Displaying items by tag: Forest2market

1Q2017 Baltic Rim Index brings transparency about wood raw material prices to region’s forest products, forestry and bioenergy industries.

Forest2Market has published the first installment of its Baltic Rim Wood Price Index, a transaction-based wood raw material price benchmark for the forest products, forestry and bioenergy industries in Scandinavia (Sweden and Finland), the Baltic States (Estonia, Latvia and Lithuania) and Northwest Russia.

The results for 1Q2017 show that, among other trends, there are significant differences in delivered wood costs (roadside wood costs plus transportation costs to mill) for both pulp producers and sawmills in Sweden.

  • Pulp producers: the highest-cost mill paid 26 per cent more for conifer pulpwood than the lowest-cost mill. Annualized, the cost savings potential for the highest-cost mill exceeds 250 million SEK (26 million EUR). If a mill consuming 2.5 million cubic meters (m3) of pulpwood annually could reduce its costs to the market average of 43 SEK/m³ (4.5 EUR/m³), the savings would exceed 100 million SEK (10.4 million EUR).
  • Sawmills consuming pine sawlogs: the highest-cost mill paid 20 per cent more for conifer sawlogs than the lowest-cost mill. Annualized, the cost savings potential for the highest-cost mill exceeds 65 million SEK (6.8 million EUR). If a mill consuming 500,000 m3 of logs annually could reduce its costs to the market average of 67 SEK/m³ (7 EUR/m³), the savings would exceed 33 million SEK (3.4 million EUR).
  • Sawmills consuming spruce sawlogs: the highest-cost mill paid 34 per cent more for conifer sawlogs than the lowest-cost mill. Annualized, the cost savings potential for the highest-cost mill exceeds 125 million SEK (13 million EUR). If a mill consuming 500,000 m3 of logs annually could reduce its costs to the market average of 151 SEK/m³ (15.7 EUR/ m³), the savings would exceed 75 million SEK (7.8 million EUR).

2017 05 12 101820With this newest addition to its product line, Forest2Market now provides market price reports, performance benchmarks and custom analytics to major wood markets across North America, Brazil, Scandinavia, the Baltic States and Russia.

With the Baltic Rim Wood Price Index, timber buyers and sellers will be able to clearly and confidently compare their performance to market, accurately assess market prices and build strong partner relationships, as well as define, measure and adjust strategic decisions based on actual and actionable data. While high-cost mills can use the Index to lower their costs, low-cost mills can use the data to demonstrate to stakeholders that they are extracting as much value as possible from the supply chain.

This level of market transparency comes at a critical time for the region’s industry. “Now that the United States has instituted tariffs on softwood lumber coming from Canada,” said Pete Stewart, President and founder of Forest2Market, “Sweden’s sawmills will have an opportunity to export more softwood lumber to the US. But they’ll only have that opportunity if they are cost-competitive. Using the Index to manage costs provides a strategic advantage in this environment.”

Antti Kämäräinen, Director of Fores2Market’s Scandinavian business, sees a similar utility for the Index in Finland: “Currently, container freight in Finland is painfully high. The Index will allow sawmills to reduce their costs at the front of the value chain as they are buying wood. This will mitigate the overall effect of high freight costs on profitability. With the new demand that will come on line in Finland in 3Q2017, this will be especially important.”

Russian mills also have a reason to manage their costs. “Over the last few years, domestic wood raw material costs have increased annually over 10 per cent in local currency,” said Vasylysa Hänninen, Director of Forest2Market’s Baltic States and Russia business. “The weak ruble has masked the effect of rapidly increasing wood costs, making mills seem more competitive and profitable on the global market than they really are. Over the last year, however, the ruble has been strengthening. As the exchange rate stabilizes, the mask will be removed and profitability will drop. With the Index, mills can pay less for wood raw materials, securing their competitive advantage in the international market.

About Forest2Market

With solid data, industry experience and third-party independence, Forest2Market provides participants in the wood, sawnwood, paper, bioenergy and biochemicals supply chains with business solutions that support fact-based decision making and planning. Headquartered in Charlotte, North Carolina, USA, with offices in Kennewick, Washington, USA; Curitiba, Brazil; and Helsinki, Finland, Forest2Market is the global wood and fiber supply chain expert. www.forest2market.com

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As many of you know, Forest2Market recently started operating in Europe and western Russia. We have named the new product the Baltic Rim/Russia Timber Price Index, which basically covers Scandinavia, the Baltic States, Poland and western Russia. On a recent trip to western Russia, I visited with some of the new customers, as well as potential customers of the benchmark service, and of course learned some very interesting things about the regional market.

