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Global Timber and Wood Products Market Update

July 11, 2018

By: The Working Forest Staff

The US and Canadian Pellet Feedstock Price Indices increased in early

2018, driven mainly by higher demand for pellets in Europe and Asia,

according to the North American Wood Fiber Review

 

The pellet feedstock price indices for North America, launched by WRI in 2013, have

trended upward in Canada during most of 2017 and early 2018 but declined in the US

during the same period. The level of availability of sawmill residues was the major driver

for the price corrections the past year.

Seattle, USA. Wood fiber costs for pellet producers in both Canada and the US were

slightly higher in the 1Q/18 than in the previous quarter, continuing an upward trend that

started in early 2017. In Western Canada, the difficult weather conditions during the winter

months hampered harvest operations, forcing multiple sawmills to either slow production

or take limited downtime in the first quarter. The lower sawmill operating rates resulted in

reduced supplies of residues for pellet manufacturers, forcing some to use more costly

forest biomass in their feedstock mix. The total fiber cost for Canadian pellet producers

has slowly moved upward during 2017 and early 2018 to reach a three-year high in the

1Q/18.

The Pellet Feedstock Price Index for Canada (PFPI-CA), reported in US dollars, rose by

8.1% y-o-y to reach US$44.21/odmt in the 1Q/18, according to the North American Wood

Fiber Review. Much of this increase was the result of a strengthening of the Canadian

dollar against the US dollar.

Pellet feedstock costs in Western Canada are likely to increase overall in 2018 because of

the shrinking availability of sawlogs for the region’s sawmills, a crucial source of biproducts

for the pellet industry.

In the US, the Pellet Feedstock Price Index (PFPI-US) also inched up from the previous

quarter, reaching US$63.60/odmt. However, as compared to the same quarter in 2017, the

PFPI-US index was down 3.0% as there were incremental changes in the feedstock mix,

with a higher share of lower cost shavings and microchips and a lower share of high cost

roundwood. As 2018 continues, U.S. South lumber production and its impact on sawdust

and shavings supplies will influence the index. With sawmill residual supply expected to

increase, pricing for sawdust and shavings will likely fall and thus benefit those pellet mills

able to handle residuals.

Note. The WRI pellet feedstock price indices for Canada and the US (PFPI-US and PFPICA),

launched in 2013, show a quarterly volume-weighted price for the fiber consumed by

each country’s pellet sector. The feedstock mix (roundwood, sawdust, shavings, microchips

and forest biomass), production capacity and operating rates, are gathered to calculate

the regional index price.

 

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