 1Q/08 as the chip market tightened in the US Northwest and domestic prices rose more than expected. With a further tightening of the residual chip supply in the 2Q, it will be increasingly difficult for exporters to meet the demand from Japanese pulp manufacturers as long as the lumber market does not improve in the US. If Japanese companies want to continue to source Douglas-fir chips from the US Northwest, they will have to get used to higher costs for residual chips and also may be forced to accept a higher content of chips manufactured from roundwood in the near future.

Total wood chip exports from Canada fell almost 25% during the second half of 2007. Chips going from British Columbia to the state of Washington in the US suffered the biggest decline with a 55% reduction in exports. Although a few US pulpmills close to the Canadian border benefit from the border trade, imported volumes to the US are now down to less than one percent of the total wood fiber demand in the US Northwest. However, exports of softwood chips from British Columbia to Japan have steadily increased over the past five years with the total volume reaching over 260,000 oven-dry metric tons (odmt) in 2007, up from 137,000 odmt in 2003. Canada is currently the 4th largest supplier of conifer chips to Japan after Australia, the US and New Zealand.

The export price for softwood chips from BC has gone up substantially the past 12 months. The price in 1Q/08 increased almost US$30/odmt from the previous quarter, reaching a 13-year high. The Canadian export price for softwood chips going to Japan is currently higher than that of Douglas-fir chips from the US west coast and Radiata pine from for Australian. Softwood chip prices have also gone up in Australia the past year, currently averaging just over US$160/BDU ($147/odmt). The rising costs of wood chips from Australia, the largest supplier of softwood chips to Japan, resulted in a reduced market share in 2007. US suppliers, on the other hand, increased their share from 25% to 32% between 4Q/06 and 4Q/07.

With the tightening supply of wood chips in both the US and Canada, the North American share of Japanese wood chip imports is likely to decline in 2008. Furthermore, Australia is probably not going to be able to increase export volumes much this year, which leaves Japanese pulp companies with few options other than either reducing the consumption of softwood fiber or offering higher prices for wood chips in North America and New Zealand in the hope that additional volumes may be available.

The North American Wood Fiber Review, established in 1982 and utilized by most of the major forest companies in the US and Canada, tracks pulpwood and wood chip prices in 17 key markets of North America.