The last week of February, I toured Karelia Oblast. Our home base was Petrozavodsk, which is the capital city of the Republic of Karelia, Russia—an area that stretches along the western shore of Lake Onega for some 27 kilometers. Petrozavodsk is very pleasant town with a population of about 250,000, and our hotel was situated right on Lake Onega. As a point of reference, Lake Onega is a large lake of US Great Lake scale; it is only diminutive to its neighbor lake to the west called Lake Lagoda.

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Everyone in this business knows that a substantial amount of wood fiber moves from western Russia to Finland via truck and/or a combination of truck and rail. I was eager to talk about this trade with our new and prospective customers, and was hopeful to understand these supply chains a bit better. 

Then on an early afternoon walk one day, I encountered a log vessel firmly entrenched in the ice of Lake Onega. This vessel was at port and not stranded—or at least not stranded at sea.

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Luckily, the gentleman I was meeting the next day was a large leaseholder of Russian timber, and I aimed to ask him about the vessel. Even more fortuitously, during our meeting I learned that the vessel was actually one that he used to move low-grade pulpwood to customers in Sweden, which is some 1600 km away.

This particular leaseholder has a port loading facility on the east side of Lake Onega where wood is trucked from up to 250 km away and loaded on the aforementioned log vessel for the journey across Lake Onega. The vessel then passes through a series of canals and channels to Lake Lagoda, through yet another series of canals and channels past Saint Petersburg port before hitting the Baltic Sea, where it sails unimpeded before finally reaching a port in southeastern Sweden.

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This whole experience—the visit to Russia and the involvement of starting the Baltic Rim/Russia Timber Price Index has really opened my eyes to the extent to which the industry goes, and can go, to transport wood long distances, as well as the effect that exchange rates have on these wood flows. The US dollar to Ruble exchange rate at the time of my visit was about 80 to 1. The last time I visited Russia—about 10 years ago, it was roughly 16 to 1. 

Obviously, at this exchange rate and with the Russian economy stumbling, there is great incentive to export anything of any value.  As the world gets smaller and governments and economies grow larger (and fail on larger scales), we will continue to see these wild fluctuations in exchange rates. These vast swings will open up market opportunities that are simply unimaginable now. 

Finding those opportunities will be a challenge for all of us in the forest products industry moving forward, which is one of the reasons Forest2Market started the Baltic Rim Index as a complement to our North American and Latin American Indexes. It will provide clear and transparent market data to our global customers regardless of the market conditions, currency fluctuations or political climate.

source. forest2market.com

Published in Logistics
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The most densely forested countries in Europe, Finland and Sweden—with their ideal growing conditions for conifers, easily workable and valuable tree species, good harvesting conditions and infrastructure and accessibility to major European markets—have a robust and prosperous forest products industry. In 2014, the countries were the largest pulp producers in Europe, representing more than 60 per cent of total European pulp production (36.5 million tonnes) and 13 per cent of global pulp production (173 million tonnes). Sweden is the world’s fifth largest pulp producer, and Finland is the sixth. They follow just Brazil, Canada, the United States, Chile and Indonesia. Scandinavia also has a world-class sawn wood industry, which will be the focus of follow-on articles.

Global Competition

Despite being a high production region, Scandinavian countries are facing increasing pressure from global competitors with lower wood costs. The figure below illustrates the relative cost positions of the major pulp producing regions in the world. Coniferous fiber costs in Scandinavian countries are on the higher end of the scale, with both the US South and Southern Brazil being advantaged from this perspective.

Finland cost competitiveness

Increased Demand Leads to Increased Production Capacity

As competition has grown, however, so has demand. The global increase in demand for conifer pulp has led to a series of announcements for new production capacity. The Metsä Fibre pulp/bioproduct mill scheduled to open in central Finland in 2017 will be the largest ever investment in the forest industry in Finland, at 1.1 billion EUR. With an annual pulp production capacity of 1.3 million tonnes, the mill will increase consumption by 4 million m3 of roundwood on a yearly basis. In addition, a number of other pulp/bioproduct mill projects have been announced, some for the construction of new capacity and others for expanding the capacity of current facilities.

