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Constrained woodchip supply and increasing demand have driven up prices. In the run-up to the Woodfiber Conference 2022, international timber economist John North shares our latest market outlook. He explains why we expect FOB prices to rise across the board in the latter half of 2022 and the first part of 2023. And why the current market situation underscores the long-term outlook we have had over the last few years: demand far outweighs supply, pushing smaller projects to expand more rapidly.
Get the highlights of North’s analysis below. Register to attend Woodfiber Conference 2022 to meet North, your peers and other big players, and get a more in-depth look at the global woodchip market.
Vietnamese acacia remains most economical fiber
Hardwood woodchip supply in most major supplying countries is facing headwinds moving into the second half of 2022. The typhoon-related salvage harvesting that took place in Vietnam last year created a surplus in supply from the world’s largest supplier, and it now seems that surplus has been reduced, which has caused a massive increase in the FOB price. However, because of its market share, even at around $180/bone-dry metric ton (BDMT) FOB, Vietnamese acacia remains the most economical fiber.
E. globulus from Australia is the most expensive fiber but is one of the highest quality fibers available.
Chilean exports are likely to fall going into 2023
We previously reported that Arauco’s MAPA project would be a major consumer of fiber from Chilean plantations starting last year, but as the mill has been slower to start up, Chilean exporters have taken advantage of high prices in the export market, and volumes have been higher than forecasted; Eucalyptus nitens accounts for nearly 70% of exports. MAPA is expected to commence production in September, which will very likely constrain export volumes in the last quarter of 2022 and beyond. Chilean export volumes are down 1% year over year.
FOB price increases support Thai fiber export market
Although it is considered to be of poorer quality than even Vietnamese acacia, Thai exporters are increasing volumes of E. camaldulensis to both China and Japan, suggesting the supply is very price elastic in Thailand. In years where the FOB price is depressed, we generally see lower export volumes, but recent price increases have brought more Thai fiber to the market, with volumes up 34% year over year.
LATAM export market likely to grow
Further expansion by the major pulp producers in Latin America, including Arauco and newcomer Paracel, will likely lower the ceiling for fiber available for export from Brazil and even Uruguay. Paracel has planted over 100,000 hectares in Paraguay, but they will not be viable for a number of years, so the company plans to purchase fiber from Brazil in the meantime, which is driving prices up because of competition with Suzano and others.
While there has been no news on a eucalyptus plantation project in Ecuador or Colombia, acacia log exports from Mozambique have resumed, and though the shipments are destined for Europe, they could be available for Asia if prices rise enough to support increased harvesting.
Increases in Chilean and South African FOB prices are not only due to demand in Asia, but also competition from domestic mills and new entrants (i.e., Europe) into the woodchip market.
Sanctions against Russia could reshape trade flows
Global economic sanctions against Russia have put Nordic pulp producers like Stora Enso and others at risk of facing fiber shortages, which has their fiber procurement departments inquiring with exporters in Eastern Europe and Africa to build more resilient fiber supply chains. This might indicate that there will be less fiber available for the Asian markets should it be diverted to Europe, at least while the sanctions are in place.
East Asian import market continues to grow
Hardwood chip imports into Japan remain flat year over year, but shipments to China are up 9.4%, and Sun Paper’s mill in Laos has increased imports by over 10% as it reaches full capacity.
The overall Asian import market, including hardwood and softwood, is up 6.1% compared with the same period last year.
Take a deep dive into the latest wood fiber market dynamics and access the outlooks for the global woodchip, pulp and wood pellet markets from Fastmarkets’ experts. Join us at Woodfiber Conference 2022. Register here.