Wfr Sample

1

North AmericanWood Fiber

Review

© 2007 Wood Resources International, LLC

North American Wood Fiber Market UpdateJune 2007

Negotiated prices for wood chips exported to Japan 1H/2007 (FOB):Douglas-fir, U.S. (US$/BDU) 167.50 142.50 (2H/06)SPF, Canada (US$/BDU) 140.00 100.00 (2H/06)Pine, Australia (US$/BDU) 150.00 110-112 (2H/06)Euc., Australia (Aus$/odm 176-180 161 (2H/06)

Nor

th A

mer

ica

Wood fiber prices are moving downward

Wood fiber prices were unchanged or falling in mostregions this quarter with the exception of British Co-lumbia and Alberta, where tight fiber supply pushedprices of both wood chips and pulplogs upwards. Woodprices in the two western provinces were also impactedby higher market pulp prices as some chip contractsare linked with these prices. As the Canadian dollarstrengthened this quarter, wood costs in US dollar termsdid go up in all provinces of Canada and are generallyhigher than in the US.

Only two regions in the US had higher wood costs thanCanada during the 2Q; Maine, and the states in theNorthwest. Pulpmills in western US have gone througha roller coaster ride, with conifer residual chip pricesalmost doubling from the 2Q last year to the 1Q of thisyear, peaking at US$140/odmt (delivered). At their peakthis region had the highest conifer fiber costs in theworld. During the 2Q/07, pulpmills in the US North-west were able to build exceptionally high inventories(they increased from 10 days in December to 30 daysin May), and wood prices have started to came backdown again.

In the US South, prices were practically unchangedwith pine chips averaging $68/odmt (delivered) and pineroundwood ranging from $80-90/odmt. Wood chipprices have been remarkably stable the past few yearswith only small adjustments of a few dollars up or down.Pine log prices have trended upward as stumpage andtransport costs have increased, particularly in the SouthCentral states where average prices are up almost 10%from a year ago to $36/green ton ($90/odmt).

Canada increases imports of wood chips

Wood chip trade between Canada and the US has in-tensified as Canadian pulpmills are struggling to supplytheir pulpmills with residual chips from a sawmill sec-tor in decline. Chip imports more than doubled in 12months from early last year to March of this year. In

Benchmark Prices for Market Pulp in Europe

300

350

400

450

500

550

600

650

700

750

800

Jan-

03

Apr-0

3Ju

l-03

Oct-03

Jan-

04

Apr-0

4Ju

l-04

Oct-04

Jan-

05

Apr-0

5Ju

l-05

Oct-05

Jan-

06

Apr-0

6Ju

l-06

Oct-06

Jan-

07

Apr-0

7

US

dol

lars

/ton

Softwood Pulp (NBSK) Hardwood Pulp (BHKP)

Source: FOEX

As of June 12, 2007: NBSK: $785/ton BHKP: $686/ton

the 1Q/07, Canada imported almost 500,000 odmt ofwood chips, of which most were destined to pulpmillsin British Columbia, Quebec and New Brunswick. Withcontinued cut backs in the lumber industry and astrengthening Canadian dollar, it can be expected thatCanadian companies will continue to search for addi-tional chip volumes on the US side of the border.

Softwood pulp prices keep going up

Global softwood pulp prices are continuing upward,while hardwood pulp prices have leveled off at just over$780/ton according to FOEX Benchmark Index. Theaverage benchmark NBSK pulp price in Europe hasincreased by almost $150 in one year, reaching $785/ton (CIF Europe) in June, the highest price since 1996.

Trade of Wood Chips in Canada

0

50

100

150

200

250

300

350

400

450

500

1q/01 3q

1q/02 3q

1q/03 3q

1q/04 3q

1q/05 3q

1q/06 3q

1q/07

1000

odm

t

Net Trade Export Import

2


Review


U.S. Lake StatesChips 79 (66 - 86)Roundwood 81 (60 - 108)

U.S. South CentralChips 69 (60 - 77)Roundwood 89 (80 - 102)

U.S. NortheastChips 94 (61 - 142)Roundwood 98 (74 - 148)

Canadian MaritimesChips 86 (65 - 104)Roundwood 95 (59 - 106)

QuebecChips 126 (99 - 149)Roundwood 151 (117 - 180)

U.S. Pacific NorthwestChips 118 (83 - 145)Roundwood 91 (69 - 123)

U.S. South EastChips 67 (60 - 72)Roundwood 82 (72 - 92)

AlbertaChips 84 (67 - 96)

OntarioChips 122 (95 - 140)Roundwood 149 (113 - 176)

Notes.Units in US$/odmt (delivered).1 odmt (oven-dry metric ton) equal to 1.102 short tons or 2204 lbExchange rate: Can$ 1.11/US$ (Average 2Q/2007)

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

Conifer Wood Fiber Costs in North AmericaSecond Quarter, 2007

Nor

th A

mer

ica

British ColumbiaChips 91 (83 - 112)Roundwood 113 (79 - 122)