The Effect of New Demand on Timber Supply

On the surface, it appears that Finland’s forests are capable of meeting this additional demand. Forest area has remained almost unchanged in Finland over the last 50 years, and the volume of growing stock has increased more than 40 per cent over the same period. In 2013, growing stock volume in Finnish forests was 2,357 million m3 (over bark), and the annual growth rate was approximately 100 million m3 (in 2013: 104 million m3). In addition, 10 million m3 of roundwood was imported in 2013, for a total of 110 million m3. At the same time, industrial roundwood consumption in the country was 64.5 million m3, and fuelwood consumption was 9.4 million m3. With just 74 million m3 of the available 114 million m3 being used in 2013, or 61 per cent, an additional 40 million m3 of over supply was available to the market.

Even though the forest is healthy and growing from an operational and economic perspective, the fact that consumers imported 10 million m3 of roundwood each year points to regional supply deficits, as imports flowing from the Baltics and Russia attest. Logistics are one explanation. Some of these forests are not economically harvestable from a logistics perspective, as individual harvest sizes are small or difficult to log because of swampy terrain. Others are far away from mills, and because of high fuel costs, transporting logs from the forest to the market is not economically feasible. These logistical issues incent forest products companies to import logs from nearby Russia to save on freight costs, and to import inexpensive logs from areas, like the Baltics, with minor pulpwood markets. Logs from these areas are readily available and relatively inexpensive, compensating for higher freight rates.

In this context, an additional 4 million m3 of demand should induce a certain amount of diligence in the industry. This additional capacity will add fiber constraints to the local market regardless of the state of the entire Finnish forest.

  • 4 million m3 in a local market is a significant increase in demand. 
  • It is unlikely that all of the new demand can be sourced from the forest directly, so expect an increase in saw log production in conjunction with pulpwood production and a proportional increase in lumber and chips.
  • 4 million m3 represents a 6 per cent increase in roundwood demand and a 10 per cent increase in pulpwood demand; at the same time, forests grow at an average rate of 3 per cent per year.

The Effect of New Demand on Timber Prices

To support this additional demand, markets in Scandinavia are likely to become more dynamic and complicated, and wood will flow more freely across borders. Because mills will need to source wood from further distances, logistics costs will increase, and they become a larger part of overall costs.

Forest2Market’s experience with similar situations in North and South American markets suggests that logistics costs go up first and then stumpage prices follow. Currently, real stumpage prices have been following a downward trend in Finland as a result of the oversupply, and prices are lower than they are in key competitor countries as a result. The addition of production capacity will bring supply and demand into greater parity, and—at least in some areas—prices should reverse trend.

Scandinavian forest products markets are approaching a liminal moment. Facing increased competition globally from markets with lower cost positions and the potential for the higher fiber costs associated with more dynamic markets, producers in Scandinavia will be under greater pressure to understand their markets and manage their cost positions not only in regards to other mills in their region, but to other mills across the globe.

Currently, the delivered price data required to evaluate a mill’s cost position relative to the market and to optimize the supply chain to reduce costs is unavailable in Europe. A credible benchmark, like the ones Forest2Market has developed in North and South American markets, would provide a level of transparency to the market that would be beneficial in the long term to both Scandinavian markets and support the health and sustainability of forests through better utilization.

Published in European News
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Thursday, 23 April 2015 07:27

Forest2Market and Indufor Partnership

Forest2Market, Indufor Partner to Offer Europe’s First Transaction-based Log and Fibre Pricing and Supply Chain Optimisation System

f2m logoRecent announcements of new mill investments in Scandinavia, the Baltic Rim and Northwest Russia have led to concern over increased competition, tighter fibre supply and higher raw material prices. Market concerns like these are often exacerbated by inadequate and inaccurate market data. Poor data leads to the inability to measure performance and assess the results of strategic initiatives. It also makes it impossible to identify performance gaps and eradicate supply chain inefficiencies.

To counteract inadequate and inaccurate data, Forest2Market, a leading provider of market data and analytics in the US, Canada and Brazil, and Indufor, a global forest consulting service provider, have formed a partnership to bring the first transaction-based log and fibre pricing and supply chain optimisation system to the region.

For this new supply chain optimisation system, Forest2Market will collect transaction data from subscribers and produce its flagship measurement tool, the wood raw material price benchmark. The benchmark serves as the foundation from which value-added analytical tools are produced to help subscribers reduce their costs and optimize their supply chains. Startup for this service is expected in 2015.

This service will bring a new level of confidence and transparency to the European forest products, timberland and bioenergy industries. For the first time, buyers and sellers will be able to clearly and confidently compare performance to market, accurately assess market prices and build strong partner relationships, as well as define, measure and adjust strategic decisions based on actual, real-time and actionable data.   

