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Global timber and wood products market update

Global-timber-and-wood-products-market-update

The Wood Resource Quarterly is celebrating 30 years of global wood price reporting. Global timber and wood market reporting is included in the 52-page quarterly publication established in 1988 and with subscribers in over 30 countries, tracks sawlog, pulpwood, lumber and pellet prices and trade, and market developments in most key regions around the world. Here are exerts from the latest issue: 
 
Special report: global sawmill production cost margins 2005-2017 

  • The Global Sawlog Price Index (GSPI) was up 2.4 % from the 1Q/17 and 3.5% higher than in the 2Q/16.
  • The Euro-based European Sawlog Price Index (ESPI-€) was up 2.6% q-o-q and 2.0% y-o-y.
  • Both WRI wood fibre price indices were up slightly from the 1Q/17. However, the softwood fibre prices index was down 5.1% from a year ago. 
  • Global softwood lumber trade increased during the 1H/17 and lumber prices have trended upward around the world. 
  • US pellet exports were up to 3% during the first six months of 2017 and Canadian shipments fell 18% compared to 1H/16.

Global timber markets

  • Sawlog prices were up quarter-over-quarter in practically all regions of the world in the 2Q/17. The biggest increases were seen in Central and Eastern Europe while there were modest price declines in the US South, Coastal British Columbia, Quebec and Brazil.
  • Although European sawmills continue to have some of the world’s highest raw-material costs, the discrepancy between the Global Sawlog Price Index (GSPI) and the European Sawlog Price Index (in US dollar terms) has fallen, bottoming out in the first quarter of 2017 to reach its lowest level in more than ten years, according to the WRQ.

Global pulpwood prices 

  • Both the WRI global wood fibre price indices inched up in the 2Q/17 because of a weaker US dollar and higher prices in the local currencies in many of the 17 regions that the two indices are comprised of.
  • In the 2Q/17, the Global Softwood Fibre Price Index (SFPI) was up 0.1% from the previous quarter to $85.10/odmt, which was the first q-o-q increase since the 2Q/16. The biggest price increases (in dollar terms) occurred in the US Northwest, the Nordic countries, Spain, Russia and Chile.
  • The Global Hardwood Fibre Price Index (HFPI) also experienced a modest increase in the 2Q/17, mainly because of higher prices of hardwood pulplogs throughout Europe and Russia, as reported in the Wood Resource Quarterly.

Global pulp markets 

  • Higher pulp production in Latin America contributed to a rise global market pulp production by about 0.5% during the first five months of 2017 as compared to the same period in 2016. During the same period, production fell in North America partly because of the seasonal maintenance downtime at the pulp industry during the spring.
  • Strong demand and tighter supply during the spring pushed pulp prices upward in Europe, North America and China, with hardwood pulp price increasing the most. The price discrepancy between NBSK and BHK has tightened considerably compared to 2016.

Global lumber markets 

  • International trade of softwood lumber is on pace to a new record high in 2017 if the trend from the first six months of 2017 continues in the second half of the year.
  • Of the ten largest lumber-exporting countries in the world, Russia, Finland, Austria and Ukraine increased shipments the most year-over-year during the first half of 2017. Russia alone, has accounted for 22% of global lumber trade so far in 2017, which is up from 15% ten years ago.  
  • During the first five months of 2017, lumber production in the US South bounced back after having declined during the second half of 2016. The total production output from January through May was 7.3% higher this year as compared to the same period in 2016.
  • Lumber prices in both the US and Canada have trended upward for almost two years and reached 13-year highs in July.
  • Prices for lumber prices in the Nordic countries continue to be depressed in US dollar terms, although they have moved up slightly during the 2Q/17. Current price levels are close to the lowest they have been in eight years.
  • Demand for softwood lumber has picked up in China in 2017 with import volumes during the first seven months being 16% higher than during the same period in 2016. By far, the biggest jump in supply sources has been from Russia.

Global biomass markets 
Global trade of wood pellets has experienced a dramatic growth with a doubling of shipments to 16 million tons in 2016. There are four countries, the United Kingdom, Denmark, South Korea and Italy, that currently consume almost 80% of the world’s traded pellets.
 
The fibre costs for pellet plants in North America have trended downward the past year with the US and Canadian Pellet Feedstock Price Indices reaching their lowest levels in over four years in the 2Q/17, according to the North American Wood Fibre Review.

With the feed stock shifting towards lower cost fibre, including industry and forest residues, total wood costs for pellet manufacturers fell during 2016 and early 2017, according to the Review. The PFPI price indices for the US and Canada have fallen 16% and 26%, respectively since 2013.

Wood pellet manufacturers in North America consume wood fibre from a variety of sources with different price levels, trends and cost drivers. The WRI pellet feedstock price indices for Canada and the US (PFPI-US and PFPI-CA), which were launched in 2013, show a quarterly volume-weighted price for the fibre consumed by each country’s pellet sector. Each individual facility’s estimated mix of fibre (roundwood, sawdust, shavings, microchips, etc.) are calculated using local fibre pricing to determine a weighted price, which is further combined with production capacity and operating rate to calculate the final regional index price.

The price indices for both the US and Canada have trended downward the past few years and reached record lows in both countries in the 2Q/17. The PFPI-US has fallen 15% from its peak in the 3Q/13 to the 2Q/17. Slightly declining roundwood prices, plummeting sawdust costs, and a change in the feedstock mix towards lower cost residuals in both the Gulf States and the Atlantic States were the major reasons behind the decline in the PFPI-US Index the past year.

A snapshot of the various feedstocks currently being used by the US export pellet sector shows 50 percent were roundwood in the 2Q/17 followed by significant volumes of sawdust and shavings and an increasing supply of forest microchips.

The Canadian price index, PFPI-CA, which combines the larger Western export pellet sector primarily in BC with the smaller Eastern sector found in Ontario, Quebec, New Brunswick and Nova Scotia, has fallen more than the US index (in US dollar terms), mostly because of the weaker Canadian dollar. However, wood fibre costs for pellet manufacturers have also fallen slightly in Canadian dollar terms because of lower costs for logs the past few years. From its record high in early 2013 to the 2Q/17, the PFPI-CA declined 26%. The lower indexed price in the 2Q/17 primarily reflected the falling costs of sawdust and shavings and incremental increases in the usage of these feedstock forms over higher cost roundwood.
 

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