3


Review


Non-Conifer Wood Fiber Costs in North AmericaSecond Quarter, 2007

U.S. Lake StatesChips 58 (51 - 66)Roundwood 73 (50 - 91)

U.S. South CentralChips 65 (54 - 69)Roundwood 82 (73 - 91)

U.S. NortheastChips 75 (48 - 97)Roundwood 74 (67 - 128)

Canadian MaritimesRoundwood 75 (63 - 90)

QuebecChips 77 (68 - 90)Roundwood 86 (70 - 103)

U.S. South EastChips 63 (57 - 69)Roundwood 82 (74 - 92)

OntarioChips 74 (68 - 86)Roundwood 81 (70 - 99)

Nor

th A

mer

ica

U.S. Pacific NorthwestChips 134 (92 - 151)Roundwood 94 (62 - 111)

Notes.Units in US$/odmt (delivered).1 odmt (oven-dry metric ton) equal to 1.102 short tons or 2204 lbExchange rate: Can$ 1.11/US$ (Average 2Q/2007)


4


Review


Wood Fiber Costs in North AmericaSecond Quarter, 2007

Nor

th A

mer

ica

Note.

Prices are for residual wood chips and roundwood delivered to pulpmill or chip plant (units in US$/odmt).

1 odmt (oven-dry metric ton) equal to 1.102 short tons (dry weight) or 2204 lb

Exchange rate: Can$ 1.11/US$ (average 2Q/2007)

Sources.US - Lake States WRI sources and the Timber Mart-North published by Prentiss & Carlisle Management CoAll other regions Data collected by Wood Resources International and WRQ sources

Wood Chips Roundwood

Avg Min Max Avg Min Max US$/odmt (delivered) US$/odmt (delivered)

Conifer

U.S.Northwest 118 83 145 91 69 123Lake States 79 66 86 81 60 108Northeast 94 61 142 98 74 148South East 67 60 72 82 72 92South Central 69 60 77 89 80 102

CanadaBritish Columbia 91 83 112 113 79 122Alberta 84 67 96 ..... ..... .....Ontario 122 95 140 149 113 176Quebec 126 99 149 151 117 180Maritimes 86 65 104 95 59 106

Non-Conifer

U.S.Northwest 134 92 151 94 62 111Lake States 58 51 66 73 50 91Northeast 75 48 97 74 67 128South East 63 57 69 82 74 92South Central 65 54 69 82 73 91

CanadaOntario 74 68 86 81 70 99Quebec 77 68 90 86 70 103Maritimes ..... ..... ..... 75 63 90

5


Review


Wood Fiber Costs in North America2Q/06 - 2Q/07

Nor

th A

mer

ica

Notes.All prices in US dollars per green tons (2000 pounds) or equal to 0.907 metric tonnesRoundwood prices are delivered to pulpmill or chipping facilityChip prices are for residual chips and do not include chips manufactured from roundwoodExchange rate: Can$ 1.11/US$ (average 2Q/2007)


2Q/06 3Q/06 4Q/06 1Q/07 2Q/07 Change 2Q/06 3Q/06 4Q/06 1Q/07 2Q/07 Changey/y (%) y/y (%)

Conifer

U.S.

Northwest 36 42 60 64 53 48.7 28 35 43 41 37 32.4

Lake States 31 31 32 32 36 16.7 37 37 36 35 33 -11.7

Northeast 48 44 43 43 43 -11.3 42 41 40 40 40 -5.8

South East 30 29 30 30 30 0.0 32 32 33 34 33 3.8

South Central 34 31 33 31 31 -6.8 33 34 36 38 36 8.5

Canada

British Columbia 29 31 36 37 41 43.9 28 35 37 41 46 63.2

Alberta 30 31 34 35 38 26.6 ---- ---- ---- ---- ..... na

Ontario 63 56 56 52 55 -11.9 60 60 59 57 60 1.1

Quebec 64 59 58 54 57 -11.2 61 61 61 58 61 0.2

Maritimes 42 40 40 39 39 -6.0 41 40 38 36 38 -6.3

Non-Conifer

U.S.

Northwest 44 49 54 61 61 38.2 29 32 37 39 38 30.3

Lake States 30 30 27 27 26 -12.5 31 31 30 30 29 -4.4

Northeast 34 34 35 34 34 -1.4 32 31 32 31 30 -7.5

South East 29 28 29 29 29 0.0 33 33 33 34 33 0.0

South Central 29 29 29 29 29 1.6 33 32 34 33 33 0.0

Canada

Ontario 33 33 33 32 34 1.2 32 32 32 31 33 1.4

Quebec 34 34 34 33 35 0.8 34 34 34 33 35 1.7

Maritimes ---- ---- ---- ---- 0 na 31 31 30 30 30 -2.9

Wood Chips RoundwoodUS$/green tons (delivered)US$/green tons (delivered)

6


Review


WOOD CHIP EXPORTSUnited States

Nor

th A

mer

ica

Chip Exports from the U.S. in 2005/2006

0

50

100

150

200

250

Washington Oregon Other West Northeast South

1000

mt (

dry

wei

ght)

