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Increased reliance on domestic Eucalyptus fiber by Spanish pulp mills
Increased reliance on domestic Eucalyptus fiber by Spanish pulp mills has resulted in a dramatic reduction in wood chip shipments from Uruguay, reports the Wood Resource Quarterly
European pulpmills imported much less Eucalyptus chips from Latin America during
2012, mainly because Spanish pulp mills reduced their reliance on relatively costly wood
fiber from Uruguay dramatically, reports the Wood Resource Quarterly. Pulp mills in Spain have also paid less for domestic pulplogs the past year, resulting in substantially lower wood fiber costs in 2012 than the previous year.
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.
Over the past eight years, Uruguay has exported between 300,000 oven-dry metric tons (odmt) and 600,000 odmt annually to Spain, so losing all that volume is a major setback for landowners and chip exporters in the country. Total chips exports to Spain for 2012 will be an estimated 200,000 odmt, which represents less than half of the shipments in
2011, and is the lowest levels seen since 2004. Even the other two major buyers of Eucalyptus chips, Portugal and Norway, have cut back purchases substantially the past 12 months with the result that total volumes of chips exported from Uruguay in 2012 may reach a total of only 700,000 odmt, down from almost 1.6 million odmt in 2011.
Eucalyptus log prices in Spain have been declining steadily for more than a year, and the major fiber consumers have lowered the price they pay to land owners practically every quarter since early 2011. The average Eucalyptus log price in the 3Q/12 was 11 percent below the price in 3Q/11, according to the WRQ. In US dollar terms, the average cost for Eucalyptus has declined by 26 percent since its all-time-high in the 2Q/11. Spanish pulp mills currently have some of the lowest hardwood fiber costs in Europe, but are still paying more for hardwood fiber than competitors in Latin America and North America.
Weaker pulp markets are forcing pulp manufacturers worldwide to reduce costs
Weaker pulp markets are forcing pulp manufacturers worldwide to reduce costs, resulting in the lowest softwood wood fiber prices seen since 2010, reports the Wood Resource Quarterly.
The declining prices for softwood pulp during much of 2012 have forced many pulp mills to try to cut wood fiber costs to remain profitable. As a consequence, the wood fiber price index (SFPI) has continuously declined the past year and, during the 3Q/12 was at its lowest level since 2010, according to the Wood Resource Quarterly.
Prices for softwood market pulp (NBSK) prices have trended downward for more than a year from their record highs of over $1000 per ton in the summer of 2011. In the 3Q/12, prices had fallen to between $750-800/ton in Europe and were about 50 dollars higher in the US. This relatively long-lasting price decline seems to have come to an end this fall, as there are now pulp producers negotiating higher prices again. List prices for December are in the range of $820-870/ton depending on if the deliveries are to Europe or North America.
The lower pulp prices have resulted in downward price pressure on wood fiber prices in many high wood cost regions around the world as pulp companies have seen product prices approach production costs. When profit margins for pulp mills are being squeezed, one of the first step taken to improve profitability is often to try to reduce the wood costs, since those costs typically account for 60-70 percent of the production costs when manufacturing pulp.
Prices for pulplogs and wood chips fell in the local currencies in most of the key regions worldwide in the 3Q/12, according to the Wood Resource Quarterly www.woodprices.com. However, because the US dollar weakened against most currencies, wood prices in US dollar terms did not decline as much in the third quarter.
The Softwood Wood Fiber Price Index (SFPI), which is based on US dollars, was down another 0.5 percent from the 2Q/12 to US$100.05 per oven-dry metric ton (odmt). This was the fifth consecutive quarterly decline, and the index has now fallen 8.7 percent since early 2010. The biggest price declines were seen in the Northwestern US, Germany, Spain and Russia.
Hardwood fiber prices started to increase in some regions around the world in the 3Q/12, which resulted in the first increase of the Hardwood Wood Fiber Price Index (HFPI) in over a year, as reported in the WRQ. The Index increased by $1.56/odmt from the 2Q/12 to $106.44/odmt in the 3Q/12. Hardwood fiber prices increased the most in Russia, Eastern Canada and Brazil.
