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North American

Wood Fiber

Review

1 © 2011 Wood Resources International LLC.

Table of Contents

The North American Pulpwood and Biomass Market This Quarter ....................................................... 2

Wood Fiber Prices in North America 2Q/2011 ............................................................................................ 3 Softwood fiber prices, metric tons .............................................................................................................................. 4

Hardwood fiber prices, metric tons ............................................................................................................................. 5

Softwood and hardwood fiber prices, green short tons ............................................................................................... 6

The US Regional Wood Fiber Market Updates .......................................................................................... 7 The South wood fiber market update .......................................................................................................................... 7

The Lake States and Northeast wood fiber market updates ........................................................................................ 8

The Western wood fiber market update ...................................................................................................................... 9

Wood chip prices in the Northwest ..................................................................................................................... 10

Wood chip consumption and inventory in the Northwest ................................................................................... 11

Pulplog prices in the Northwest ........................................................................................................................... 13

Residue and woody biomass prices in the West .................................................................................... 14

Canada Wood Fiber Market and Industry Update .................................................................................. 15 Wood chip and pulpwood prices in Western Canada ............................................................................................... 16

Wood chip and pulpwood prices in Eastern Canada ................................................................................................. 17

North American Woody Biomass Market Update ................................................................................... 18 North American Woody biomass policies and issues update .................................................................................. 18

North American Woody biomass industry update .................................................................................................... 20

North American Regional market updates ................................................................................................................ 21

Interior British Columbia and Mississippi/Alabama ......................................................................................... 21

US Southeast and Northeast ............................................................................................................................... 22

Northern California and Western Washington ................................................................................................... 23

Regional Woody Biomass Price Comparison ......................................................................................................... 24

North America Wood Fiber Trade ............................................................................................................. 25 US wood chip trade ................................................................................................................................................... 25

Imports ................................................................................................................................................................. 25

Exports ................................................................................................................................................................. 26

Canada wood chip trade ............................................................................................................................................ 27

Imports ................................................................................................................................................................. 27

Exports ................................................................................................................................................................. 28

North America Wood Pellet Exports to Europe ........................................................................................ 29

North America Sawlog Markets and Exports ............................................................................................ 31 Sawlog prices ....................................................................................................................................................... 31

Sawlog exports .................................................................................................................................................... 33

The Global Forest Industry the past quarter – update from the WRQ .................................................. 34

The Global Wood Fiber Indices (SFPI and HFPI) ................................................................................... 35

Subscription Information, Disclaimer and Copyright Laws ................................................................... 36

North American Wood Fiber Review

June, 2011

North American

Wood Fiber Review

© 2011 Wood Resources International LLC. 2

The North American Pulpwood and Biomass Market This Quarter April - June, 2011

Tsunamis and tornadoes have yet to affect North

American commodity prices

While Japan’s earthquake and tsunami was the

major development in 1Q/11, anticipated demand

for rebuilding lumber has yet to take hold. The

series of tornadoes across the US South brought

widespread damage in April, but the impact on

building materials pricing has not yet been seen.

The German government’s decision to close its

nuclear plants by 2022, triggered by the Japanese

Fukushima nuclear drama, holds some promise for

additional pellet demand from the wood-to-energy

industry segment in North America. However any

market impact is still months or years away.

Western Canadian wood chip prices stabilize,

pulplog prices surge on the BC coast

In Canadian dollar terms, wood fiber chip prices

stabilized, tied as they are to product formulae. In

US dollars, BC softwood chip prices rose less than

four percent from US$106/odmt to US$110/odmt,

with transportation and exchange rate changes

accounting for most of the increase.

BC Coast pulplog prices, in contrast, rose a striking

20 percent in US dollar terms, from US$42/green

ton in 1Q/11 to US$49/green ton in 2Q/11.

Northwest U.S. fiber prices increase again

Fiber buyers in the Northwest U.S. were still

scrambling for adequate fiber supplies in 2Q/11

resulting in higher prices for the fourth quarter in a

row. Softwood residual chip prices rose 20 percent

to US$129/odmt from the previous quarter.

With western lumber production falling once again

in the second quarter, less residual chips will be

generated, and therefore whole log chips are likely

to grow in importance for the rest of the year.

Whole-log chips represent a higher percentage of

the total fiber consumption in 2Q/11, which has

resulted in a blended (residual and whole log)

delivered price of US$136/odmt this quarter.

Fiber prices in Ontario and Quebec stable,

Maritimes continue rising

Wood prices in Ontario and Quebec were

unchanged in Canadian dollars, but up slightly in

the U.S. dollars due to strengthening of the

Canadian dollar. In the Maritime Provinces of Nova

Scotia and New Brunswick, both softwood and

hardwood roundwood prices rose by double digits.

New woody biomass and pellet facilities open or

are near completion

Georgia Biomass, in Waycross, Georgia officially

opened its pellet facility in 2Q/11, paving the way

for an additional consumption of 1.5 million green

tons of wood fiber for pellet production. All

production is expected to be exported to Europe.

New England Wood Pellets officially opened its

85,000 ton capacity pellet plant in Deposit, New

York – the largest such plant in the Northeast.

Trebio Renewable Biomass in Quebec should

complete its new 130,000 ton capacity pellet plant

in the next few months, which will also be the

largest pellet plant in Eastern Canada.

In Lufkin Texas, Aspen Power’s 50MW biomass

plant, the largest in the state, was conducting final

test burns before beginning operations.

Two additional biomass “hotspots” to be tracked

British Columbia’s Interior is the center of North

America’s pellet export industry and over the next

decade, it will continue to invite innovation in

utilizing wood fiber for new products.

In addition, there are a number of new or announced

biomass, pellet, or biofuel projects in Mississippi

and Western Alabama. How these new players will

interact with what is the heart of the southern pulp

and paper industry will be fascinating.

These two areas will now be monitored (page 21

this edition) in NAWFR’s Biomass section.

North American

Wood Fiber

Review


Wood Fiber Prices in North America

Second Quarter 2011

Avg Min Max Avg Min Max

Softwood

U.S.

Northwest 129 89 192 109 57 156

Lake States 108 95 130 121 102 145

Northeast 105 60 154 106 79 142

Southeast 71 61 79 73 62 83

South Central 73 59 83 69 59 82

Canada

British Columbia 110 95 133 122 93 156

Alberta 117 89 143 ..... ..... .....

Ontario 120 93 140 148 111 171

Quebec 130 104 156 166 124 187

Maritimes ..... ..... ..... 118 100 146

Hardwood

U.S.

Northwest 108 96 121 72 59 89

Lake States 73 55 97 93 62 111

Northeast 82 68 121 108 91 149

Southeast 65 58 73 72 63 82

South Central 68 53 76 68 58 83

Canada

Ontario 81 73 93 91 76 109

Quebec 85 73 96 99 78 114

Maritimes ..... ..... ..... 98 86 130

US$/odmt (delivered) US$/odmt (delivered)

Wood Chips Roundwood

Notes:

All prices in US dollars in US$/odmt (oven-dry metric ton). 1 odmt equal to 1.102 short tons (dry weight) or 2204 lb.

Roundwood prices are delivered to pulpmill or chipping facility.

Chip prices are for residual chips and do not include chips manufactured from roundwood.

Exchange rate: Can$0.964/US$ (Average 2Q/2011)

Sources:

U.S. – Lake States WRI sources and the Timber Mart-North published by Prentiss & Carlisle Management Co.

All other regions Data collected by North American Wood Fiber Review and Wood Resource Quarterly.

North American

Wood Fiber Review


Alberta Chips 117 (89-143)

Ontario Chips 120 (93-140)

Roundwood 148 (111-171)

Quebec Chips 130 (104-156)

Roundwood 166 (124-187)

Canadian Maritimes Roundwood 118 (100-146)

U.S. Pacific Northwest Chips 129 (89-192)

Roundwood 109 (57-156)

)

British Columbia Chips 110 (95-133)


)

U.S. Lake States Chips 108 (95-130)

Roundwood 121 (102-145)

U.S. South Central Chips 73 (59-83)


U.S. Southeast Chips 71 (61-79)


U.S. Northeast Chips 105 (60-154)


Notes:

Units in US$/odmt (delivered). 1odmt (oven-dry metric ton) equal to 1.102 short tons or 2204 lb.


Chip prices are for residual chips and do not include chips manufactured by roundwood


Sources:

US – Lake States WRI sources and the Timber-Mart North published by Prentiss & Carlisle Management Co.

All other regions Data collected by Wood Resources International and WRQ sources.