1q/06 2q/06 3q/06 4q/06 1q/07

Change

1Q 2007 Wa Or OthNW Ak North South Total, U.S. from last Q

(%)

Conifer Chips

Japan 0 111 0 0 0 0 111 -38

Canada 220 0 16 0 95 0 331 31

Other 0 0 0 0 0 23 23 2200

Total 220 111 16 0 95 23 465 7Change from

last Q (%) 38 -38 14 -100 22 2200 7

Non-Conifer Chips

Japan 5 0 0 0 0 0 5 -88

Canada 0 0 0 0 139 0 139 -3

Other 0 0 0 0 0 27 27 -31

Total 5 0 0 0 139 27 171 -24Change from

last Q (%) na -100 na na -3 -64 -24

TOTAL 225 111 16 0 234 50 636 -3Change fromlast Q (%) 42 -40 14 -100 5 -34 -3

7


Review


WOOD CHIP IMPORTSUnited States

Nor

th A

mer

ica

Wood Chip Imports to the U.S.

0

50

100

150

200

250

300

350

1q/97

1q/98

1q/99

1q/00

1q/01

1q/02

1q/03

1q/04

1q/05

1q/06

1q/07

1000

odm

t

US West US Other Total

Sources: U.S. Department of Commerce, Statistics Canada and Industry Sources.

Change in ImportsOrigin 3q/05 4q/05 1q/06 2q/06 3q/06 4q/06 1q/07 last quarter last year

1000 odmt % %

Canada, BC 75 51 51 46 63 35 24 -31 -53Canada, other 10 4 7 9 5 3 4 33 -43Brazil 160 73 73 132 100 128 72 -44 -1

Total 245 128 131 187 168 166 100 -40 -24

Change from last Q -6.1 -47.8 2.3 42.7 -10.2 -1.2 -39.8

8


Review


British Columbia Wood Chip Exports

0

50

100

150

200

250

1q/00

3q/00

1q/01

3q/01

1q/02

3q/02

1q/03

3q/03

1q/04

3q/04

1q/05

3q/05

1q/06

3q/06

1q/07

1000

met

ric

ton

(dry

wei

ght)

US Japan Total

Sources: B.C. Ministry of Forests, Statistics Canada and Industry Sources.

WOOD CHIP EXPORTSCanada

Nor

th A

mer

ica

Origin Total

1000 odmt

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

1q/06 51 26 77 7 0 37 44 1212q/06 46 84 130 9 0 0 9 1393q/06 63 61 124 5 0 0 5 1294q/06 35 57 92 3 0 0 3 951q/07 24 130 154 3 0 0 3 157

Change, last Q (%) -31 128 67 0 na na 0 65Change, last year (%) -53 400 100 -57 na -100 -93 30

Other ProvincesBritish Columbia

9


Review


British Columbia Wood Chip Imports

0

50

100

150

200

250

300

1q/00

3q/00

1q/01

3q/01

1q/02

3q/02

1q/03

3q/03

1q/04

3q/04

1q/05

3q/05

1q/06

3q/06

1q/07

1000

met

ric

ton

(dry

wei

ght)

Washington Other Total

WOOD CHIP IMPORTSCanada

Sources: Statistics Canada, B.C. Ministry of Forests and Industry Sources.

Nor

th A

mer

ica

Destination British Columbia Ontario Other Total

1000 odmt

Origin Wa Other Total Total Total Total

1q/06 80 13 93 30 108 2312q/06 71 15 86 24 92 2023q/06 148 27 175 38 171 3844q/06 159 19 178 27 194 3991q/07 225 16 241 33 202 476

Change, last Q (%) 42 -16 35 22 4 19Change, last year (%) 181 23 159 10 87 106

10


Review


Wes

tern

U.S

.

Western U.S. Wood Fiber Market UpdateJune 2007

Surprisingly swift turnaround in wood fiber inven-tories.

Wood fiber inventory levels at pulpmills in the North-west have experienced an amazing turnaround the pastsix months; going from a record low of only 10 days inDecember to the highest June inventory in seven years,equivalent to 30 days fiber consumption. The north-east Washington (Puget Sound) and western Oregon(Willamette Valley) were the only regions where pulp-mills did not substantially increase their wood fiber in-ventories in the 2Q. Much of the increase was theresult of lower demand from pulpmills which were tak-ing maintenance downtime during the spring, as wellas to higher availability of roundwood chips.

The FRA Western Technical Division data reveal thatlast month's inventory of pulplogs was the highest forthe month of May for at least the past 8 years.

A number of independent wood chip producers in theregion have started to cut back on pulplogs as de-mand for roundwood chips has declined. This has re-sulted in reduced pulplog prices region-wide: from$42/green ton to $37/green ton, a drop of over al-most five dollars. Some log buyers saw prices fall fromalmost $50/ton in the first quarter to less than $35/tonin June.

