Wood raw material costs for the manufacture of sawnwood have shot up in many regions around the world in 2006 and 2007, with the global average softwood sawlog price reaching an all-time record high of $82/m3 in 2007, as UNECE and FAO pointed out in their recent UNECE/FAO Forest Products Annual Market Review, 2006-2007.
During 2007, the average global wood fibre prices reached their highest levels in 12 years as a result of strong pulp and paper markets and a number of events that impacted the wood fibre supply, including but not limited to increased competition for raw material from the energy sector, weak US sawnwood markets and unfavourable weather conditions.
The total harvest in the UNECE region in 2006 was estimated at 1.4 billion m3, which was
down 1.4% from the exceptional level of 2005, but 10.0% higher than five years ago.
Almost 1.2 billion m3 of total removals were utilized for industrial purposes; 75% consisted of
softwood species, a large share of which was used by an expanding sawmilling sector.
The apparent sharp decrease of 9% in consumption of softwood roundwood is misleading, as
large volumes of damaged timber from the 2005 storm in northern Europe were inventoried and
actually consumed during 2006.
Roundwood consumption by the pulp industry in Europe increased by 8% from 2005, reaching a
total of 120 million m3 in 2006, which was 76% of their total wood fibre consumption.
The Russian Federation has increased harvests of industrial roundwood by 22% over the past
five years, reaching 144 million m3 in 2006, of which 65% was used domestically and the
remainder exported mainly to China, Japan and the Nordic countries.
Roundwood consumption fell in Canada, as the forest industry was negatively impacted by the
slump in US housing during 2006 and 2007, and the strengthening of the Canadian dollar.
Removals of fuelwood have gone up substantially in the past few years, reaching 27% of total
removals in 2006, due to higher wood energy consumption driven by government policies,
higher costs of fossil fuels and greater supply of storm-damaged timber.
Mobilization of more roundwood while both wood energy and wood industry demands mount,
especially in Europe, is of greater concern in light of new Russian export taxes.
Raw material prices
In 2006 and 2007, global sawn softwood markets have been fairly strong with high demand in Europe, Asia and Canada. The US market is the only major world market
that has experienced a downturn: housing starts have fallen from approximately 2.1 million (annually adjusted) in 2005 to just over 1.5 million starts in May 2007. These
market developments have impacted sawlog prices.
Prices are higher in Europe and Oceania, while log costs have been stable or declining in North and Latin America. The Wood Resource Quarterly (WRQ) Global Conifer
Sawlog Price, which is based on domestic species typically processed into construction and higher grades in 18 key areas around the world, reached a record high of $82/m3
in the first quarter of 2006. This was because log costs in Europe in particular increased drastically with respect to the US dollar. The global average price has been fluctuating between $53/m3and $78/m3 over the past 12 years. Much of the increase can be contributed to the weakening of the US dollar, but costs have also gone up
in the local currencies in Europe, as log supply has tightened over the past two years. In the mid-1990s, the difference between the lowest cost WRQ regions (Latin
America at $40/m3) and highest cost WRQ region (Central Europe at $115/m3) was $75/m3, while in 2007 the disparity between the lowest and highest cost region
had increased to almost $100/m3. The average European prices are currently all above the global average; the other regions tracked are below the WRQ average.
In early 2007, sawlog prices were rising in both Europe and Russia, but falling in North America. The biggest price changes in the UNECE region in the past year were in Russia, as delivered prices rose substantially last winter when the mild weather created major problems for loggers and truck haulers resulting in tight log supply and low log inventories. In just 12 months, there were also substantial upward price adjustments in central Europe, where sawlog prices in Germany and Austria increased by 55 and 27%, respectively (with respect to the US dollar). In the
Nordic countries and eastern Europe, average sawlog prices were up 27% and 36% respectively over the same period.
Global softwood sawlog prices, 1995-2007
Delivered softwood sawlog prices in Europe and Russia, 2003-2007
It is interesting to note that average prices in the Nordic countries, the Baltic States and eastern Europe have steadily converged in the past 12 years, and have become practically identical over the past 18 months. The countries around the Baltic Sea have clearly become one common market for wood raw material.
In North America, softwood sawlog costs have declined as the sawnwood market weakened in 2006. However, in the western US, prices rose in
early 2007, influenced by a more active log export market. Both the Republic of Korea and Japan were increasing sawlog purchases from the US. With the higher export tariffs for Russian logs in the coming years, it is plausible that log importers in Asia will be more active in the US and Canada, thus affecting the costs for domestic sawmills in North America.
Delivered softwood sawlog prices in North America, 2003-2007
Prices for oak sawlogs in Germany have trended upward for almost five years, reaching a record level in the first quarter of 2007. The price increases have mainly been the result of higher demand for sawn hardwood, parquet flooring and wood furniture from the export market. Beech sawlog prices in Germany have fallen in the past two years as demand, particularly in the US and Europe, declined in late 2006 and during the first few months of 2007.
Delivered hardwood sawlog prices, 2003-2007
Oak sawlog prices in the US south reached a five-year low of $55/ton last summer, with the slowing housing starts having an impact on the demand for flooring, cabinets and furniture. With a moderately tighter supply, average prices have gone up slightly to $60/ton in 2007. The average global wood fibre prices (based on wood prices in countries accounting for 85-90% of the world’s wood-based pulp production capacity) reached the highest level in 12 years in the first quarter of 2007 when softwood fibre averaged $102/oven-dry metric ton (odmt) and hardwood fibre reached $91/odmt. The rise in wood fibre costs worldwide has been the result of strong pulp and paper markets, and a number of events affecting the supply, including: higher energy costs, increased
competition for raw material from the energy sector (Europe), weak sawnwood markets (North America) and unfavourable weather conditions (Russia). In 2006 and
2007, both softwood and hardwood pulpwood prices have gone up substantially in the UNECE region, with the biggest price increases in western US, Russia, Finland and
France.
Delivered softwood pulp log prices in Europe, 2003-2007
In 2006 and 2007, wood raw material costs for the manufacturing of sawnwood and pulp have gone up in many regions around the world, with the exception of the US and Canada. Prices for sawlog and pulpwood are likely to stabilize worldwide later in 2007 and 2008 as the demand and pricing structure of manufactured products level off.
Delivered softwood pulp log prices in North America, 2003-2007
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