Pulpwood Prices Fell in 3Q2010

Last winter, total fiber prices escalated due to a significant increase in the haul distance required to move adequate supply to mills in the U.S. South. Local supply in the West-South and Mid-South, constrained by wet weather that prohibited logging, had to be replaced with chip shipments from the East-South, the Lake States, and even as far away as Nova Scotia and Brazil.

Since the end of 1Q2010, however, weather has returned to normal conditions, and as a result, prices have reverted to historical averages (see chart). Hardwood fiber suffered the biggest losses, with prices dropping 13 percent in third quarter, from $49.50/ton to $43.08/ton. Pine fiber prices fell 4 percent, from $36.92/ton to $35.53/ton in the third quarter.

During the winter, we expect to see moderately higher prices due to a normal seasonal increase in rainfall levels and increased demand over the holiday season for containers and paper. Holiday sawmill curtailments will add to these increases, as mills will need to replace a portion of their sawmill residuals with chipped pulpwood.

The most interesting event to watch over the winter will be the RWE pellet facility, Georgia Biomass. The company will reportedly start buying fiber in December as they prepare for a 2011 start-up.