Dramatic fall of wood fiber prices in the 2Q

After peaking at 12-year record highs, regional aver-age softwood residual chip prices in the Northwest

fell by as much as $25/BDU ($22/odmt) in the 2Qcompared to the previous quarter. The biggest pricedrops occurred in the subregions of the Lower Co-lumbia River and Western Oregon, where some saw-mills received up to $30/BDU less for their chips thisquarter. In those two regions, which are the most com-petitive areas in the Northwest, residual prices rangedbetween $125-130/BDU. The lowest wood fibercosts continue to be in the Puget Sound regions and ineastern Washington, Idaho and Montana.

Despite the sharp price reductions this quarter, woodfiber costs are still substantially higher than a year agoand it is expected that prices of both residual chipsand whole-log chips will continue downward in the3Q.

Increased exports of wood chips from the US toBritish Columbia

As fiber supply has tightened in neighboring BritishColumbia, pulpmills close to the US border have in-creasingly been purchasing wood chips in the USNorthwest. Wood chip imports to BC in the 1Q were241,000 odmt, which was up 35% from the previousquarter and 159% higher than a year ago! With ex-pected continued decline in residual supply in the prov-ince and strengthening of the Canadian dollar againstthe US dollar, it is likely that the northbound move-ment will continue, thus putting price pressure up inthe northern part of Washington state.

Softwood Chip and Pulplog Inventory - US NW

0

200

400

600

800

1000

1200

Jan-

99

May

-99

Sep-9

9

Jan-

00

May

-00

Sep-0

0

Jan-

01

May

-01

Sep-0

1

Jan-

02

May

-02

Sep-0

2

Jan-

03

May

-03

Sep-0

3

Jan-

04

May

-04

Sep-0

4

Jan-

05

May

-05

Sep-0

5

Jan-

06

May

-06

Sep-0

6

Jan-

07

May

-07

1000

BD

T

Pulplogs Softwood chips TotalSource: FRA/WTD

Residual and Roundwood Chip Prices 2Q/2007Western U.S.

148164 162

152 146139 140

113108

125124132130

114110

149

0

20

40

60

80

100

120

140

160

180

200

Douglas-fir

Hemlock Douglas-fir

Hemlock Douglas-fir

Hemlock Douglas-fir

Hemlock

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

US$

/BD

U (

deli

vere

d)

Residual chips Roundwood chips

11


Review


WOOD CHIP PRICES - Western U.S.

April - June 2007

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

Wes

tern

U.S

.

Douglas-fir Chip Prices in Western U.S.

0

20

40

60

80

100

120

140

160

180

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

US

$/B

DU

1q/06 2q/06 3q/06 4q/06 1q/07 2q/07

Douglas-Fir

US$/BDU (del.) Ave Ave Ave Ave Ave

Washington 117 90 - 175 121 90 -175 na …. - …. 100 88 -122 115 100 - 128 Northwest (Puget Sound)

Lower Columbia River 141 113 - 185 141 78 -185 na …. - …. 98 78 -117 150 130 -165 (SW Wa + NW Or)

Oregon/California 127 108 - 183 127 113 -168 na …. - …. 105 93 -127 na …. -…. (Willamette V. & NW Ca)

Inland Empire 118 93 - 171 122 93 -188 126 93 - 188 na …. -…. na …. -…. (E. Wa, Idaho, Montana)

Weighted Average 128 90 - 185 131 78 -188 126 93 - 188 101 78 -127 146 100 -165

Range

CedarPine Hardwood

Range Range Range Range

Hemlock

12


Review


Wes

tern

U.S

.

WOOD CHIP INVENTORIES - Western U.S.

Note. Inventories in the above table include both wood chips and sawdust.

Company Location Jun-06 Sep-06 Dec-06 Mar-07 Jun-07

(1000 BDU)

Blue Heron Paper Co. Oregon City, Or 1 1 2 1 2

Boise Cascade Corp. St. Helens, Or 2 8 14 10 12Wallula, Wa 19 33 30 40 40

Evergreen Pulp Samoa, Ca 10 8 14 20 45

Georgia Pacific Corp. Camas, Wa/Wuana, Or 20 10 14 24 58Toledo, Or 19 8 15 11 21Coos Bay, Or 3 4 13 21 10

Inland Empire Paper Co. Spokane, Wa 3 1 4 5 4

Kimberly Clark Everett, Wa 8 3 6 22 27

Longview Fibre Co. Longview, Wa 4 6 9 55 56

Nippon Paper Industries Port Angeles, Wa 1 1 1 1 1

Oregon Chip Terminal Coos Bay, Or 15 6 7 20 36

Ponderay Newsprint Co. Usk, Wa 3 3 4 4 3

Pope&Talbot Pulp, Inc. Halsey, Or 18 18 26 50 42

Port Townsend Paper Corp. Pt Townsend, Wa 4 4 9 11 11

Potlatch Corp. Lewiston, Id 5 6 8 15 39

Roseburg Forest Products Coos Bay, Or 30 35 50 35 30

Simpson Paper Co. Tacoma, Wa 27 21 21 42 29

Smurfit-Stone Container Missoula, Mt 10 8 13 30 34

SP Newsprint Co. Newberg, Or 2 2 1 2 2

Weyerhaeuser Co. Albany, Or 34 15 32 30 38Longview, Wa 25 42 25 52 60Springfield, Or 34 15 30 28 20

TOTALS, Western U.S. 305 263 348 529 629

Change from last year (%) -41.6 -47.1 -25.6 50.3 106.1

13


Review


Wes

tern

U.S

.

