Seattle, USA. For most of the past 20 years, pulpmills in Western Canada have had lower wood fibre costs than pulpmills in the Eastern provinces. One year ago, pulp manufacturers in British Columbia paid almost C$60/odmt less for softwood chips than did pulp mills in Ontario and Quebec, and five years ago the difference was almost C$100/odmt, according to the North American Wood fibre Review.
Because wood costs account for almost 50 per cent of the production costs for Canadian pulp mills, companies in Eastern Canada have been at a competitive disadvantage to many other mills, not only in other regions of Canada, but throughout North America.
Pulp mills in Ontario and Quebec have consistently had some of the highest wood fibre costs in North America. However, prices have fallen lately; softwood chip prices have declined 10 per cent over the past 12 months and they were 25 per cent lower in the 4Q/10 than five years ago. Prices are currently the lowest they have been in this region in over 10 years. In US dollar terms, wood costs in Eastern Canada are now lower than most countries in Europe, as reported in the Wood Resource Quarterly.
In the 3Q, wood chip prices in Western Canada increased again due to their formulaic tie to market pulp prices. However, they did not go up as dramatically on a quarter-by-quarter basis as they did from 1Q to 2Q earlier this year. The latest uptick resulted in prices at levels not seen since 2001. Pulp mills in the region currently have some of the highest chip prices in North America. With NBSK pulp prices now beginning their descent; softwood chip prices will follow downward in the coming quarters.
Despite a price decline in Eastern Canada and an increase of almost 40 per cent in one year in the West, pulp mills in British Columbia continue to have lower wood fibre costs than mills in the eastern provinces of the country.
Biomass and wood chip market updates are included in the 32-page publication North American Wood fibre Review. The report, established in 1982 and with readers in a large number of forest and energy companies in North America and Europe, tracks wood fibre prices in 15 key markets of the US and Canada.