Softwood Fiber Prices in North America

Second Quarter 2011

North American

Wood Fiber

Review


U.S. Pacific Northwest

Chips 108 (96-121)


U.S. South Central

Chips 68 (53-76)


U.S. Southeast

Chips 65 (58-73)


U.S. Northeast

Chips 82 (68-121)


)

Quebec

Chips 85 (73-96)


Canadian Maritimes


U.S. Lake States

Chips 73 (55-97)


Ontario

Chips 81 (73-93)


Hardwood Fiber Prices in North America

Second Quarter 2011

Notes:

Units in US$/odmt (delivered). 1odmt (oven-dry metric ton) equal to 1.102 short tons or 2204 lb.


Chip prices are for residual chips and do not include chips manufactured by roundwood


Sources:

US – Lake States WRI sources and the Timber-Mart North published by Prentiss & Carlisle Management Co.

All other regions Data collected by Wood Resources International and WRQ sources.

North American

Wood Fiber Review


Wood Fiber Prices in North America

2Q/10 – 2Q/11

2Q/10 3Q/10 4Q/10 1Q/11 2Q/11 Change 2Q/10 3Q/10 4Q/10 1Q/11 2Q/11 Change

y/y (%) y/y (%)

Softwood

U.S.

Northwest 40 42 47 49 59 45 29 31 34 41 44 52

Lake States 46 46 46 48 49 7 43 43 44 49 49 13

Northeast 40 41 41 44 48 19 41 40 39 42 43 6

South East 33 31 31 32 32 -1 29 29 30 30 30 1

South Central 34 34 33 33 33 -4 31 28 29 28 28 -10

Canada

British Columbia 46 47 47 48 50 9 37 37 38 41 49 32

Alberta 43 48 49 51 53 24 …. …. …. …. …. na

Ontario 53 52 54 54 55 3 56 56 57 59 60 7

Quebec 57 57 58 58 59 3 63 62 64 66 67 7

Maritimes ..... …. …. …. …. na 36 35 37 42 48 32

Hardwood

U.S.

Northwest 52 50 50 50 49 -6 32 34 31 31 29 -9

Lake States 32 32 32 33 33 3 34 35 36 38 38 12

Northeast 37 37 37 37 37 1 38 38 37 40 44 14

South East 29 29 29 29 29 0 31 30 30 30 29 -6

South Central 31 31 31 31 31 -1 33 29 29 28 28 -16

Canada

Ontario 35 35 36 36 37 4 35 35 36 36 37 4

Quebec 37 37 38 38 39 3 37 37 38 39 40 7

Maritimes …. …. …. …. …. na 33 33 34 36 40 18

Wood Chips Roundwood

US$/green tons ob (delivered)US$/green tons (delivered)

Notes:

All prices in U.S. dollars per green tons (2000 lbs) or equal to 0.907 metric tonnes


Chip prices are for residual chips and do not include chips manufactured from roundwood.


Sources:

U.S.-Lake States WRI sources and the Timber Mart-North published by Prentiss & Carlisle Management Co.

All other regions Data collected by North American Wood Fiber Review and Wood Resource Quarterly.

North American

Wood Fiber

Review


0

5

10

15

20

25

30

35

40

Softwood chips Softwood

roundwood

Hardwood

chips

Hardwood

roundwood

US

$/g

reen

ton (

del

iver

ed)

South Central Fiber Prices

1Q/10 2Q/10 3Q/10 4Q/10 1Q/11 2Q/11

0

5

10

15

20

25

30

35

Softwood

chips

Softwood

roundwood

Hardwood

chips

Hardwood

roundwood

US

$/g

reen

ton (

del

iver

ed)

South East Fiber Prices

1Q/10 2Q/10 3Q/10 4Q/10 1Q/11 2Q/11

South Central fiber prices drift lower

Violent storms in Mississippi and Alabama, and

flooding along the Mississippi River dominated

weather news in this region during the 2Q/11.

Wildfires across the state of Texas added to the

region’s drama. The river flooding resulted in

curtailments to a few pulpmills and chipping

facilities, and there were also some seasonal

maintenance outages. These temporary reductions

in demand canceled out reductions of fiber

production which occurred secondary to the weather

and fire events.

In some buyer’s opinions, cleanup from Alabama’s

swath of damage from tornadoes (estimated at 14

million green tons of wood over 230,000 acres) has

raised the likelihood that overall delivered softwood

roundwood prices may drop in 3Q/11. While

salvaging is difficult and more costly, the sheer

volume of wood that is under pressure to be brought

in before it deteriorates will bring a surge of supply

to the market.

Sawmill residual chip prices remained unchanged,

though lumber production showed growth through

the 1Q/11.

High diesel prices have been the only factor

applying pressure towards increasing delivered

wood cost, but except in specific instances, those

increases have been negligible.

Southeast fiber prices also see small decreases

Wildfires primarily in Georgia during May created

salvage opportunities similar to those in Mississippi

and Alabama. The “advantage” in this situation, in

contrast to the twisted damaged wood left by

tornadoes, is the relatively clean sweep of fire

leaving stands in much better shape for conventional

salvage harvest operations. As a result, a brief

“flood” of freshly killed roundwood entered the

supply arena in the Southern end of this region, with

local pulp mills being quick to take advantage of the

increased supply.

Both softwood and hardwood delivered wood prices

in the Southeast dropped on average one US$/green

ton. Several contacts noted that while lower

delivered wood prices were the norm, rising

Southeast stumpage prices wherever new

competition has emerged. One such example is in

Southeast Georgia where a major new pellet plant

has begun operations.

Southwide region further improves its

comparative advantage

With other pulp regions experiencing significant

increases in wood costs this quarter – whether from

sawmill reductions in residual chips or extended

transitions from spring to summer access to wood,

the South’s low, stable wood prices continue to

make the region a formidable world competitor.

US South Wood Fiber Market Update April - June, 2011

North American

Wood Fiber Review


0

10

20

30

40

50

US

$/g

reen

ton

(deli

ver

ed)

Lake States Wood Fiber Prices

Sftwd Roundwood Hwd Roundwood

Sftwd chips Hwd chips

0

10

20

30

40

50

60

US

$/g

reen

ton (

del

iver

ed)

Northern New England Wood Fiber Prices

Sftwd Roundwood Mixed Hwd Roundwood

Poplar Roundwood Mixed Hwd Chips

Wood fiber prices rise slightly due to increased

diesel costs and wet operating conditions

Though there was much concern over the long wet

transition from winter to late spring, the Lake States

region experienced relatively little price movement.

Softwood residual chips showed a two percent rise

from the previous quarter, though the rise in

residual softwood chips is thought to be more a

function of scarcity due reduced sawmill production

than increased demand.

While both softwood and hardwood roundwood

prices were steady this quarter, both are nearly 13-

14 percent higher than one year ago. Softwood

roundwood, US$43/green ton in 2Q/10, is now

US$49/green ton. Hardwood roundwood,

US$34/green ton then, is now US$39/green ton.

Wet conditions this past fall and winter, in

particular where early snows had prevented freezing

in mixed spruce and fir stands, resulted in the jump

in softwood roundwood prices and prices have

remained elevated to date. As summer access to

wood begins to take hold, delivered wood prices

should ease, though pressure from higher diesel

prices may prevent any net change.

Northern New England hardwood roundwood

still scarce resulting in further price increases

Mixed hardwood, sorted poplar roundwood, and

hardwood residual chip prices all rose significantly

in 2Q/11 in Maine, the center of Northern New

England’s pulp and paper industry. Hardwood

roundwood rose 11 percent from the previous

quarter, while poplar rose 10 percent. Hardwood

residual chip prices rose nearly six percent, though

like other regions, this reflected slowing lumber

production and shrinking residual chip supply.

On an annual basis, hardwood roundwood prices

have climbed nearly 26 percent in one year – from

US$39/green ton to US$49/green ton in 2Q/11. The

rise is a result of both long and short term factors.

The long running dispute over using Canadian

bonded labor has resulted in some contractors

reducing their capacity and workforce. In the short

term, a slow wet spring, lower than hoped for

inventories coming out of winter, and high diesel

prices were repeatedly cited.

Broader Northeast regional wood fiber prices

outside of Northern New England remain

significantly lower and more stable.

Lake States - Northeast Wood Fiber Market Update

April - June, 2011

North American

Wood Fiber

Review


124

147141

162

140

152

119 116

159

175 170

186

147

167

150

141

0

25

50

75

100

125

150

175

200

Douglas-fir Hemlock Douglas-fir Hemlock Douglas-fir Hemlock Douglas-fir Hemlock

W. Washington Lower Columbia R. W. Oregon Inland Empire

US

$/B

DU

(d

eliv

ered

)

Residual and Roundwood Chip Prices 2Q/2011 Northwest U.S.