Chip Inventory in Western U.S.

0

100

200

300

400

500

600

700

800

900

Mar-

99

Sep-9

9

Mar-

00

Sep-0

0

Mar-

01

Sep-0

1

Mar-

02

Sep-0

2

Mar-

03

Sep-0

3

Mar-

04

Sep-0

4

Mar-

05

Sep-0

5

Mar-

06

Sep-0

6

Mar-

07

1000

BD

U

Lower Columbia River Or, West (Willamette V.) Wa, West (Puget S.)

East Wa/Id/Mt/Ca Export Total

Source: NAWFR

Softwood Chip and Pulplog Inventory - US NW

0

200

400

600

800

1000

1200

Jan-

99

May

-99

Sep

-99

Jan-

00

May

-00

Sep

-00

Jan-

01

May

-01

Sep

-01

Jan-

02

May

-02

Sep

-02

Jan-

03

May

-03

Sep

-03

Jan-

04

May

-04

Sep

-04

Jan-

05

May

-05

Sep

-05

Jan-

06

May

-06

Sep

-06

Jan-

07

May

-07

1000

BD

T

Pulplogs Softwood chips TotalSource: FRA/WTD

Note. 1 BDT=2000 Lb= 0.907 odmt 1 BDU = 1.20 BDT

14


Review


SAWMILL RESIDUE PRICES - Western U.S.

UTILITY LOG PRICES - Western U.S.April - June 2007

Wes

tern

U.S

.

April - June 2007

Note. Prices are in dollars per BDT (eq. 2000 lb or 0.907 metric ton)

Pine Hardwood

Ave Range Ave Range Ave Range Ave Range

US$/green ton o.b. (delivered)

Washington, West 39 35-45 39 36-45 ..... ..... 34 28-38

Lower Columbia River 35 28-42 36 28-45 ..... ..... 40 32-45 (SW Wa + NW Or)

Oregon, West 36 30-42 38 30-47 ..... ..... 38 35-41

Idaho/Eastern Washington 37 30-45 37 30-45 37 30-45 ..... .....

Montana, West 43 30-50 43 30-50 43 30-50 ..... .....

Weighted Average 37 (28-50) 37 (28-50) 39 (30-50) 37 (28-45)

Douglas-fir Hem-fir

Ave Range Ave Range Ave Range

US$/BDT (delivered)

Washington West (Puget Sound) ..... ..... 38 22-40 24 10-30

Lower Colombia River ..... ..... 33 27-42 32 24-50 (SW Wa + NW Or)

Oregon West (Willamette Valley) 47 28-65 42 32-50 32 23-46 Northeast 52 36-55 48 25-62 .... .... South 46 28-58 34 18-43 31 24-40

California 53 42-58 50 44-62 38 28-55

Idaho/Montana 41 29-48 47 29-59 35 18-48

Weighted Average 48 (28-65) 43 (18-62) 29 (10-55)

Hog fuelSawdustShavings

15


Review


Can

ada

Canadian Wood Fiber Market UpdateJune 2007

A strengthening Canadian dollar impacts fiberprocurement strategies

In the middle of June, the Canadian dollar reached0.93 on the US dollar, and market analysts are pre-dicting that the US and Canadian dollars will be onpar later this year. With this strengthening of the Cana-dian dollar, now at an over 15-year record high againstthe US dollar, many Canadian companies both in thewestern and eastern provinces are struggling to keeptheir mills running. Few are profitable given the cur-rent lumber prices in the US market.

According to WWPA's most recent statistics, the in-dustry was running at 83% of practical capacity inMarch. This is likely to be lower in the 2Q as moresawmills, particularly in Interior BC and Quebec, haveannounced curtailments during the quarter. Lumberproduction in BC was 9% lower in March this year ascompared to last year, while production in the rest ofthe country ran 15% lower than in March 2006. Evenmany integrated companies with both pulpmills andsawmills took the unusual step at curtailing lumber pro-duction despite the impact this will have on the internalwood fiber supply for the pulp manufacturing. Thisdevelopment has forced pulpmills all over Canada toincreasingly rely on more expensive roundwood chips.

Wood fiber prices reaching seven year highs inthe western provinces

In British Columbia and Alberta, chip prices have goneup for four consecutive quarters after dipping torecord-lows in 1Q/06. Wood chip prices in the twowestern provinces are now at the highest levels in sevenyears, with Coastal BC prices averaging over C$100/odmt (FOB sawmill) while average prices in Albertaand Interior BC were around C$80/odmt in the 2Q.

Assuming the Canadian dollar continues to strengthenand pulp prices remain flat, wood chips prices couldvery well decline a few dollars next quarter as manypulpmills still use formula pricing based on mill net prices(in US dollars).

