Continued high lumber prices encouraged sawmills to maintain aggressive production levels in Q1 2021, further increasing residual chip supplies in the Northwest. The return of two fiber consumers to the region— Cosmo Specialty Fiber in Washington and the Roseburg Forest Products chip export facility in the Willamette Valley —provided welcome sources of demand for incremental volumes, yet neither materially altered the trajectory of prices. The prospect of spring maintenance outages will provide little joy to local sawmills as chip supplies outstrip demand at current operating rates. Fire-damaged timber in the region is likely to flow into sawmills over the coming months as landowners race to recover as much value as possible. This will offer a supply “push” to match the current demand “pull” of high lumber prices, spurring sawmills to produce more lumber. The expected result is more chips.

Whole log chip prices fell to historic lows west of the Cascades in Q1 2021. The price spread between residual and whole-log chips, however, returned to more typical ratios. Buyers remained committed to keeping whole-log chippers viable, but low market prices for residual chips were pressuring the sector. Residual chip prices fell for a third straight quarter west of the Cascades as lumber production remained strong. Sawmill residual chip volumes outpaced fiber demand though the pace of price declines slowed, except in the Puget Sound. Softwood residual chips in the Puget sound fell by 10% for the quarter, marking the greatest quarterly and annual decline (31%). Lower Columbia River hemlock-fir prices managed a 2% gain but remained down 21% year-over-year. Inland Empire prices remained the least impacted, down “only” 10% for the year, and was the highest priced region.

This post contains a sample from the Q1 2021 Forisk Wood Fiber Review. Click here to learn about the Forisk Wood Fiber Review (FWFR), which has tracked pulpwood, wood chip, and biomass markets in the U.S. and Canada since 1983.