Residual chips Roundwood chips

0

20

40

60

80

100

120

140

160

180

in $

/BD

U d

eliv

ered

Douglas-fir and hemlock chip prices at the

Lower Columbia River pulpmills

DF Residual chips DF Whole-log chips

HEM Residual chips HEM Whole-log chips

Wood fiber price rises show no abatement

For the fourth straight quarter, weighted wood chip

prices in the Pacific Northwest rose substantially.

The weighted price of Douglas-fir chips (both

residual and whole log) is now US$144/bdu, up 42

percent from 2Q/10, and 13 percent from 1Q/11.

Hemlock prices, once nearly indistinguishable from

those of Douglas-fir, have “separated,” currently

averaging US$155/bdu, up 47 percent from 2Q/10.

The current price surge is a result of four primary

factors: sawmill lumber production well below

historical volumes, high pulpmill production due to

strong product prices, a reopened pulpmill in

Washington, and strong Chinese demand for logs.

Western sawmill lumber production continues well

below capacity in spite of some selling to the China

market. The resulting lack of residual chips has,

according to the Forest Resources Association,

culminated in nearly 46 percent of wood fiber

consumed by Northwest pulpmills being

manufactured chips in the first five months of 2011.

Historically, sawmill residual chips have provided

70-75 percent of the furnish to the region’s

pulpmills.

High product prices for most pulp and paper grades

continue, resulting in continued high operating rates

and high demand for fiber at the region’s pulpmills.

A newly reopened pulpmill in Cosmopolis

Washington has also further increased the demand

for hemlock in particular, as this is the preferred

species for the mill’s primary product.

In addition, the strong log demand from China

continues to siphon off some of the available chip-

n-saw grade logs used in a pinch in pulpmill whole

log chipping operations or in sawmills.

The rise in chip prices has moved the Pacific

Northwest into the highest cost fiber region in the

U.S this year. In fact, the prices now in the PNW

rival those in the traditionally highest-priced

Eastern Canadian Provinces of Ontario and Quebec.

Northwest U.S. pulplog prices rise

Hemlock pulplog prices have climbed 62 percent

from one year ago. In 2Q/10, the average price was

US$29/green ton, and is now US$47/green ton.

Douglas-fir pulplog prices have risen 45 percent in

the past year – from US$29/green ton in 2Q/10 to

US$42/green ton this quarter.

To date, most of the increase in pulplog prices has

been confined to the West side of the Cascade

mountains. Still Douglas-fir and hemlock pulplog

prices east of the Cascade mountains have risen 21-

25 percent from 2Q/10 to 2Q/11, and reports are

increasing regarding new log concentration yards

being set up or reopened on the east side for 3Q/11.

This portends an interesting summer and fall.

Northwest U.S. Wood Fiber Market Update April - June, 2011

North American

Wood Fiber Review


in US$/bdu (delivered) Ave Ave Ave Ave

Washington 140 113 - 195 160 90 - 211 See US West average See US West average

Northwest (Puget Sound)

Lower Columbia River 154 127 - 190 172 127 - 197 See US West average See US West average

(SW WA + NW OR)

Oregon 143 118 - 180 157 118 - 185 na na

(Willamette Valley)

Inland Empire 129 99 - 166 125 97 - 166 na na

(E. Washington, Idaho)

US West, weighted average 144 99 - 195 155 90 - 211 112 82 - 139 126 105 - 137

Douglas-Fir Hemlock Cedar Hardwood

Range Range Range Range

0

20

40

60

80

100

120

140

160

W. Washington Lower Columbia R. W. Oregon Inland Empire

US

$/B

DU

Douglas-fir chip prices in Northwest U.S.

2Q/10 3Q/10 4Q/10 1Q11 2Q11

Notes:

Wood chip prices in above table and graph include both residual chips and chips manufactured from roundwood.

Prices are in US$/BDU delivered to domestic pulpmills. 1 BDU = 2400 lb. = 1.09 metric ton (dry weight)

1 BDU = 1.2 BDT

Wood Chip Prices – Northwest U.S.

April - June, 2011

North American

Wood Fiber

Review


Northwest U.S. Wood Chip Inventories

Company Location Jun-10 Sep-10 Dec-10 Mar-11 Jun-11

Blue Heron Paper Co. Oregon City, Or 0.7 0.2 0.4 closed closed

Boise Cascade Corp. Wallula, Wa 21 24 44 39 34

Cascade Pacific Pulp LLC Halsey, Or 40 25 30 32 40

Clearwater Paper Corp. Lewiston, Id 29 39 56 59 35

Cosmo Speciality Cellulose Cosmopolis, Wa - - - - 15

Georgia Pacific Corp. Camas, Wa/Wauna, Or 35 25 31 18 28Toledo, Or 13 17 23 10 12Coos Bay, Or 5 3 4 3 1

Inland Empire Paper Co. Spokane, Wa 1 6 6 8 3

International Paper Springfield, Or 15 15 18 15 15

Kimberly Clark Everett, Wa 15 21 24 17 13

Longview Fibre Co. Longview, Wa 54 57 50 40 67

Nippon Paper Industries Port Angeles, Wa 0.5 0.5 0.8 0.7 0.6

Oregon Chip Terminal Coos Bay, Or 28 14 4 14 12

Ponderay Newsprint Co. Usk, Wa 2 2 2 2 3

Port Townsend Paper Pt Townsend, Wa 7 10 12 10 8

Roseburg Forest Products Coos Bay, Or 30 30 28 30 8

Simpson Paper Co. Tacoma, Wa 15 24 24 21 10

SP Newsprint Co. Newberg, Or 0 0.5 1 0.7 0.7

Weyerhaeuser Co. Longview, Wa 33 29 34 25 33

TOTAL Northwest U.S. (in 1000 BDU) 344 342 392 344 338

Change Y/Y (%) -20 -30 -14 -21 -2

Notes:

Inventories in the above table include both chips and sawdust, and represent the estimated on-hand volumes at the end

of 2Q/11.

North American

Wood Fiber Review


0

100

200

300

400

500

600

700

800

in 1

00

0 B

DU

's

Chip and sawdust inventory in Northwest U.S.

WA (Puget S.) East WA/ID/MT Lower Columbia River

OR (Willamette V.) Export Total

Source: North American Wood Fiber Review

0

10

20

30

40

50

60

0

200

400

600

800

1000

1200

Inv

ento

ry (d

ays)

Co

nsu

mp

tio

n (1

00

0 B

DT

)

Wood fiber consumption and inventory

Northwest U.S.

Consumption

Days of

InventorySource: FRA Western Region

- through May, 2011

North American

Wood Fiber

Review


US$/green ton (delivered)

Hardwood

Ave Range Ave Range Ave Range

Washington, West 44 30-59 49 35-63 29 24-35

Lower Columbia River 44 38-52 50 40-59 29 25-36

(SW WA + NW OR)

Oregon, West 46 40-55 46 40-55 29 27-35

Inland Empire 34 23-50 34 23-50 ..... .....

Weighted Average 42 (23-59) 47 (23-63) 29 (24-36)

Pulplog Prices – Northwest U.S.

April - June 2011

Douglas-fir Hem-fir

Notes:

1BDT equivalent to 2000 lb or .907 metric ton

0

5

10

15

20

25

30

35

40

45

50

US

$/G

reen

to

n (

deli

vere

d)

Pulplog Prices in Northwest U.S. 2001 - current

Douglas-fir Hem-fir

North American

Wood Fiber Review


US$/BDT (delivered)

Ave Range Ave Range Ave Range Ave Range

Washington, West ..... ..... 48 33-61 35 26-47 46 41-58

Lower Columbia River ..... ..... 52 40-59 33 20-40 42 31-49

(SW WA + NW OR)

Oregon, West 60 35-71 55 38-72 33 24-40 43 40-50

Northern California ..... ..... ..... ..... 36 30-45 49 42-52

Inland Empire 39 19-70 53 15-89 38 15-55 58 45-65

Weighted Average 52 (19-71) 52 (15-89) 35 (15-55) 47 (31-65)

Residue and Woody Biomass Prices - Western U.S.

Shavings Sawdust Mill

Woody Biomass

Forest

Sawmill

April - June 2011

0

10

20

30

40

50

60

70

US

$/B

DT

(d

eli

vere

d)

Sawmill Residue Prices in the Western U.S. 2000 - current

Shavings Sawdust

North American

Wood Fiber

Review


Coastal BC pulplog prices rise due to continued

demand pressures

Pulplog prices along the BC coast were up sharply

in 2Q/11, 17 percent from the previous quarter.

