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Hakan Ekstrom's  Instablog

Hakan Ekstrom
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Mr. Ekstrom is the President of Wood Resources International LLC . The company is an internationally recognized forest industry consulting firm established in 1987, which publishes two quarterly timber price reports and have readers in over 25 countries. The Wood Resource Quarterly, established... More
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  • With Recent Pulpmill Expansion, China Has Surpassed Japan To Become The World's Largest Importer Of Hardwood Chips

    Major expansion of pulp manufacturing capacity in China the past five years has resulted in a dramatic increase in the importation of wood chips to supply the new pulp mills, and the country became the world's largest importer of hardwood chips in the 2Q/13, reports the Wood Resource Quarterly. Australia, Indonesia, Thailand and Vietnam are the major suppliers of wood chips, with Vietnam accounting for over 50% of the imported supply.

    Growing demand for paper in China has not only forced the country to import large volumes of pulp to supply the country's paper machines, but also resulted in investments in new pulp production within China. Because of a lack of competitively priced wood fiber in China, the two pulp companies with the largest pulp mills in the country, Asia Pacific Resources International Ltd (APRIL) and Asia Pulp and Paper (NYSEMKT:APP), are procuring much of their wood fiber needs from out-of-country sources. As a consequence, importation of wood chips to China has surged the past few years.

    In just five years, the import value for wood chips has increased from 180 million dollars in 2008 to 1.3 billion dollars in 2012, and this year the estimated import value could be close to 1.5 billion dollars, according the Wood Resource Quarterly (

    It has only been a matter of time before China became the largest importer of hardwood chips in the world. In the 2Q/13, China surpassed Japan with the record importation of almost 2.4 million m3 of chips.

    Although there have been sporadic shipments of chips from Latin America, Malaysia and South Africa during 2012 and 2013, there are really only four countries that have been supplying China with wood fiber the past few years. Those countries are Australia, Indonesia, Thailand and Vietnam, with Vietnam accounting for over half of the total import volume.

    Another interesting development is that the average cost of imported wood chips has declined by almost six percent from the 2Q/12 to the 2Q/13, as reported in the WRQ. The biggest price decline has been in Australian chips, which have fallen over 11 % in one year. Because of this price drop, in the 2Q/13, Australia exported its highest quarterly volume to China since 2010.

    With the continued plans to expand domestic pulp manufacturing in China it, can be expected that shipments of wood chips, both softwood and hardwood, is going to increase in the coming years.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Oct 07 5:45 PM | Link | Comment!
  • As Wood Fiber Costs Have Fallen Substantially In The West The Past Year, Pulp Mills In The Western US Are Becoming More Competitive With Southern Mills

    During much of the past seven years, wood costs have been substantially higher for pulp mills in Western US than they have for pulpmills in the Southern states, according to the North American Wood Fiber Review. However, sharply falling wood chip prices in the West during 2012 and 2013 have improved the competitiveness of the region's pulp mills.

    Wood costs account for between 50-55 percent of the production costs for pulp mills in the US. Historically these costs have often been substantially lower in the Southern states than in the Northwest, the two major pulp-producing regions of the country. However, this has been changing with the most dramatic regional price movements in North America happening in the US Northwest, where prices for softwood chips, the major fiber source for the region's pulp mills, have fallen for five consecutive quarters. Chip prices in the 2Q/13 were down by a third from early 2012, according to the North American Wood Fiber Review ( In contrast, softwood residual chip prices in the US South have remained practically unchanged for over three years, even though the supply of wood chips has increased as the result of higher lumber production in the region.

    Wood chip prices in the US South are still lower than in the Western states, but pulp mills in the Southern states are consuming a higher percentage of higher-cost wood fiber in the form of roundwood, making the total average fiber costs in the South only slightly lower than in the West. Just a few years ago, the average softwood fiber costs for pulp mills in the West were more than 50 percent higher than those in the South.

    Southern prices for both softwood and hardwood pulplogs in the 2Q/13 were unchanged from the previous quarter, after isolated price spikes during the always volatile winter season, as reported in NAWFR. However, pulpmills typically take spring maintenance outages, which reduces demand for wood fiber, resulting in downward prices pressure on logs. The fact that both softwood and hardwood roundwood prices remained unchanged this spring indicates additional demand is being felt from other sources, ie. pellet and OSB mills in some regions, and that harvest levels have picked up after the housing recession.

    Prices for pulplogs, which are the major fiber source for pulp mills in the South, have slowly trended upward the past two years and are expected to continue this trend during the rest of 2013. Since June, heavy amounts of rainfall have begun to cause challenges for wood supply deliveries, and there are early indications that wood prices in the South are climbing in the 3Q.

    Sep 30 12:48 PM | Link | Comment!
  • Steady Increase In Global Trade Of Wood Chips The Past Ten Years; Japan And China Imported 83 Percent Of Traded Hardwood Chips In 2012

    The global pulp industry has increased its importation of wood chips the past ten years, reaching the second highest import levels on record in 2012, reports the Wood Resource Quarterly. Japan, China, Finland and Turkey were the largest importing countries last year.

    Wood chips are one of the few forest products commodities that have seen a steadily increasing trend in globally traded volumes the past decade. With the exception of 2009, when global production of pulp fell by about ten percent and the demand for wood fiber was down, international trade of wood chips has increased every year from 2000 to 2011, as reported in the Wood Resource Quarterly.

    From 2009 to 2012, global chip trade increased by 6.5 million tons to just over 31 million tons, valued at over five billion US dollars, slightly below the all-time high reached in 2011. Much of the increase in chip imports has been because of the expansion of MDF production capacity in Turkey and due to major investments in pulp capacity in China.

    The top ranking of chip-importing countries has changed quite considerably the past five years. Although Japan is still, by far, the largest chip importer in the world, import volumes have declined from a record-high of almost 15 million tons in 2008 to just over 11 million tons in 2012. China, on the other hand, has gone from being a net exporter of chips less than ten years ago to become the second largest importer of wood chips in the world. With the expansion of pulp production capacity in China and the lack of domestic fiber sources, it is likely that China will surpass Japan as the world largest chip importer within 2-3 years. Japan and China are the two dominant consumers of globally traded chips. Their dominance is particularly accentuated for hardwood chips, where they imported 83 percent of the world's total imports in 2012.

    Pulp mills in Finland, the third largest chip importer, have for a long time relied on residual chips from Russian sawmills with close proximity to the border and on chips from the Baltic States. This trade has increased in recent years. The fourth on the import ranking list for 2012 is Turkey, which has become a major chip destination in just the past few years.

    It is likely that global trade of wood chips will continue to go up in the coming years for two main reasons because 1) there are limited forest resources in some of the countries which are expanding industry capacity and 2) some forest companies are making the strategic decision to diversify their supply sources and import wood chips rather than procure marginal fiber supplies locally.

    Sep 30 12:46 PM | Link | Comment!
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