Canadian Pulpmills Less Competitive Because of Increasing 4Q Wood Costs New Report Says



Wood fiber costs increased for many pulpmills in North America in the 4Q. Availability of less expensive residual chips from sawmills declined and the share of costly roundwood chips increased throughout the continent. In US dollar terms, wood fiber prices were about seven percent higher than the previous quarter and almost 20% higher than a year ago.

Soft wood fiber costs in all provinces of Canada, with the exception of Alberta, are currently higher than in all the major pulp-producing regions of the US. As wood costs account for almost 50% of the total production costs when manufacturing pulp, it is obvious that increasing wood costs are of major concern for Canadian pulp producers. With the strong currency, many Canadian forest companies are struggling to stay profitable and have become less competitive relative to US companies. A number of pulp and paper companies have also announced permanent closures of high-cost production facilities throughout the country. News of mill closures have continued to cover the front pages of newspapers across Canada; from Mackenzie in British Columbia to Miramichi in New Brunswick.

Pulpmills in British Columbia have been increasing their share of roundwood chips as the supply of residual chips from sawmills dwindled during most of 2007. In the Interior of the province, most pulpmills have typically relied to 90-100% on low-cost residual chips, but in recent months many mills have been forced to lower this share, and to start chipping roundwood. The province of Alberta is the only province where there were no market related curtailments by pulpmills in 2007. This is also the province with the lowest wood fiber costs in North America because regional pulpmills utilize, for the most part, low-cost residual chips from an efficient and competitive sawmilling sector.

With the relatively high costs of wood and energy in addition to the strong Canadian dollar, it is expected that more pulpmills will be forced to reduce production in 2008 as they will increasingly have difficulty competing in the world markets. This is despite a healthy demand for both market pulp and selected paper grades in the US and overseas.

The North American Wood Fiber Review, established in 1982, tracks delivered wood fiber costs in the 17 major markets in North America.

Contact Information

Wood Resources International

Hakan Ekstrom

Seattle, USA

www.woodprices.com





Canadian Pulpmills Less Competitive Because of Increasing 4Q Wood Costs New Report Says