Increased reliance on manufactured chips in BC

Historically most pulpmills in the Interior BC have re-lied on residual chips for over 95% of their wood fiberfurnish, as the lumber industry is fairly large relativethe pulp sector. As this supply source has diminishedthe past six months, many pulpmills have been forcedto start up whole-log chip programs with increasedutilization of smaller trees (mostly beetle-killed) andtreetops.

Over the next 8-10 months it can be expected that theshare of manufactured chips will increase to between10-20% of the total fiber supply. Increasingly, coastalpulpmills are also hauling roundwood chips from theInterior out to the coast, as prices are competitive withthe high-cost volumes on the coast. Declining residualvolumes on the coast have pushed up pulplog pricesfrom C$32/ton for hem-fir a year ago to $52/ton inthe 2Q/07.

Wood fiber costs down in Eastern Canada

Wood fiber prices did not change much in Ontarioand Quebec as the overall supply and demand werein balance. However, there were regional differenceswithin the provinces and some pulpmills have to in-creasingly travel further, including into the US, to pro-cure roundwood for chipping. Wood chip prices av-eraged just over C$135/odmt (US$124/odmt) downabout 13% from a year ago.

Wood Fiber Costs in British Columbia 1997-2007

0

20

40

60

80

100

120

140

1q/97

1q/98

1q/99

1q/00

1q/01

1q/02

1q/03

1q/04

1q/05

1q/06

1q/07

Can

$/od

mt (

FOB

saw

mill

)

BC, CoastBC, N. InteriorBC, S. InteriorAlberta

16


Review


WOOD FIBER PRICES - Western CanadaApril - June 2007

Notes.* Only small quantities traded during this quarterDomestic chip prices in Can$ per BDU at sawmillDomestic log prices in Can$ per m3 (delivered)1 BDU= 2400 Lb. = 1.09 metric ton (dry weight)Exchange rate: Can$ 1.11/US$ (Average for 2Q/ 2007)

Can

ada

WOOD CHIP PRICES - Western Canada

0

20

40

60

80

100

120

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

Can

$/B

DU

(F

OB

saw

mil

l)

1q/06 2q/06 3q/06 4q/06 1q/07 2q/07

WOOD CHIPCan$/BDU (FOB sawmill)

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

British ColumbiaNorth Interior ..... ..... 85 67-95 85 67-95 ..... .....South Interior 82 75-94 82 75-94 82 75-94 65 57-69Coast 106 95-128 113 103-135 ..... ..... 75 65-90

Alberta ..... ..... ..... ..... 82 62-97 ..... .....

ROUNDWOODCan$/m3 ub (delivered)

British ColumbiaNorth Interior* ..... ..... 31 23-36 31 23-36 ..... .....South Interior* 35 25-40 35 25-40 35 25-40 ..... .....Coast 44 35-46 52 48-54 ..... ..... ..... .....

17


Review


Can

ada

April - June 2007

WOOD FIBER PRICES - Eastern Canada

Notes.Domestic chip and log prices in Can$ per odmt (delivered)1 odmt (dry weight) = 1.102 short tons (dry weight) = 2204 lbExchange rate: Can$ 1.11/US$ (Average for 2Q/2007)Sources: Industry contacts and the Wood Resource Quarterly (WRI, LLC)

CONIFER WOOD FIBER PRICES - Eastern Canada

0

20

40

60

80

100

120

140

160

180

200

Ontario Chips

OntarioRoundwood

QuebecChips

Quebec Roundwood

Maritimes Chips

Maritimes Roundwood

Can

$/od

mt (

del)

2q/06 3q/06 4q/06 1q/07 2q/07

WOOD CHIPS ROUNDWOOD

Can$/odmt Can$/odmt

Conifer Non-conifer Conifer Non-coniferAve Range Ave Range Ave Range Ave Range

Ontario 135 105-155 82 76-96 165 125-195 90 78-110

Quebec 140 110-165 85 75-100 168 130-200 96 78-114

Maritime Prov. 96 72-115 na na 105 65-118 83 70-100

18


Review


The Global Forest Industry - 1Q/2007Excerpted from our sister publication Wood Resource Quarterly, a 48-page market report tracking globalpulpwood and sawlog markets, including prices for most major wood-consuming regions around theworld. See www.woodprices.com for more information.

The Pulp and Paper Market

The supply of softwood market pulpis continuing to be tight as manypulpmills in the Nordic countries,Canada and Western US have haddifficulty running at full operatingrates due to wood fiber shortages.As a result, NBSK prices have goneup this quarter, reaching $760/ton inEurope and $790/ton in the US.

With many pulpmills taking mainte-nance shut downs in the spring, itcan be expected that global pulp sup-ply will continue to be tight and thatpulp prices will strengthen further.

The global production of market pulpwas 3.1% higher in 2006 than 2005,and this trend continued in early 2007when pulpmills, particularly in LatinAmerica, ran at substantially higherrates than in early 2006.