Hemlock pulplogs rose to C$$49/m3 from C$42/m3

in 1Q/11. A combination of strong pulpmill

production, increased log exports to China, and

slow pulplog production from heavy snowpack

lingering in mid-elevation forest stands were cited

as the three primary factors. Anticipated seasonal

increases in harvest levels, just beginning now in

the late 2Q/11, should ease pressure on high prices

this summer.

In contrast to 2Q/11 pulplog prices, softwood chip

prices, which are tied to market pulp prices, were

essentially unchanged in BC’s coast region.

Similarly in BC’s Northern Interior, softwood chip

prices stayed the same. Because the region’s

sawmills were running at higher operating rates to

meet increased lumber demand from China, a

relatively strong supply of residual wood chips

reduced price pressure, which mitigated the

increased costs of diesel and thus helped prevent

higher delivered fiber costs.

In the BC Southern Interior, softwood prices rose

11 percent from the previous quarter, pressured

somewhat by the higher chip prices on the Coast, as

well as a bit of exposure to the price surge in the

neighboring US Pacific Northwest. The longer

distances between consuming mills and fiber

suppliers in the Southern Interior as compared to the

Coastal and Northern Interior regions - was an

additional pressure on pricing due to higher cost of

diesel.

Alberta softwood fiber prices continue slow rise

Alberta softwood fiber prices crept higher for the

third straight quarter to C$103/bdu – FOB. What is

not evident in this price measured at the sawmill

bin, are the increasing trucking costs, which have

risen dramatically the past year. Part of the

challenge for transportation continues to come from

competition with the oil patch sector. Both truck

drivers and mill workers have attractive benefits

and pay offered to them in the oil industry as an

alternative to forest products mills.

Wood fiber prices unchanged in Quebec and

Ontario

In Ontario and Quebec, softwood and hardwood

chip and roundwood prices remained unchanged

this quarter. With sawmills in the region historically

focused on the US domestic market, and not in

position to participate in the increased Chinese

lumber market, there was little good news for

lumber prices or mill production. Yet, as the impact

of negotiated 2011 yearly chip contracts set in, it

also became clear that some wood fiber buyers’

anticipation of reductions in chip prices generally

did not occur.

Maritime roundwood prices rise dramatically

Wood fiber prices in the Maritime Provinces of

New Brunswick and Nova Scotia continued to grow

by double digits in an apparent bid by fiber buyers

to entice private woodland owners into increasing

their harvest levels.

Softwood roundwood prices rose nearly 18 percent

in 2Q/11 from the previous quarter. With the

delivered price now averaging C$114/odmt, it also

represents a 17 percent increase from 2Q/10.

Hardwood roundwood prices increased eight

percent from the previous quarter.

On another note of interest, Paper Excellence

acquired the Northern Pulp-owned Pictou mill in

Nova Scotia, its fifth Canadian pulp mill acquisition

by the Indonesian company.

Canadian Wood Fiber Market and Industry Update

April - June, 2011

North American

Wood Fiber Review


Wood Chip and Pulpwood Prices - Western Canada April - June, 2011

Can$/BDU (FOB sawmill)

Douglas-Fir Hem-fir Spruce/pine/fir CedarAve Range Ave Range Ave Range Ave Range

British ColumbiaNorth Interior ..... ..... 95 81-116 95 81-116 ..... .....

South Interior 80 69-94 89 76-103 89 76-103 67 52-82

Coast 100 87-121 111 92-126 ..... ..... 72 55-85

Alberta ..... ..... ..... ..... 103 73-130 ..... .....

British ColumbiaNorth Interior ..... ..... 33 28-38 33 28-38 ..... .....

South Interior 33 30-39 38 32-65 38 32-65 ..... .....

Coast 40 36-43 49 42-60 ..... ..... ..... .....

RESIDUAL WOOD CHIP

ROUNDWOOD

Can$/m3 ub (delivered)

0

20

40

60

80

100

120

BC, Coast BC, N. Interior BC, S. Interior Alberta

Can

$/B

DU

(F

OB

saw

mil

l)

RESIDUAL WOOD CHIP PRICES - Western Canada

1Q/10 2Q/10 3Q/10 4Q/10 1Q/11 2q/11

Notes.

Domestic residual chips in Can$ per BDU at sawmill

Domestic log prices in Can$ per m3 (delivered to pulpmill or sawmill)

1 green ton approximately 0.92 cubic metre (Douglas-fir/hemlock) and 1.11 cubic metre (spruce/pine)

1BDU = 2400 Lb. = 1.09 metric ton (dry weight)


North American

Wood Fiber

Review


Notes.

Domestic residual chip and log prices in Can$ per odmt (delivered to pulp mill or chip plant)

1odmt (dry weight) = 1.102 short tons (dry weight) = 2204 lb


Sources: Industry contacts and the Wood Resource Quarterly

Wood Chip and Pulpwood Prices - Eastern Canada April - June, 2011

Hardwood Hardwood

Ave Range Ave Range Ave Range Ave Range

Ontario 116 90-135 78 70-90 143 107-165 88 73-105

Quebec 125 100-150 82 70-93 160 120-180 95 75-110

Maritime Prov. na na na na 114 96-141 94 83-125

WOOD CHIPS ROUNDWOOD

Can$/odmt (delivered) Can$/odmt (delivered)

Softwood Softwood

0

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140

160

180

Ontario chips Ontario roundwood Quebec chips Quebec roundwood Maritimes roundwood

Can

$/o

dm

t (d

elli

ver

ed)

SOFTWOOD FIBER PRICES - Eastern Canada

1Q/10 2Q/10 3Q/10 4Q/10 1Q/11 2Q/11

North American

Wood Fiber Review


North American Woody Biomass Policies and Issues Update

April - June, 2011

Canadian and U.S. renewable energy policies

continue to be mixed in purpose and intensity

Policies meant to encourage further utilization of

woody biomass as a renewable energy source,

continue to vary in intent and consequences in both

the U.S. and Canada. At times, woody biomass

policies are caught up with broader policies

pertaining to wood allotments or forest regulations,

the result being apparent contradictions in direction.

For example, in the U.S., the 9th

Circuit Court,

which covers most of the Western States, has ruled

that runoff from logging roads – public or private -

is subject to Environmental Protection Agency

regulations under the Clean Water Act. If the ruling

is upheld (it is under appeal), significant new

restrictions are likely for both timber harvesting and

subsequent woody biomass utilization.

In contrast, Washington State continues to

encourage greater woody biomass utilization off

those same private and state forestlands with

proposed legislation intended to produce a next

generation jet fuel.

Canadian polices vary from East to West

In Canada, the Province of Nova Scotia has

implemented a new policy reducing clearcutting to

50 percent of the total harvest. While the motive is

to ensure sustainability, it is unclear whether the

regulations apply to harvest acres or volume, and

what might be exceptions for disease or

regeneration, as well as other technical questions.

At the same time, the NS government is providing

five million dollars in funding to provide training,

and technical services to non-industrial woodlot

owners, as well as harvest tracking, and monitoring.

The Province is also lowering the amount of woody

biomass that can be utilized towards reaching a

Provincial goal of 40 percent renewable energy by

2020. A previous cap of 500,000odmt/year, has

been lowered to 300,000odmt/year which can be

used to generate electricity.

In Ontario, the Provincial Government’s program to

redistribute available forest tenures met with steady

criticism from industry groups, as well as individual

companies not able to acquire an allotment.

Ontario’s Forest Tenure Modernization Act was

also criticized for its fast track timetable, and the

lack of hearings in the rural areas of the Province

most affected by the pending reforms.

In British Columbia, enthusiasm continues to be

expressed by Provincial forest officials, both for

generating new lumber markets in Asia in general,

as well as for continuing to assist efforts to salvage

the stands killed by the Mountain Pine beetle. These

efforts indirectly support the robust BC pellet

export industry resulting in new ventures or

explorations of additional facilities.

Canada’s Pulp and Paper Green Transformation

Program approaches conclusion

Canada’s Pulp and Paper Green Transformation

Program (PPGTP) is now less than one year from

its ending date. Companies received a maximum

funding envelope based on a per liter credit for

black liquor produced by their mills in 2009. They

have until March 31, 2012 to draw on this funding

to finance approved capital projects. The one billion

dollar program has generally been seen as a positive

incentive in promoting woody biomass utilization

and greater efficiencies in the energy consumption

of the pulp and paper industry.

Looking back, the top six qualifiers for Canada’s

PPGTP funds were:

C$143 million, Domtar Inc.

C$122 million, Canfor Pulp Limited Partnership

C$88 million, West Fraser, Ltd

C$69 million, Alpac Forest Products

C$59 million, Diashowa-Marubeni

C$57 million Mercer Celgar

North American

Wood Fiber

Review


0

2

4

6

8

10

12

14

US

(H

enry

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$/m

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dt;

C

anad

a (A

lber

ta H

ub

) C

an$

/gig

ajo

ule

North American Natural Gas Prices

US (Henry Hub) Canada (Alberta Hub)

Biomass Crop Assistance Program on the edge

This time last year, BCAP was concluding its

injection of money into the woody biomass market,

generating a wide variety of takers and resistance.

