Wood costs for pulp manufacturers on the rise

Wood costs, which account for up 70 percent of production costs when manufacturing pulp, have gone up worldwide the past two years, according to the market report Wood Resource Quarterly.

Much of the increase has been the result of higher wood fibre 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 fibre 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 US$1000 per ton for softwood market pulp (NBSK) in the month of April.

The US Northwest, Europe, Chile, Australia and New Zealand markets saw the biggest softwood fibre price increases in the 1Q/11, while there were only modest price changes in the US South, Canada and Brazil.

Hardwood Fibre prices were up in many of the same markets as those for softwood fibre, with the highest increases in Europe, Australia and Chile, and only small upward prices adjustments in Canada and Russia. Both the Softwoood and Hardwood Price Indices were almost 20 percent higher than two years ago.