The only region that did not increaseproduction in 2006 was NorthAmerica, where the pulp sector inEastern Canada was hard hit by highproduction costs and reduced woodfiber supply.

The Lumber Market

The declining trend in housing startsin the US that lasted for much of2006 ended in November, and num-bers have since then stabilized ataround 1.5 million starts (seasonallyadjusted annual rate).

With lower housing starts, demandfor lumber has been in decline foralmost 12 months, resulting in con-tinued reductions in lumber manu-

facturing. In early 2007, productionin both Canada and the US wasmuch lower than in 2006 and thereare few signs that demand for lum-ber will pick up any time soon.

With the lower demand for lumberin the US, imports fell by an aston-ishing 24% in January as comparedto the same month in 2006. The big-gest decreases in shipments werefrom Canada, Germany, Austria andSweden.

In March, lumber prices in the USwere close to record low levels. TheRandom Length composite price forframing lumber was down 23.6%from a year ago.

The lumber market in Europe is hot,with strong demand in western Eu-rope and limited supply in the Nor-dic countries, in eastern Europe andin Russia. The tight market has in-creased lumber prices to record-high levels.

Lumber consumption in Japan washigher this winter than last year, re-sulting in an increase in domesticproduction as well as a rise in im-ports. In January, imports were upfrom the US, Russia, Europe andNew Zealand, while Canadian ship-ments were down almost 20%.

Global Sawtimber Prices

The WRQ Global Conifer SawlogPrice, based on sawlog prices in 18major regions around the world, wasup substantially this quarter, reach-ing a all-time high of US$82.31/m3in the 1Q/07. This can be compared

to US$72.71/m3 the same quarterin 2005, and to US$71.84/m3 in2004. The biggest price increasesthis quarter occurred in western US,Finland, Germany and the BalticStates.

The Global Average Wood FiberPrice

The average global coniferpulpwood price was up 3.5% to$101.76/odmt in the 1Q/07, and asmuch as 16.8% from a year ago asfiber prices increased in practicallyall markets covered by the WRQ.Eastern Canada was the only regionwith both lower wood chip andpulplog prices this quarter.

The average global price for non-conifer wood fiber was practicallyunchanged at $91.47/odmt withlower prices in Canada and Japan,while prices increased in Europe,Russia and Australia.

The Wood Pellet Market inNorth America

Wood pellet markets in the US andCanada have really taken off thepast few years. Total production inNorth America increased sharplybetween 2003 and 2006, doublingfrom almost 900,000 tons to 1.7 mil-lion tons.

This year, it is expected that pro-duction will reach approximately 2.3million tons. Despite this dramaticchange, the per capita consumptionis still much lower than in Europe.

19


Review


Pac

ific

Rim

JAPANWood Chip Inventory

Note. Data include total wood fiber inventory at domestic pulpmills, port yards and on ships.

Wood Fiber Inventory in Japan - Conifer

0

100

200

300

400

500

600

700

Jan-

03

Apr-0

3Ju

l-03

Oct-03

Jan-

04

Apr-0

4Ju

l-04

Oct-04

Jan-

05

Apr-0

5Ju

l-05

Oct-05

Jan-

06

Apr-0

6Ju

l-06

Oct-06

Jan-

07

1000

odm

t

Inventory Change March, 2006 532,000 odmtMarch, 2007 505,000 odmt (-5.1 %)

Wood Fiber Inventory in Japan - Non-Conifer

0

200

400

600

800

1000

1200

1400

Jan-

03

Apr-0

3Ju

l-03

Oct-03

Jan-

04

Apr-0

4Ju

l-04

Oct-04

Jan-

05

Apr-0

5Ju

l-05

Oct-05

Jan-

06

Apr-0

6Ju

l-06

Oct-06

Jan-

07

1000

odm

t

Inventory Change March, 2006 1,092,000 odmtMarch, 2007 957,000 odmt (-12.4 %)

20


Review


JAPANImports of Conifer Wood Chips

Notes. Average value in US$/odmt (CIF)Source: Japan Customs Statistics

Pac

ific

Rim

Imports of Conifer Wood Chips 2005/2006Japan

0

50

100

150

200

250

300

USA Australia New Zealand Canada Fiji Other

1000

odm

t

1q/06 2q/06 3q/06 4q/06 1q/07

Origin 4q/05 1q/06 2q/06 3q/06 4q/06 1q/07 Change q/q Avg value1000 odmt % US$/odmt

USA 153 210 204 201 145 133 -8 185

Australia 228 259 256 249 265 252 -5 145

New Zealand 62 48 43 53 48 57 19 143

Canada 36 55 68 77 73 80 10 156

Fiji 36 18 39 21 33 18 -45 138

Other 66 63 6 5 7 35 400 170

Total 581 653 616 606 571 575 0.7 157

Change fromlast quarter (%) -12.0 12.4 -5.7 -1.6 -5.8 0.7

21


Review


Notes. Average value in US$/odmt (CIF)Source: Japan Customs Statistics

JAPANImports of Non-Conifer Wood Chips

Pac

ific

Rim

Imports of Non-Conifer Wood Chips 2005/2006Japan

0

200

400

600

800

1000

1200

Australia S. Africa Chile Vietnam Brazil Other

1000

odm

t

1q/06 2q/06 3q/06 4q/06 1q/07

Origin 4q/05 1q/06 2q/06 3q/06 4q/06 1q/07 Change q/q Avg value1000 odmt % US$/odmt