(The BCAP matching payments totaled over $243

million as reported by the USDA in October, 2010)

This year, having morphed into an agricultural

program focused on new project areas for dedicated

crops, BCAP is now on the edge of being defunded

altogether. The U.S. House Agriculture

Appropriations Subcommittee has voted to

eliminate all BCAP funding for 2012.

New Jersey withdraws from regional carbon

trading program

In New Jersey, the governor removed his state from

participating in the 10-state Regional Greenhouse

Gas Initiative (RGGI) because of concerns over the

value received for a Carbon Valuation and Trading

program. The program required power producers to

buy and sell permits for the right to emit CO2 but

Governor Christie remarked "Reduced emissions

have been due to increased use of natural gas, and

the decreased use of coal. We're seeing that the

market, and not RGGI, has created incentives to

reduce the use of carbon-based fuels.”

REC’s and PPAs take center stage

The New Jersey action highlighted ongoing

negotiations across the country between utilities and

renewable power producers over rates they are

willing to pay for power, and what is needed to

cover the producers’ costs. Renewable Energy

Credits (REC’s) have been one source of income for

power producers in addition to the rates established

in their power purchase agreement rates (PPA). The

value of REC’s may now become a concern if state

governments, as in the case of New Jersey, question

the value received.

Regarding PPA’s, California biomass plants are in

tough negotiations for “viable” PPA rates.

Similarly, four NH biomass plants have stated they

are likely to shut down if they're not able to secure

adequate short-term energy contracts with Public

Service of New Hampshire utility.

Fossil Fuel prices continue mixed trends

Low natural gas prices continued to emphasize the

attractiveness of this fuel, no doubt slowing

investment commitments in new woody biomass

projects.

Conversely, the benchmark West Texas

Intermediate crude price remained high, spurring

continued industry efforts to secure more favorably

priced and less volatile energy sources.

Woody Biomass Policies and Issues Update continued April - June, 2011

0

20

40

60

80

100

120

140

160

US

$/B

arre

l

North American Crude Oil Benchmark Price

West Texas Intermediate (WTI)

North American

Wood Fiber Review


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300

400

500

600

US

an

d C

anad

ian

cu

rren

cies

-C

ents

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Gal

lon

US and Canada National Average Retail Diesel Prices

US National Average Canada Average

Diesel fuel prices across the continent continue to

climb, adding to the costs to delivered woody

biomass

High diesel prices were mentioned by fiber buyers

and contractors in every region of North America as

a factor in either more costly wood fiber and

biomass, or in preventing what would otherwise be

falling delivered costs for regional oversupplies.

As shown in the above graph, diesel prices have

returned towards those peak prices of mid 2008

before the economic stumble. From the low of

April, 2009, the US average diesel price has risen

85 percent, from $2.22/gallon to $4.12, while in

Canada, the per litre price has climbed 47 percent,

from C$3.32 to C$4.88/US gallon equivalent.

Diesel prices have cooled and dropped in some

regions towards the end of the quarter, but remain at

historically high levels.

Biomass facilities across the continent ready to

enter the market

In Lufkin, Texas, Aspen Power LLC is procuring

woody biomass supplies and preparing for final test

burns at its 50 MW plant. In addition, Southern

Power is building a 99 MW plant in Sacul Texas,

with a startup date set for early 2012. The two

facilities alone will increase demand for woody

biomass in the region by more than two million

green tons yearly.

In the US mid-Atlantic states of Virginia and North

Carolina, increased woody biomass use is in store.

Enviva has plans for a 350,000 metric ton

capacity pellet plant in Ahoskie, NC.

IP’s shuttered Franklin, VA mill is being

considered as a possible pellet facility, in

addition to IP’s decision to “repurpose” a

portion of its mill to produce fluff pulp.

Dominion Power has one power plant in Hurt,

Virginia utilizing woody biomass, is nearing

completion of a Virginia City hybrid facility

within a year that will use both biomass and

natural gas, and recently announced that three

other coal burning power plants will be

converted to woody biomass use in the next

several years.

In Canada, several significant biomass utilization

projects are moving forward.

Abitibibowater’s Thunder Bay Ontario pulpmill

is building a 40 MW biomass cogeneration unit

(CHP) that will move the mill from its current

23% internally generated power to 60-62

percent.

Conifex Timber announced plans for a 36 MW

CHP unit at one of its two Mackenzie, British

Columbia sawmills

New Page has begun constructing a 60 MW

CHP unit at its Point Tupper, Nova Scotia mill.

Trebio Renewable Biomass is completing its

130 mton capacity pellet plant in Portage du

Fort, Quebec with pellet export plans.

Two new biomass hotspots are now being

tracked by the NAWFR

On the following pages, two new biomass hotspots

are highlighted: British Columbia’s interior, the

major pellet exporting region in North America; and

Mississippi/Western Alabama in the heart of the

U.S. Southern pulp and paper industry.

North American Woody Biomass Industry Update

April - June, 2011

North American

Wood Fiber

Review


Interior British Columbia

The pellet industry in the

interior of British Columbia

has been a pioneer of woody

biomass utilization in the

form of wood pellet exports.

For many years, this region has

proven to be a formidable

competitor to the US solid wood industry in terms

of lumber production, spawning heated rhetoric and

challenges regarding the Softwood Lumber

Agreement between the US and Canada. The

volumes BC produced were in response to the

booming US housing market, but recently due to the

Mountain Pine Beetle epidemic. With the US

housing market now just a fondly remembered

phenomenon, BC’s solid wood industry continues

to churn out lumber, now destined for China.

Through it all, the literal mountains of sawdust

generated by lumber production found an

improbable home in a pellet export industry selling

product into a long distance energy sector market in

Europe. With an historic sawdust price range of

C$23-28/odmt (FOB), a handful of pellet

companies have emerged to dominate the current

export trade. However, smaller pellet manufacturers

are also present, and more continue to explore

opportunities to utilize residues in the region

(including one biofuels refinery project in

Kamloops, BC announced by Raven Biofuels).

Somewhat surprising, there even remains a surplus

of sawdust in the region. And while sawdust and

pellets remain the big biomass story, one of the

largest biomass plants in Canada producing

electricity is Capital Power LLC’s 66 MW facility

in Williams Lake, BC, utilizing primarily sawmill

residues. Several of the region’s pulpmills consume

woody biomass, and several integrated expansion

projects that will result in even more woody

biomass utilization are underway.

Mississippi/Western Alabama

The emergence of a woody

biomass hotspot in what can be

considered the heart of the US

Southern pulpmill industry will

create interesting dynamics. While woody

biomass, primarily bark, has long been utilized by

pulpmills for a portion of their power needs, the

drop in pulpmill capacity over the past several

years has resulted in a large positive growth/drain

ratio of available fiber. This trend is particularly

noticeable in Mississippi.

With the yearly occurrence of hurricanes, and this

year’s strikingly destructive tornadoes, there is also

a recurring surge of woody biomass material

available for salvage.

KiOR is the most visible new player in this region.

The Texas based company has announced up to

five facilities to be built over the next several

years, producing a drop-in “bio crude” which has

already been accepted (on paper) from Hunt

Refining, a Tennessee-based company with a

refinery in Tuscaloosa, Alabama. Construction has

begun on KiOR’s first site in Columbus, MS. The

company has also attracted a second off-take

agreement with Catchlight LLC – a joint venture

between Weyerhaeuser and Chevron Corporation.

Enviva Pellets has acquired two operating pellet

plants in Amory and Wiggins, MS with plans to

expand, while Westervelt Renewable LLC has

announced plans to build a 250,000 ton capacity

export pellet facility in Aliceville, Alabama.

Three other emerging companies in this region are:

Bluefire – a cellulosic ethanol enterprise

planning to build in Fulton, Mississippi.

Coskata – with announced plans to build a

commercial ethanol plant in Boligee, Alabama.

New Biomass Energy – which plans to build a

65,000 ton capacity torrified wood pellet plant

in Quitman, Mississippi.

Woody Biomass Regional Updates

April - June, 2011

North American

Wood Fiber Review


0

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90

US

$/B

DT

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eli

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Maine -Northern New Hampshire Forest Biomass Prices


0

10

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30

40

50

US

$B

DT

(d

eliv

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South, mill biomass prices


South Georgia, North Florida, and

Southeast Alabama

Georgia Biomass LLC, held

its official opening of its pellet

plant in Waycross, Georgia,

during 2Q/11, and is now procuring

softwood roundwood for its

manufacturing. Bulk pellet delivery to Europe

is the next step and should begin late in the 2Q/11.

