FIBER

FORISK WOOD FIBER REVIEW: CAPITAL INVESTMENTS AND FIBER PRICES IN NORTH AMERICA

BY BROOKS MENDELL

The systematic “snapshots” of fiber prices captured by the Forisk Wood Fiber Review help us identify and point to sources of pain and opportunity. For example, capital continues to flow to the U.S. South: GP and West Fraser confirmed or completed significant sawmill and OSB investments in the late 2021. Outside of the South, the announced acquisition of EACOM Timber Corp. in Eastern Canada by Interfor was especially noteworthy, as it demonstrates the potential upside in the forest industry across North American regions. That said, risks remain. Wildfires, rainfall and warming demand from China have created stresses in the Pacific Northwest and British Columbia. Given investment activities and shifting markets, how did wood fiber pricing look across North American as we closed out 2021? In the U.S. South Central region (Figure 1), softwood roundwood and chips and hardwood roundwood were up 1 to 2%, while hardwood chips prices were up approximately 4%. In the frenzied Southeast, fiber prices—both chips and roundwood— increased for the fourth straight quarter in Q4 2021. In the U.S. Great Lakes region, softwood and hardwood fiber prices held relatively steady for a second quarter against a backdrop of soft demand. In the Northeast, hardwood and softwood chips rose 2 to 3%; roundwood held steady. In the Pacific Northwest, softwood chips and roundwood jumped approximately 11% against a backdrop of stronger Chinese demand and

FIGURE 1. SOUTH CENTRAL FIBER PRICING THROUGH Q4 2021

SOURCE: FORISK WOOD FIBER REVIEW

reduced fire salvage operations, which dried up available pulp logs earlier in 2021.

As for Eastern Canada fiber prices during the quarter, softwood chips and hardwood roundwood in Quebec/eastern Ontario fell approximately 2% in U.S. currency (and remained level in Canadian dollars). Hardwood roundwood fell in the Maritimes for the second quarter in all on one line dollars, after increasing in Q2 2021. Western Canada softwood chips declined for a second quarter after multiple quarterly price increases (for residuals chips, due in great part to their formulaic ties to the price of northern bleached softwood kraft (NBSK). Softwood chip prices in Alberta and British Columbia fell about 1% and 5%, respectively, for the quarter.

For broader context, we recognize how supply chain issues continue to trouble forest industry managers. One lumber firm executive told us, “We’ve got wood right now, but our challenge is labor.” We speak with hundreds of foresters, investors, and managers each quarter when compiling data for the FWFR and the Forisk Market Bulletin. Many shared multiple examples of recent pain points: • “Logging crews are cannibalizing each other’s operators.” • “We’re losing woods workers and guys in the mill at the same time to other industries.” • “There is craziness in the wood supply chain. I’m just wondering who’s going to run out of people first.”

One procurement manager sounded a more hopeful note, observing that the situation at each mill and for each market differs: “Maybe we don’t have too few trucks. Maybe we just need to take better care of the trucks and drivers that we have.”

Regardless the size and depth of the issue, we always have improvement opportunities.

The above is data from the Forisk Wood Fiber Review, a quarterly publication tracking North America’s major wood fiber markets, and the Forisk Market Bulletin, which tracks forest industry investments.

Author: Brooks Mendell Forisk Consulting LLC 770-725-8477 bmendell@forisk.com