In capturing a quarterly “snapshot” of fiber prices by region across North America, the Forisk Wood Fiber Review (FWFR) also summarizes market trends and investments. Fevered lumber prices appear to have broken due to a combination of producers (sawmills) catching up and demand moderating in the repair and remodeling (R&R) market. Labor remains a factor across the supply chain, in home construction, at mills and, critically, for truck drivers (especially in the U.S. South). In the pulp and paper and pellet sectors, we continue to consider the consolidations (e.g. Drax + Pinnacle and Paper Excellence + Domtar) combined with shifts in paper grades and raw material mixes (e.g. growing recycled paper capacity). Still, we are mindful of overgeneralizing. As FWFR Editor Tim Gammell notes, Q2 is often a “weak quarter” for drawing conclusions, as it includes mud season and maintenance activities, especially in Canada and across the Northern U.S.

For 2021 YTD, the management of risk dominates conversations with forest industry professionals, even as firms continue to invest capital into increasing capacity at sawmills, pulp mills and pellet plants. In the past four quarters, North America added 1.4 billion board feet (BBFT) of sawmill capacity, with another 1.6 BBFT of capacity coming in H2 2021 (not including Canfor’s recently confirmed plans for a new 250 MMBF mill in Louisiana for 2022). The size and location of this capacity influences the current availability and expected pricing for residual wood fiber and roundwood pulpwood by region.

Given capital investment activity, how did fiber pricing look in select regions?

• In the U.S. South Central region, residual chips held steady for softwood and hardwood, while roundwood prices were up.
• In the U.S. Lake States, fiber prices largely fell across the board for the third quarter in a row: softwood and hardwood chips, as well as softwood roundwood were down ~1% for the quarter; hardwood roundwood (including poplar) held steady.
• In the Northeast, fiber prices fell ~3% for softwood and hardwood chips, and softwood roundwood.
• Western Canada continued to show quarterly price increases for chips in US dollars. In Alberta and BC, the price of softwood residual chips increased significantly due to their formulaic ties to the price of NBSK.

 

The importance of wood fiber markets remains a central topic in conversations with clients and investors for both tactical and strategic reasons. To help address this topic, Forisk’s 5^th annual “Wood Flows and Cash Flows” conference on September 2^nd, 2021 includes an Executive Panel dedicated to the topic of wood fiber markets. Enjoy investment research and strategic analysis of the forest industry virtually from the comfort of your (home) office. To learn more and to register, click here.