From Forest2Market's Economic Outlook 

 

 

Pine purchases by pulp and paper mills in the South remained flat in the second quarter. Pine pulpwood volume was just under first quarter purchase volume, while primary or chip mill chip volume fell 9.5 percent and secondary or mill residual chip volume increased by 15 percent. For all pine fiber, purchased volume declined just 0.23 percent.

Pine fiber prices fell $2.26/ton on a weighted average basis across the South. Multiple factors led to this drop. First, dryer weather increased log supply. Pulpwood costs direct to mills and through chip mills fell as a result. In addition, higher sawmill production at the beginning of the quarter increased the supply of mill residues or secondary chips. Pulp and paper mills substituted this cheaper material for higher priced primary chips from chip mills. Prices ended the quarter just above $36/ton.

 

 

Hardwood fiber purchases increased by more than 9 percent in the second quarter across the South as mills built inventory. The weighted average delivered price for hardwood fiber fell $2.34/ton.

"Inventories have decreased steeply since 3Q2009, and that continued through the first quarter," said Stuber. "So even though hardwood purchases were up 9 percent, this was primarily a move to build inventory after winter log shortages. At the same time, mill's cut hardwood production. Frankly, it doesn't look like production will increase anytime soon, since inventories have returned to year-ago levels. As a result, we expect prices will continue to fall."