At full production, the plant is expected to produce

750,000 tons of pellets annually.

This region has several woody biomass projects

underway which have previously described in back

issues of NAWFR. Two updates however, are

worth mentioning:

The large 100 MW plant in Gainesville, Florida

biomass plant has announced the securing of a

power purchase agreement with a local utility.

This has triggered site clearing as the project’s

first phase of actual construction.

Vega Biofuels is the latest company to emerge

in the region, announcing plans to build a “bio-

coal” facility in Cordele, Georgia. This

company is one of a handful of businesses now

pursuing or having announced commercial-scale

pellet torrefaction as their manufacturing

process.

Southwide mill biomass residue prices in 2Q/11

have drifted slightly lower to US$42/bdt delivered.

Northern New England

In the 2Q/11, it became more difficult to

make a profit by generating woody

biomass supplies from the forests in

Northern New England. Demand has

decreased because of the closures of

two regional stand-alone biomass

plants and the two Katahdin pulpmills

in Millinocket Maine which closed in April.

Because biomass plants and pulpmills are faced

with the short-term challenge of keeping some

contractors in the game, prices remained stable.

Higher diesel prices also kept average delivered

woody biomass from deteriorating further. (See

graph)

Several local participants believe they are seeing

delivered woody biomass prices at the true bottom,

if operations are to survive. Emphasis is being

made on the need for contractors to deliberately

integrate their biomass production with other

harvest operations for additional efficiencies.

At the same time, there is a concern that regional

electricity market prices are not sustainable for

several of the region’s stand-alone biomass plants.

Those facilities with low debts have a small

advantage over those who don’t. At the same time,

biomass plants that are simply the higher-cost units

in a larger owner portfolio of renewable power

generating facilities, are more vulnerable to

shutdowns for strategic financial reasons.

Woody Biomass Regional Updates continued

April - June, 2011

North American

Wood Fiber

Review


0

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60

US

$/B

DT

(d

eliv

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)

Northern California Woody Biomass Prices

non differentiated mill forest ag urban


0

10

20

30

40

50

60

70U

S$

/BD

T (

del

iver

ed)

Western Washington Woody Biomass Prices

mill forest urban


Northern California

Northern California biomass

plants are finally beginning to

gain access to forest biomass

after a series of late winter

storms that produced significant

late season snowpack. Forest

biomass is an important seasonal

component of many mill’s fiber

sources though at a noticeably higher cost.

Similar to New England, the relatively slow

California economy and an apparent preference for

wind and solar renewable power, keeps the aging

stand-alone biomass plants in a constant quest for

power purchase agreements at adequate rates. A

few mountain plants remain closed for this reason

among others, though Laidlaw Energy LLC

announced an agreement to purchase an idled plant

in Susanville, CA. Previously owned by Renegy,

the 14 MW biomass plant will need refurbishing

and startup is not expected till 2012.

Forest biomass prices climbed nearly nine percent

in 2Q/11 from the previous quarter (see graph). The

average to US$49/bdt was primarily due to longer

hauling distances, but higher diesel costs also

played a role. Mill residues rose slightly, likely due

in to constrained sawmill lumber production, and

lower available supplies (still less expensive than

forest biomass).

Western Washington

In contrast to Northern

California, Western Washington

biomass consumers were

benefiting from a “glut” of

woody biomass.

In spite of the abundance of biomass,

delivered prices did not drop, partly due to

increased diesel prices (see graph). Similar to

Northern New England, biomass buyers were also

calculating how to work long term with preferred

suppliers to keep them in the game.

Adding to the challenge of keeping a biomass

harvesting infrastructure in place, the surge of log

exports to Asia has created new concentrations of

woody biomass at unexpected locations – export

docks. While the overall volume of biomass may

not be significantly larger (a portion of these logs

would have been debarked at sawmills under

“normal” circumstances), the logistics of moving

biomass from origin to destination have changed.

In late May, Grays Harbor Paper, located in

Hoquiam, Washington, announced its closure. The

mill was unique in that it powered itself entirely by

woody biomass, most of that coming from the

forest. Its closure removed a significant consumer

of woody biomass from the Western Washington

hotspot, contributing to oversupply.

Woody Biomass Regional Updates continued

April - June, 2011

North American

Wood Fiber Review


0

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80

90

US

$/B

DT

(d

eliv

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)

Selected Regional Prices of Mill and Forest Biomass

South mill biomass Northeast forest biomass Northwest mill biomass

Northwest forest biomass California mill biomass California forest biomass

Unit: US$/BDT (delivered)

4Q/09 1Q/10 2Q/10 3Q/10 4Q/10 1Q/11 2Q/11 Q/Q Y/Y

South, mill 40 46 40 44 43 43 42 -2 5

Northeast, forest 60 56 58 56 52 52 52 0 -10

Northwest, mill 34 32 31 34 32 34 35 3 13

Northwest, forest 47 42 37 45 45 46 47 2 27

N California mill 34 27 31 34 32 35 36 3 16

N California forest 48 45 39 45 44 45 49 9 26

Change (%)

Woody Biomass prices in the US

Source:

North American Wood Fiber Review. Conversion of green tons to bone dry tons assumes 50% moisture content

Woody Biomass Regional Price Comparison

June, 2011

North American

Wood Fiber

Review


0

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1000 o

dm

t

Wood Chip Imports to the U.S.

US West US Other Total

Origin 1q/09 2q/09 3q/09 4q/09 1q/10 2q/10 3q/10 4q/10 1q/11 Q/Q Y/Y

1000 odmt

Canada, BC 18 15 26 0 17 17 20 10 23 130 35

Canada other 1 5 3 0 0 0 0 0 0 0 na

Other 0 0 0 0 0 50 23 0 0 0 na

Total 19 20 29 0 17 67 43 10 23 130 35

Change Q/Q (%) -21 5 45 -100 na 294 -36 -77 130

Change (%)

North American Wood Fiber Trade

While a relatively quiet quarter of wood chip trade

within North America (in contrast to logs and

lumber), we note that wood chips were exported to

China from the US West Coast in 2Q/11.

Our sister publication, the Wood Resource

Quarterly, further analyses wood fiber trade in the

Pacific Rim.

U.S. Wood Chip Imports

North American

Wood Fiber Review


North American Wood Fiber Trade continued

U.S. Wood Chip Exports

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Washington Oregon Other West North South

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00

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Wood Chip Exports from the U.S.

1Q/10 2Q/10 3Q/10 4Q/10 1Q/11

1Q11 WA OR Other West North South Total, U.S. Q/Q Y/Y

Conifer Chips

Japan 0 164 0 0 0 164 -21 -12

Canada 49 0 8 35 0 92 5 -26

Other 0 22 0 0 77 99 50 29

Total 49 186 8 35 77 355 -2 -9

Change Q/Q (%) 23 -10 -11 -10 17 -2

Non-Conifer Chips

Japan 0 0 0 0 0 0 na 0

Canada 0 0 0 58 0 58 -18 205

Other 0 0 0 0 0 0 na na

Total 0 0 0 58 0 58 -18 205

Change Q/Q (%) na na na -18 na -18

TOTAL 49 186 8 93 77 413 -4 1

Change Q/Q (%) 23 -10 -11 -15 17 -4

Change (%)

North American

Wood Fiber

Review



Canadian Wood Chip Imports

Destination Ontario Quebec Other Total

Origin WA Other Total Total Total Total Total

3Q/09 58 9 67 15 48 33 163

4Q/09 37 10 47 17 46 20 130

1Q/10 80 4 84 4 34 22 144

2Q/10 46 9 55 14 29 44 142

3Q/10 51 10 61 17 47 29 154

4Q/10 40 9 53 18 50 42 163

1Q/11 49 11 60 21 38 34 153

Change, Q/Q (%) 23 22 13 17 -24 -19 -6

Change, Y/Y (%) -39 175 -29 425 12 55 6

Wood Chip Imports to Canada

British Columbia

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10

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Wood Chip Imports to Canada

BC Quebec Ontario Other Total

Note: Virtually all BC imports are softwood chips, Eastern Canada’s are split between hardwood and softwood

North American

Wood Fiber Review



Canadian Wood Chip Exports

Origin Total

Destination U.S. Japan Total US Turkey Other Total All

2Q/09 15 41 56 5 0 0 5 61

3Q/09 26 81 107 3 0 0 3 110

4Q/09 0 61 61 0 18 0 18 79

1Q/10 17 78 95 0 0 1 1 96

2Q/10 17 76 93 0 0 0 0 93

3Q/10 20 48 68 0 0 16 16 84

4Q/10 10 54 64 0 0 0 0 641Q/11 23 99 122 1 21 0 22 144

Change, Q/Q (%) 130 83 91 na na na na 125

Change, Y/Y (%) 35 27 28 na na na na 50

Wood Chip Exports from Canada

British Columbia Other Provinces

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Wood Chip Exports from Canada

