North American wood fiber prices decreased 8% year-over-year through Q4 2023 according to the Forisk Wood Fiber Review (FWFR). Continued soft demand from pulp and paper mills, decreasing foreign demand, and generally favorable logging conditions contributed to the fiber oversupply in North America.
Canadian roundwood prices increased 1% and chip prices fell 11% year-over-year. Softwood pulplogs in British Columbia were flat and rose 4% in the Maritimes for the quarter in U.S. dollars. Delivered softwood chip prices decreased 2% for Alberta, 14% for E. Ontario/Quebec and 13% in British Columbia for the year. “Canada continues to be in a state of change, particularly in the west.” according to Vickie Swanton, Forisk’s Western Region Representative. “The industry faces challenging supply scenarios, and continued weak end-markets, particularly in Asia, may lead to further declines in market activity.”
U.S. roundwood and chip prices fell around 2% and 15% year-over-year, respectively. U.S. Southeast fiber prices fell year-over-year for roundwood and chips, while they rose moderately for the South Central region. Prices for the Northeast softwood roundwood were flat year-over-year and residual chips dropped 14%. “After a year where weak markets and several pulp and paper mill closures reduced fiber demand throughout the country, it is not unexpected to see price decreases. The oversupply of cheap fiber, particularly in the South, will encourage consumers to consider capital projects that might increase fiber demand and provide relief for markets.” noted Stephen Wright, Product Manager for the FWFR. “Logger health continues to be a priority for suppliers, with many noting that there might not be enough if the markets turn around quickly in 2024.”
Wood fiber costs account for over half of total pulp manufacturing cost worldwide. The Forisk Wood Fiber Review includes prices and market commentary for all major North American regions, providing essential data for anyone that needs to track pulpwood, wood chips, and biomass prices in the world’s largest and most dynamic wood fiber markets. The FWFR provides updates of softwood and hardwood prices for all major markets in North America. Prices are reported for wood delivered to consuming plants as a range and average price. Each report also updates U.S. and Canada trade statistics for lumber, logs, wood pellets, wood chips and pulp.
If fiber markets are weak and fiber demand is reduced and fiber supplies exceed demand (oversupply), why would fiber consumers undertake capital projects to increase demand? I suspect the oversupply of fiber is at least in part due to low demand. Fiber consumers and investors might undertake capital projects given long term interest rates are low, but not because demand is weak. I understand industry capital projects take a long time before going into production, but undertaking a capital project now, even with lower interest rates, would be a speculative endeavor anticipating a sudden and rapid increase in demand as well as a growing supply, not just a present oversupply.