The price outlook for wood prices in the fourth quarter is mixed, with a stabilizing of prices in most softwood pulp-producing countries but also continued price declines in a few regions.
The Global Forest Industry Q3 review
The Global Sawlog Price Index (GSPI) fell for the fifth consecutive quarter to $81.94/m3.
The Softwood Wood Fiber Price Index (SFPI), which is based in US dollars, was down another 0.5 percent from the 2Q/12 to US$100.05/odmt. Hardwood Wood Fiber Price Index (HFPI) increased by $1.56/odmt from the 2Q/12 price to $106.44/odmt in the 3Q/12.
Softwood pulp (NBSK) prices have trended downward for more than a year from their record highs in the summer of 2011. Hardwood pulp (BHKP) prices have not experienced the same price fall as NBSK prices.
Despite the weakening markets for lumber, six of the ten largest lumber-exporting countries in the world have shipped more lumber this year than last year.
North American lumber production rose for the third straight quarter in the 3Q/12.
The importation of softwood lumber to China in September was down for the fourth consecutive month to 1.14 million m3, a decline of 14 % from September 2011.
Pellet exports from the US South to Europe rose 13 % in the 2Q/12 from the previous quarter; almost a doubling in one year.
Wood costs for pulp mills and sawmills in Brazil have fallen
Pulp mills and sawmills in Brazil became more competitive in 2012, because the costs for the wood raw-material, which accounts for about 70 percent of the production costs,have declined by over 20 percent since 2011, according to the Wood Resource Quarterly.
Seattle, USA. Pulp mills and sawmills in Brazil became more competitive in 2012 mostly thanks to a weakening Brazilian Real. Pine sawlog prices in Brazil, in US dollar terms, fell 22 percent in just one year, and prices in the 2Q/12 have been at a level below where they were just before the financial crisis that hit in 2008, according to the WoodResource Quarterly (www.woodprices.com).
In the local currency on the other hand, prices have actually increased steadily and in the 2Q/12 were at their highest levels in over four years. Domestic demand for wood products has been a key driver for the higher log costs. In 2010 and 2011, the local lumber market was strong because of major investments in the housing construction sector in Brazil. This market slowed in 2012, and instead, lumber and plywood exports have slowly picked up steam as those sectors have benefited from the weakening Brazilian Real and the Brazilian forest industry became more competitive in the international market.
With the Real expected to continue to stay weak against the US dollar, market participants are hoping for increased exports of lumber, plywood and value-added products in the coming months. If this scenario actually comes to fruition, demand for sawlogs may go up and log prices will likely move up in both Real and dollar terms.
Although Brazilian pulplog prices have not changed much in the local currency, they have fallen dramatically in US dollar terms as the Real weakened this past year. Eucalyptus pulplog prices in the 2Q/12 were down 28 percent from the same quarter in 2011, while pine pulplog prices declined 26 percent from a year ago, according to the Wood Resource Quarterly (WRQ).
The recent dramatic price reductions of pulpwood have had the result that the wood costs for Brazilian pulpmill now are among the lowest of all regions tracked by the WRQ, as compared to a year ago when wood fiber costs in Brazil were above the Global Wood Fiber Price Indices (SFPI and HFPI). Since wood fiber costs accounted for about 70 percent of the production costs for pulp mills in Brazil in the 2Q/12, the substantial reduction in pulpwood prices has made the country’s pulp mills more competitive in 2012 relative to other pulp producers around the world.
Log and lumber imports to China were down 19%
Log and lumber imports to China were down 19% during first eight months of 2012, y-o-y, with the biggest declines seen of logs imported from Russia and the US, reports the Wood Resource Quarterly
Importation of both logs and lumber to China fell substantially in 2012, reports the Wood Resource Quarterly. Total imports, by value, during the first eight months was 4.3 billion dollars, or 19% less than in 2011, with the biggest declines in logs imported from Russia and the US, and in lumber from North America.