BC to U.S. BC to Japan

Other Provinces to U.S. Other Provinces to Overseas

Total

Prices for softwood chips exported to Japan 2Q/2011 (US$/BDU, FOB):

Douglas fir, U.S. $169.00 $169.00 (1Q/11)

SPF, Canada $170.00 $170.00 (1Q/11)

North American

Wood Fiber

Review


North American Wood Pellet Exports to Europe

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2007 642

2008 7492009 1275

2010r 1480

Pellet exports from North America to Europe

Canada US North America

Source: WRI database

in thousand metric tons % Change % Change

Canada US North America Q/Q Y/Y

3Q09 195 156 351 42 66

4Q09 227 97 324 -8 44

1Q10 202 201 403 24 14

2Q10 180 115 295 -27 19

3Q10r 274 137 411 39 17

4Q10r 233 138 371 -10 15

1Q11 228 57 285 -23 -29

A drop in pellet exports in 4Q/10 and 1Q/11 shows

a decline first in Canada, and most recently in the

U.S. Volumes shipped to Europe were at the level

of those two years ago in 1Q/09

The recent volume decline is more likely to be more

from short-term European market adjustments that

reflect concerns over some EU member states’

economies, rather than a shift from interest in, and

plans for, further significant woody biomass

utilization.

The announcement by the German government in

May that its nuclear plants would be phased out by

2022 was both startling and vague. If even just a

significant portion of the energy now produced from

nuclear power is removed, renewable energy in all

forms, including pellets, is likely to benefit.

North American

Wood Fiber Review


0

50

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200

250

300

350

400

450

10

00

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s

2007 642

2008 749

2009 1275

2010r 1480

Pellet imports to Europe from North America

NL Belgium UK Other Total

Source: WRI database

Western Canada pellet export segment update

British Columbia has a secure hold as North

America’s largest exporter of pellets to Europe, as

well as the longest shipping distance to its market.

Notwithstanding the logistics, additional interest in

joining the BC export pellet industry continues.

A new company, Biomass Secure Power (BSP)

issued a 2Q/11 press release stating it secured a 10

year agreement to provide over one million tons of

pellets annually to a South Korean conglomerate,

LG International. BSP said it was in the process of

securing two sites in British Columbia on which to

build pellet plants using a torrified wood

manufacturing process. Construction on these

plants is yet to commence but according to the

company statement, shipments to South Korea will

begin in 2012.

South Korea has established national renewable

energy and carbon emission reduction goals, so the

general demand is increasing. There are, of course,

a few other Pacific Rim nations besides Canada

(and the U.S.) - notably Australia and Indonesia -

which have expressed interest in developing a

export pellet sector.

Viridis, another BC-based company announced

plans this quarter to acquire a U.S. pellet company,

Confluence Energy which operates in Kremmling

Colorado. At the same time, Viridis stated it had

signed agreements to provide export pellets to

Europe from its Okanagan Pellet Company facility

in Kelowna BC.

Additional pellet production in Eastern Canada

Besides the two major Maritime Provinces pellet

exporters to Europe, Shaw Resources and Enligna,

Group Savioe has at times exported bulk product at

times from its St Quentin facility in New

Brunswick. The next likely exporter is Holson

Forest Products Ltd, located in Roddickton,

Newfoundland. The company is nearing completion

of its pellet facility with announced export plans of

its own.

Several other Eastern Canadian businesses with

pellet export plans are emerging, of which most

located within reach of the St Lawrence Seaway.

Furthest along, Trebio Renewable Biomass is well

into construction of a 130,000 ton pellet facility in

Portage-du-Fort, Quebec, with rail access to move

product to the Seaway.

Another pellet association formed in the U.S.

Last quarter, we neglected to note a third U.S. pellet

exporter also located in the biomass hotspot of

Southeast Georgia and Northern Florida. Fram

Renewable Fuels, with its smaller capacity facility

in Baxley, GA, differs from the other two larger

pellet exporters (Green Circle Bioenergy and

Georgia Biomass) in that its wood fiber sourcing

strategy emphasizes the utilization of mill residuals,

rather than softwood roundwood.

Fram Renewables is also one of the founding four

members of a newly established US Industrial Pellet

Association, along with Green Circle Bioenergy,

Enviva Biomass and Westervelt Company. In a

statement issued by its Executive Director Seth

Ginther, the USIPA will focus on issues of

importance to these pellet producers: sustainability,

uniformity of contracts, and certification standards

for industrial wood pellets.

North American Wood Pellet Exports to Europe - continued

North American

Wood Fiber

Review


North American Sawlog Markets and Exports

Notes.

Prices in the table and graphs in this section are for log species and grades mainly being processed into construction and better

grades of lumber.

Douglas-fir and hemlock (US Northwest): One mbf approximately equal six cubic meters (m3).

Southern pine (US South): One green short ton is approximately equal to 0.7 cubic meter.

Wood Resource Quarterly was the major source for sawlog prices. In addition, US South prices were also sourced from the

Timber-Mart South.

North American Sawlog Markets and Exports

0

10

20

30

40

50

60

70

80

90

100

US

$/m

3 (d

eliv

ered

)

Sawlog prices in the US and Canada 2009 - 2011

US, NW Douglas-fir

US, NW Hemlock

US, SC Pine

US, SE Pine

Can W, Coast Hemlock

Can W, Int. SPF

Can East Mixed sw

Sawlog prices have trended upward in nearly all

regions of North America the past two years

Sawlog prices were up in US dollar terms in all

major regions of North America except the US

South in the first quarter of 2011. This upward trend

has been ongoing for more than two years with

sawmills in the Pacific Northwest and Coastal

British Columbia in particular experiencing

substantially higher log costs in recent months.

The elevation in log costs in the Western U.S. can

be explained by the substantial increase in log

exports the past two years. In the 1Q/11, the U.S.

west coast exports to Asia reached almost 1.9

million m3, which can be compared to only 900,000

m3 in the first quarter last year.

The average Douglas-fir price in the Northwest U.S.

went up almost 50 percent in two years, reaching its

highest level since 2007. Douglas-fir sawlog prices

in the Northwest U.S. rose 20 percent to US$90/m3

delivered in the 1Q/11 alone. Hemlock prices

followed closely with a 17 percent increase from the

4Q/10.

North American

Wood Fiber Review


Sawlog Markets in North America - continued

Western Canadian sawlog prices influenced by

Asian demand

While still the lowest on the continent, sawlog

prices in Western Canada have followed the same

pattern as in the Northwest U.S. Coastal Hemlock

prices rose 10 percent to C$54/m3 in 1Q/11 from

the previous quarter, while SPF sawlog prices from

the B.C. interior rose at a slower pace of five

percent in 1Q/11.

Eastern Canadian softwood sawlog prices

slightly up

Eastern Canada’s softwood prices drifted up only

three percent from the 4Q/10, but the region still has

the second highest average sawlog price on the

continent. Smaller volumes per acre, smaller average

stem size, and relatively long transport distances

create a challenging baseline for the region.

Southern sawlog prices buck the trend

Pine sawlog prices in the U.S. South have been

surprisingly stable the past two years. In the 1Q/11,

they were only slightly higher than two years ago,

averaging US$62/m3 delivered to mill. Delivered

sawlog prices in the South, as with pulpwood

roundwood, are the lowest in the U.S.

North American lumber production rises year to

year, then slows in 2Q/11

Lumber production in North America was 12

percent higher in the 1Q this year as compared to

the same quarter in 2010, reaching its highest level

since the beginning of the financial crises in late

2008 (see graph next column).

The biggest production increases the past quarter

occurred in British Columbia and Northwest U.S.

thanks to higher lumber exports to China. Had it not

been for the export market, both lumber production

and sawlog prices along the North American west

coast would most likely have been lower this year

than last.

U.S. regional differences noted

Despite the fact that the Western U.S. exported

more lumber in the 1Q/11, it was actually the U.S.

South that increased production the most.

According to the Western Wood Products

Association, lumber production in the U.S. South

during the 1Q/11 was 16 percent higher than it was

in the 1Q/10. This contrasts with the situation in the

Western regions of the U.S. and Canada, where

production was only up seven percent from 1Q/10.

Western Canada doubles China lumber exports

Continued demand for lumber by the Chinese

market has benefited the BC sawmills in particular.

