Sawlog and Pulpwood Market Update – Latin America January 22, 2009
Eucalyptus prices in Brazil have doubled in 4 years
• Brazil’s pulp industry keeps expanding and there are numerous plans for new
projects in the coming five years. Total pulp production is estimated to reach
around 12.8 million tons in 2008, or 6.7% higher than in 2007 as reported by
the Wood Resource Quarterly (WRQ). The production has increased at
approximately 7% annually for the past six years, and is expected to continue
to expand at about the same rate with an estimated production of over 18
million tons by 2012. At that time, Brazil will be the third largest pulp
manufacturer in the world after the US and Canada. The estimated expansion
rate was made by the Brazilian Association of Pulp and Paper before the global
financial crisis, and it may very well be that several projects will be delayed
due to the difficulty in attracting investment capital.
• Wood costs in Brazil continue to be very competitive compared to other
countries in the world, particularly for pulp companies that have their own
plantations. A clear majority of the Eucalyptus pulpmills in Brazil source wood
internally. The costs for hardwood pulpwood purchased in the open market
have gone up substantially the past five years due to increased competition
from pulpmills and the steel industry.
• In the 3Q, the average Eucalyptus log price moved up a few dollars and
reached a new record. The price for open market logs has almost doubled in
four years. The current open market hardwood costs in Brazil are close to the
WRQ global average hardwood price for the 3Q.
Declining pulpwood prices in Chile and much uncertainty ahead in 2009
• Some wood chip exporters in Chile have cut back in their purchases of
pulpwood because shipments of chips to Japan for 2009 are quite uncertain in
regards export price, required volume, and exchange rate (US$ vs. Pesos). The
domestic pulpmills in Chile have also reduced log purchasing with the result
that pulpwood prices have started to decline this fall. In US dollar terms,
average Eucalyptus pulpwood prices have fallen 12% from an all-time-high in
the 1Q/08. Despite the reduction, costs are still higher than a year ago.
• Pine pulplog prices have also declined this year as pulpmills have reduced
production. Pulpwood costs are now the lowest in all regions tracked by the
Wood Resource Quarterly.
Uruguay is expanding both wood chip exports and pulp manufacturing
• Uruguay has increased export shipments of both Eucalyptus wood chips and
pulpwood the past few years. In 2007, total chip exports were almost one million odmt compared to virtually no exports just five year ago. Practically all
wood chips have been shipped to pulpmills in four countries; Japan, Spain,
Sweden and Finland. The wood chip export price for Japan has traditionally
tracked the Chile chip price minus the difference in freight cost, but during the
second half of 2008, the price was the same.
• In addition to wood chips, Uruguay has also expanded shipments of
roundwood from its plantations. Last year these shipments reached 1.7 million
m3. The majority of the logs have been destined for the Nordic countries and
Southern Europe. Over time, it can be expected that raw-material exports from
Uruguay will decline as new pulpmills are being built in the country and an
increased share of the plantation wood will be consumed domestically.