The reduction in construction activities in China during 2012 has resulted in reduced demand for lumber, and as a consequence, a sharp decline in the importation of softwood logs and lumber to the country. During the first eight months this year, China imported logs and lumber worth 4.3 billion dollars, or 19 percent less than the same period last year, as reported in the Wood Resource Quarterly (www.woodprices.com). By volume, log imports were down 17 percent and lumber imports down five percent.
The importation of softwood lumber in August was down for the third consecutive quarter to 1.1 million m3, which was a decline of 21 percent from May and 23 percent lower than in August 2011. Canada and Russia are the two dominant suppliers of softwood lumber to China, together accounting for 84 percent of the total imports, with the US, Chile and New Zealand making up most of the remaining import volume.
During the first eight months of this year, Russia, Chile and New Zealand have increased their shipments to China, while volumes from North America have declined. Exports from the US are down as much as 41 percent as compared to the same period in 2011.
In August, the average import value for all softwood lumber imported to China was down nine dollars to $203/m3 from a year ago, according to Customs data. The cost for Russian lumber fell as much as $19/m3, while Canadian average costs were down only five dollars to $200/m3 over the past year. Costs for Canadian lumber have steadily increased from earlier this year and here at a 12 month-high in August.
Chinese softwood log imports have fallen dramatically this year. From January through August, imports from Russia were down 21 percent, and from the US, 31 percent as compared to the same period in 2011. The two other major log-supplying countries, New Zealand and Canada, have shipped practically the same volume this year as last year.
With the reduced demand for logs by the lumber industry in China, log prices have fallen through most of 2012. According to the latest issue of the WRQ, average import softwood log values in the 3Q/12 were down 13 percent from a year ago, and domestic Chinese-fir log prices have fallen about six percent in 12 months.
South Korea and Japan will become large importers of pellets and energy chips.
Both Japan and South Korea intend to reduce the consumption of fossil fuels and increasingly rely on renewable energy in the future. As a consequence, both countries will increase their importation of wood pellets and energy chips from other countries in Asia and from North America in the coming years, reports the Wood Resource Quarterly.
Asia will consume more wood pellets and energy wood chips in the future. The governments in Japan and South Korea have announced definite plans to increase their usage of green and low carbon energy alternatives. South Korea is taking steps to reduce its dependence on imported fossil fuels and instead invest in domestic renewable- energy technology, including wind, solar, hydropower and biomass. The long-term plan is to increase the renewable energy share from less than four percent in 2011 to 6.1 percent in 2020, and then to 11.5 percent in 2030. As part of this effort the government has initiated a program, which has included building eight new pellet plants, as well as exploring opportunities to import large volumes of pellets in the future. The goal is to consume five million tons of pellets by 2020, a huge increase from the less than a few hundred thousand tons used in 2011.
South Korea has access to wood residues from the domestic sawmilling industry, which could be used for the manufacturing of pellets. This domestic supply, however, will not be sufficient, so South Korea will need to increase pellet imports in order to meet the ambitious 6.1% goal only eight years from now. The government estimates that by 2020, 75-80 percent of pellets consumed in the country will need to be imported. Some of the major energy companies in South Korea have reportedly been exploring the opportunities to import pellets from Australia, Vietnam, Indonesia, the Philippines, Canada and the US.
Japan is another Asian country expected to increase importation of energy chips and wood pellets, due in part to the nuclear power plant accident in Fukushima last year. Following the disaster, the Japanese government decided to close down all nuclear plants, at least temporarily. Even if a few plants eventually reopen, nuclear energy will never again be as important for energy production as it once was.
In the future, Japan will increasingly rely on renewable energy sources, with biomass likely to be one important supply source. Up until this year, Japan has imported only very limited volumes of wood pellet, primarily from Canada, but it is likely that import volumes of both pellets and energy chips will increase in the coming years.
Chile and Brazil have began to supply Eucalyptus chips to Chinese pulp mills
Chile and Brazil have began to supply Eucalyptus chips to Chinese pulp mills; however Japan continues to be the major destination for Latin American wood chips, reports the Wood Resource Quarterly
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.
Seattle, USA. In 2007, China imported wood chips from only three countries: Vietnam, Indonesia and Australia, who together shipped 1.1 million tons throughout the year. With the fast expansion of the pulp industry in China, the country is rapidly growing its need for wood fiber. Domestic supplies have proven inadequate, so the list of supplying countries has expanded from three to eight over the past 12 months.