During the first four months of 2011, Canadian

lumber exports to China more than doubled from

the same period last year, making China the second

biggest market after the US for Canadian sawmills.

West Coast lumber production slows in early

2Q/11

Lumber production statistics in April showed a drop

in both the Northwest U.S and British Columbia.

The drops in production mainly reflect a leveling

off of Chinese demand, as well as by the substantial

increases in regional lumber inventories from one

year ago.

0

5

10

15

20

25

bil

lio

n b

oard

fee

t

Softwood Lumber Production in North America

US Canada N. America

North American

Wood Fiber

Review


0

200

400

600

800

1000

1200

1400

1600

1800

2000

10

00

m3

Log exports from the US to Asia 2008 - 2011

China

Japan

S. Korea

Total

U.S. Log Exports to Asia

US log exports to Asia

1000 m3

1Q/09 2Q 3Q 4Q 1Q/10 2Q 3Q 4Q 1Q/11 Q/Q Y/Y

Washington

China 21 27 16 19 59 198 409 356 458 29 676

Japan 125 111 81 98 69 104 98 70 75 7 9

S. Korea 190 277 290 257 224 195 98 142 174 23 -22

Total 336 415 387 374 352 497 605 568 707 24 101

Oregon

China 0 60 84 92 130 248 456 388 484 25 272

Japan 272 337 329 316 304 369 296 360 364 1 20

S. Korea 7 38 40 23 46 102 54 80 119 49 159

Total 279 435 453 431 480 719 806 828 967 17 101

Alaska

China 26 79 173 178 31 83 325 219 52 -76 68

Japan 2 48 75 137 0 64 67 72 36 -50 na

S. Korea 5 67 21 80 44 96 53 123 19 -85 -57

Total 33 194 269 395 75 243 445 414 107 -74 43

US West, total

China 47 166 273 289 220 529 1190 963 994 3 352

Japan 399 496 485 551 373 537 461 502 475 -5 27

S. Korea 202 382 351 360 314 393 205 345 312 -10 -1

TOTAL 648 1044 1109 1200 907 1459 1856 1810 1781 -2 96

Change (%)

Note:

Not included are minor log volumes exported from California, and log volumes imported to Taiwan

North American

Wood Fiber Review


Global timber markets

Higher lumber production,

increased log trade, and a weak

US dollar were three factors that

pushed sawlog prices up in dollar

terms worldwide in the 1Q/11. In

many regions, prices reached

their highest levels since WRQ

started tracking log prices in

1995.

The Global Sawlog Price Index

(GSPI) increased for the eighth

consecutive quarter to an all-

time-high of US$88.14/m3. In

two years, the GSPI has gone up

by 33 percent, substantially more

than the increase in global

pulpwood prices.

Global pulpwood price

Wood fiber costs for pulp mills

worldwide rose for the third

consecutive quarter in the 1Q/11.

The Softwood Wood Fiber

Price Index (SFPI) increased

1.9 percent in the 1Q, reaching

US$105.60/odmt, the highest

level since 3Q/08. The US

Northwest, European markets,

Chile, Australia and New

Zealand saw the biggest wood

fiber price increases this quarter.

The Hardwood Wood Fiber

Price Index (HFPI) was also up

1.9 percent from the 4Q/10, and

is now close to an all-time high

of US$110.33. Fiber prices were

up in most markets, with the

highest increases in Europe,

Australia and Chile, and only

small upward prices adjustments

in Canada and Russia. Hardwood

fiber costs even declined in the

US South.

Global pulp markets

Global pulp markets have not

quite developed as many analysts

forecasted a year ago. Rather

than the predicted retraction in

market pulp prices this spring,

prices stayed strong and actually

increased to record high levels in

the month of April. The NBSK

price in Europe in early May was

US$1008/ton, according to

FOEX.

During the first two months of

2011, production of market

pulp was up five percent

compared to last year. The

biggest increase was in Western

Europe, which produced nine

percent more in 2011 than 2010.

Global lumber markets

Global demand for softwood

Lumber increased by about 18

percent in 2010. This came after

a year when wood consumption

worldwide was the lowest it had

been in almost 50 years. This

upward trend in consumption has

continued thus far in 2011, with

total volume consumed being

around 20 percent higher than the

same period in early 2010.

Not surprisingly, China has been

the major driver in the higher

lumber demand. The country’s

sawmills are far from being able

to meet the increased demand,

and as a result there has been a

substantial increase in import

volumes the past five year.

During the first two months of

2011, lumber production was up

in most provinces of Canada.

The biggest increases were in

Ontario (28%), Alberta (16%)

and Southern BC (16%).

The housing market in the US

South have fared relatively better

than the rest of the country, and

as a consequence, regional

lumber consumption was higher

than in other regions of the US.

Global biomass markets

While the U.S. and Canadian

domestic pellet industry

struggled through another year of

weak domestic market demand

and overcapacity, pellet export

shipments to Europe continued to

rise, up 21 percent in 2010.

Prices for wood pellets in the

three major markets in Europe,

Sweden, Germany and Austria

have gone up the past two years.

Global conifer sawlog price 1995 - 2011

0

10

20

30

40

50

60

70

80

90

100

1q/9

5

1q/9

6

1q/9

7

1q/9

8

1q/9

9

1q/0

0

1q/0

1

1q/0

2

1q/0

3

1q/0

4

1q/0

5

1q/0

6

1q/0

7

1q/0

8

1q/0

9

1q/1

0

1q/1

1

US

$/m

3

Source: Wood Resource Quarterly

Global Wood Fiber Price Indices 1988 - 2011

0

20

40

60

80

100

120

1q 8

8

1q 9

0

1q 9

2

1q 9

4

1q 9

6

1q 9

8

1q 0

0

1q 0

2

1q 0

4

1q 0

6

1q 0

8

1q 1

0

US

$/o

dm

t

Softwood

Hardwood

Source: Wood Resource Quarterly

The Global Forest Industry in 1Q, 2011

North American

Wood Fiber

Review


Wood Resource Quarterly

Global Wood Fiber Price Indices (US$/odmt)

Wood fiber costs for pulp mills worldwide rose for

the third consecutive quarter in the 1Q/11. The

Softwood Wood Fiber Price Index (SFPI) increased 1.9 percent in the 1Q, reaching

US$105.60/odmt, the highest level since 3Q/08. The

US Northwest, European markets, Chile, Australia

and New Zealand saw the biggest wood fiber price

increases this quarter; there were only modest price

changes in US South, Canada and Brazil.

Softwood Wood Fiber Price Index (SFPI)

1q/2008 109.67

2q 112.53

3q 110.43

4q 97.32

1q/2009 89.00

2q 90.01

3q 93.12

4q 98.34

1q/2010 99.55

2q 98.29

3q 99.80

4q 103.60

1q/2011 105.60

The Hardwood Wood Fiber Price Index (HFPI)

was also up 1.9 percent from the 4Q/10, and is now

close to an all-time high of US$110.33. Fiber prices

were up in many of the same markets as those for

softwood fiber, with the highest increases in Europe,

Australia and Chile, and only small upward prices

adjustments in Canada and Russia. Hardwood fiber

costs even declined in the US South.

Hardwood Wood Fiber Price Index (HFPI)

1q/2008 106.11

2q 108.77

3q 110.71

4q 98.38

1q/2009 91.99

2q 94.92

3q 99.15

4q 106.19

1q/2010 105.90

2q 103.37

3q 104.88

4q 108.28

1q/2011 110.33

Note. The Global Average Wood Fiber Price Index

is a weighted average of delivered wood fiber prices

for the pulp industry in all regions tracked by the

publication Wood Resource Quarterly. These

regions together account for 85-90% of the world’s

wood-based pulp production capacity. The price is

based on current quarter average prices, and

country/regional wood fiber consumption data. The

global average for softwood and hardwood is

calculated in nominal US$ per oven-dried metric

ton of wood fiber.


0

20

40

60

80

100

120

1q 8

8

1q 9

0

1q 9

2

1q 9

4

1q 9

6

1q 9

8

1q 0

0

1q 0

2

1q 0

4

1q 0

6

1q 0

8

1q 1

0

US

$/o

dm

t


0

20

40

60

80

100

120

1q 8

8

1q 9

0

1q 9

2

1q 9

4

1q 9

6

1q 9

8

1q 0

0

1q 0

2

1q 0

4

1q 0

6

1q 0

8

1q 1

0

US

$/o

dm

t

North American

Wood Fiber Review


The “North American Wood Fiber Review” is published quarterly by Wood Resources International, LLC. The

report is published in March, June, September and December. The annual subscription rate for 2011 is US$ 1200

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Disclaimer

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having a good knowledge of the market place. Prices in the report are the best estimates for the published quarter and

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