Australia 1035 876 997 1034 968 1134 17.1 162

South Africa 747 754 650 688 666 646 -3.0 160

Chile 366 533 383 422 436 476 9.2 165

Brazil 193 137 137 160 102 220 115.7 168

Vietnam 199 166 184 179 192 209 8.9 146

Other 398 487 429 351 400 361 -9.8 145

Total 2938 2953 2780 2834 2764 3046 10.2 160

Change fromlast quarter (%) 4.3 0.5 -5.9 1.9 -2.5 10.2

22


Review


Pac

ific

Rim

SOUTH KOREAImports of Wood Chips

Source: Korean Official Trade Statistics

Imports of Wood Chips in 2005/2006 South Korea

0

10

20

30

40

50

60

70

80

90

Australia US China Vietnam Other

1000

odm

t

1q/06 2q/06 3q/06 4q/06 1q/07

Origin 4q/05 1q/06 2q/06 3q/06 4q/06 1q/07 Change Y/Y

1000 odmt %

P.R. China 32 34 25 62 48 23 -32

USA 0 41 53 0 24 43 5

Australia 20 55 0 25 52 78 42

Vietnam 24 12 20 40 14 40 233

Other 50 76 45 40 14 21 -72

Total 126 218 143 167 152 205 -6

Change fromprev. quarter (%) -30.8 73.0 -34.4 16.8 -9.0 34.9

23


Review


Note. Average value in US$/odmt (CIF)Source: Taiwan Customs Statistics

TAIWANImports of Wood Chips

Pac

ific

Rim

Imports of Wood Chips in 2005/2006Taiwan

0

20

40

60

80

100

120

140

P.R. China Indonesia Australia Vietnam

1000

odm

t

1q/06 2q/06 3q/06 4q/06 1q/07

Origin 4q/05 1q/06 2q/06 3q/06 4q/06 1q/07 Change q/q1000 odmt %

PR China 36 20 0 34 0 17 na

Australia 81 0 127 83 56 80 43

Indonesia 26 25 19 26 26 17 -35

Vietnam 17 51 40 31 46 26 -43

Other 0 0 0 0 0 0 na

Total 160 96 186 174 128 140 9

Change fromlast quarter (%) -29.8 -40.0 93.8 -6.5 -26.4 9.4

24


Review


A Few Facts About the Global Forest Industry:

Global Usage of Industrial Roundwood

Almost half of harvested industrial roundwood in theworld is used to produce sawnwood, of which themajority is conifer species. Approximately 1/3 of theglobal roundwood removals are consumed by the pulpindustry mainly in the US, Sweden, Finland, Braziland Indonesia. Pulpwood removals have increasedfaster than that of sawlogs the past ten years resultingin a higher share of pulpwood harvests today than inthe mid-1990’s.

Fiber Consumption by the Global Pulp Industry

The global wood-based pulp industry relies on round-wood for up to 65% of its wood fiber needs. Thelogs are either from fast-growing plantations such asin Latin America and Oceania or from thinnings andtree tops in the slower-growing regions of NorthAmerica and the Nordic countries. Residual chips aremost commonly consumed in the US, Canada, Swe-den and Finland as these countries have large saw-milling sectors.

Production Costs for Wood-Based Kraft Pulp

Wood fiber costs account for between 38-52% ofthe total variable production costs when producingchemical wood-based pulp. Pulpwood costs havetraditionally been higher in North America and Eu-rope than in regions with faster-growing plantationssuch as in Brazil, Chile and Indonesia. The spread inwood costs between the Northern and SouthernHemisphere has declined the past few years.

Production Costs for Conifer Sawnwood

Wood cost is, by far, the largest cost component inthe production of conifer sawnwood. Wood costsrange from 60% to 75% of the total variable costdepending on the region of the world. Sawmills inNorth America and Europe typically do have higherwood costs both in real terms and as a percentage ofthe total production cost, as compared to countrieswith short-rotation plantations, such as Brazil, Chileand New Zealand.

Production Costs for Conifer Sawnwood

Labor15.0%

Other11.0%

Energy4.0%

Wood70.0%

Source: Wood Resources International LLC

Wood Fiber Consumption by the Global Pulp Industry

Conifer roundwood

35.1%

Non-conifer roundwood

29.4%

Non-conifer chips8.5%

Conifer chips27.0%


Global Industrial Roundwood Usage

Other Industrial Roundwood

7.7%

Sawnwood46.0%

Pulp31.2%

Composite Board6.3% Plywood

8.8%


Production Costs for Wood-Based Kraft Pulp

Other16.0%

Wood42.0%

Energy16.0%

Labor15.0%

Chemicals11.0%


Wfr Sample

Documents

Transcript of Wfr Sample