Two of the three chip-exporting countries in Latin America, Chile and Brazil, sent the first vessels with Eucalyptus chips since 2006 in the third quarter last year. The total volume exported from the two countries in 2011 was 100,000 tons, and during the first seven months this year, 76,000 tons have been shipped, a majority from Chile.
Wood chips from Latin America still accounted for only three percent of all hardwood chips imported to China in the 2Q/12, and these chips were among the costliest chips landing in the country, as reported in the Wood Resource Quarterly. So, although Chinese pulp mills will be in search of additional wood fiber in the coming years, it is not likely that either Chile or Brazil will be major competitors to countries in closer proximity to China, including Vietnam, Thailand, Indonesia and Australia.
Chile will most likely continue to ship a majority of its chips to Japan, where its chips are more competitively priced with other supplying countries. During the first six months of 2012, Chile was the largest supplier of hardwood chips to the Japanese pulpmills, followed closely by Australia. Chile’s market share in this market has gone from 17 percent five years ago to 27 percent in the first half of 2012. With chips from Chile being less costly than Australian chips delivered to Japan, there will continue to be opportunities for Chile to gain market share in the Japanese chip market in the coming year.
Wood costs for the world’s pulp industry continued downward in Brazil, Russia, Australia and Europe.
The costs of wood fiber for many pulp mills throughout the world continued to fall in the 2Q/12 and were at their lowest levels in over a year, according to the Wood Resource Quarterly. The greatest declines were seen in Brazil, Australia, Russia, Spain and US northwest, and Eastern Canada.
Wood fiber costs for the world’s pulp mills were down again in the 2Q/2012. Prices for wood chips and pulplogs in both local currencies and in US dollars fell in most of the 17 regions tracked by the Wood Resource Quarterly.
Uncertainty in demand for pulp, lower pulp and paper prices, reduced market pulp production and a healthy supply of sawmill residuals were all factors that put downward pressure on wood fiber prices this spring and early summer. The Softwood Wood Fiber Price Index (SFPI) fell by 4.1 percent from the 1Q/12 to $100.54 per oven-dry ton (odmt). This was the biggest quarter-to-quarter drop since 2008. The biggest price declines for hardwood fiber from the 1Q/12 to 2Q/12 occurred in Brazil, the US Northwest, Australia and Eastern Canada.
Hardwood fiber prices have fallen even more than softwood fiber prices this year. The Hardwood Wood Fiber Price Index (HFPI) was down 4.4 percent to $104.88/odmt from the previous quarter. The HFPI has now fallen for three consecutive quarters since the all-time high in the 3Q/11, and in the 2Q/12 was at the lowest level in two years. The largest price reductions from the 1Q/12 occurred in Brazil, Russia and Australia.
Although Brazilian pulplog prices have not changed much in the local currency, they have fallen dramatically in US dollar terms as the Real has weakened the past year. Eucalyptus pulplog prices in the 2Q/12 were down 28 percent from the same quarter in 2011, while pine pulplog prices declined 26 percent from a year ago. The recent dramatic price reductions of pulplogs have resulted in Brazilian pulpmills enjoying among the lowest wood costs of all regions tracked by the WRQ, despite being above the global average as recent as 12 months ago.
Wood fiber costs were also down throughout Europe in the 2Q, with the smallest declines (in US dollars) in Finland (-1.3%) and Norway (-3.6%) and the biggest reductions in Spain (-15%) and France (-7.7%). In most markets, wood fiber prices have come back down to where they were in 2010.
Wood chip prices fell throughout the US and Canada in the 2Q/12
A drop in demand for woody biomass in the US
A drop in demand for woody biomass in the US reduced biomass prices in the South, Northeast and the West during the 2Q/12, reports the North American Wood Fiber Review
Prices for mill and forest biomass fell in most major consuming regions of the US in the 2Q/12, according to the North American Wood Fiber Review. The main reason for the declining prices is the continued fall of natural gas prices to levels not seen in ten years
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