2Q Results: Pine Fiber Delivered to Pulp and Paper Mills in the South

From the August 2010 Forest2Mill newsletter.

Pine purchases by pulp and paper mills in the South remained flat in the second quarter. Pine pulpwood volume was just under first quarter purchase volume, while primary or chip mill chip volume fell 9.5 percent and secondary or mill residual chip volume increased by 15 percent. For all pine fiber, purchased volume declined just 0.23 percent.
Pine fiber prices fell $2.26/ton on a weighted average basis across the South. Multiple factors led to this drop. First, dryer weather increased log supply. Pulpwood costs direct to mills and through chip mills fell as a result. In addition, higher sawmill production at the beginning of the quarter increased the supply of mill residues or secondary chips. Pulp and paper mills substituted this cheaper material for higher priced primary chips. Prices ended the quarter just above $36/ton.
Inventories also played a part. According to Daniel Stuber, Forest2Market’s Director of Operations, “Inventory levels fell through the third and fourth quarters of 2009 and the first quarter of 2010, causing the spike in prices from September 2009 through March 2010. In 2Q2010, inventory was restored to its 2Q2009 level, and as that happened, prices began to drop.”
“Our data reflects more than two-thirds of all raw materials crossing the mill gate in the South, or about 180 million tons reported in more than 7 million transactions each year. At the end of 2Q2010, this data suggests that supply and demand for pine fiber are relatively balanced,” said Stuber. “If this continues into next quarter, prices should flatten. Though there is a chance that prices will fall back to the $34/ton range, seasonal inventory building through the fall should help prices stay at this $36/ton level.”
Additional Stories from the August 2010 Forest2Mill Newsletter:

Economic Outlook
Housing Market Update
Results from 2Q2010 Delivered Price Benchmark
      Hardwood Fiber
      Pine Sawtimber
Myth of Deforestation
AF&PA Sustainability Report

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