Hardwood fiber costs for pulp mills worldwide increased modestly at the end of 2020

Increased demand for hardwood fiber in key pulp-producing countries and a weaker US dollar resulted in higher hardwood pulplogs prices in the 4Q/20. The Global Hardwood Fiber Price Index (HFPI) was up 1.4% from the 3Q/20 to the 4Q/20, the second q-o-q increase of the US dollar denoted Index from its 15-year low in the 2Q/20. Prices rose the most in Latin America and Indonesia, while the price gains were more modest in North America and Central Europe.

Despite prices increases during the second half of 2020, hardwood pulplog costs were substantially lower in the 4Q/20 than in the 4Q/19 in most of the 15 countries tracked by the Wood Resource Quarterly, with prices declining by 5-15% y-o-y in US dollar terms.

Softwood fiber costs also increased globally in the 4Q/20, except for pulpmills in the US and Germany, where healthy production levels in the sawmilling sector generated more residuals and, as a consequence, mills had less need for costlier pulplogs. Prices for softwood residual chips in the US Northwest fell by 3% q-o-q and were as much as 19% lower than in the 4Q/19 because of high operating rates in the region’s sawmills. In the US South, where fiber prices typically fluctuate much less than in the US Northwest, average chip prices were down one percent q-o-q to a two-year low.

In Germany, softwood chip prices continued to slide in the 4Q/20. The significant increase in byproducts generated by Germany’s lumber producers has positively impacted the total softwood fiber costs for the pulp industry in the region. In just three years, wood chip prices have fallen by half to a level last seen in 2003, according to the WRQ. The reduced fiber prices are good news for German pulp producers as wood fiber costs account for almost 50% of the manufacturing costs.

Softwood fiber price changes were mixed over the past year. There were declines in North America, Central Europe, Russia, Brazil, Oceania, and Japan compared to increases in the Nordic countries, Chile and China. When averaged out, there was ultimately a slight rise in the Global Softwood Fiber Price Index (SFPI) during 2020. The annual average SFPI of slightly less than $87/odmt was the lowest level since 2004.