“We are happy to be working with Indufor to introduce our supply chain optimisation system to Europe. We have used this system to help many of our clients in North America, and believe it will be of great value to European forest products industries as well,” said Pete Stewart, President and CEO of Forest2Market.

“Forest2Market is the only market service that creates and maintains its own proprietary database of actual transaction data. We have long-term, loyal industry relationships in North America since 2000, and in 2013, we expanded to Brazil with great success. We look forward to working with Indufor here in Scandinavia, the Baltic Rim and Russia to provide the industry with data and other powerful tools for improving business decisions.”

“We are pleased to be Forest2Market’s partner in Europe for this one of a kind benchmarking service that utilises actual transaction data,” said Jarno Seppälä, Head of Forest Industry & Bio Solutions Consulting at Indufor. “We strongly believe it will be a valuable addition to the general price information that is currently available and to existing supply chain analysis currently being conducted by industry players themselves. Now companies will be able to analyse the real efficiency of their operations.”

About Forest2Market

Headquartered in Charlotte, N.C., Forest2Market provides market pricing data, benchmarks, supply chain expertise and other decision support services to customers in the forestry, wood and paper products, and bioenergy and biochemicals industries. For more information, visit www.forest2market.com or read our blog at http://blog.forest2market.com.

About Indufor

Indufor Oy is an independent international consulting company with the head office in Helsinki, Finland and regional offices in Auckland, New Zealand and Melbourne, Australia. The company provides world class advisory services to a wide range of public and private sector clients around the world in forestry, sustainable natural resource management and forest/bio industries. For more information, visit www.indufor.fi

 

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f2mMarket2Mill, Forest2Market’s recovered fiber price report and benchmark, is now reporting Sorted Office Paper (SOP) and Export OCC prices and market trends. In addition, prices are now being reported for the California/Nevada sub-region.

“These changes are in response to the feedback we receive from our customers. Our goal is to report on all recovered paper grades, says Suzanne Hearn, Vice President of Marketing and Sales at Forest2Market, “and as we have customers that request the addition of grades to the report, we will work with all of our subscribers to meet the reporting requirements. We aim to add transparency to recovered fiber pricing so that so that our customers can make better informed business decisions. Supply and demand are the only factors that should affect price in an efficient market and, to that end, we will continue to strengthen Market2Mill reports by adding grades.”

Launched in April 2011, Market2Mill has already undergone several expansions. While the initial reports covered DLK and OCC, Forest2Market quickly accumulated enough data to split OCC prices into two categories: those traded under contract and those traded on the open market.

“With the inclusion of SOP prices in our price report and benchmarks, document destruction companies will—for the first time—have the tools they need to compare their performance to, and improve their performance against, the market,” says Hearn. “And export markets have been drawing high volumes of fiber away from the US domestic supply. The strength of demand coming out of Asia in particular has created a price differential between export and domestic markets. By adding export prices to our reports, Market2Mill subscribers will have a global picture of the market.”

Market2Mill is the only product on the market that reports volume weighted average prices derived from actual transactions submitted by subscribers, who use this to accurately assess their performance against the market and develop forward-looking pricing strategies.

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When the economy fell off the cliff in the autumn of 2008, both domestic and export recovered fiber markets quickly followed.  In fact, traded volumes and prices of all fiber grades fell so fast and far that processing plants hung placards on their doors telling all who approached: “No paper wanted.”
 
Before the 2008 collapse, general business in the industry was strong; the market was highly competitive, pushing prices steadily upward.  All the good done by an increasing fiber recovery rate in the US was quickly undone in the fall of 2008.  Tons were diverted to the landfill.  Companies that were being paid for fiber were forced to give it away. Some even had to pay to have recovered fiber hauled away. It was a scary time, made even more scary by the sheer magnitude of the decline and the absence of sufficient warning.
 
What if, through the summer of 2008, there had been a better market indicator available than a single published regional commodity price for each fiber grade?   Would prices have plummeted in the same dramatic way?  Could a better indicator have softened our industry’s landing?  To what degree did the widely used, subjective market price reports available to us at the time amplify the price decline? Did their tendency to reflect building negative sentiment and anxiety about the future market impact developing events? Would the market have played out differently—with less volatility and a softer landing—if we had known the actual current market price and had insight into more robust market trend information?
 
While we can’t know the answer to these questions for sure, we may have an opportunity to find out. Recovered fiber markets are once again softening, a result of lackluster overseas economic performance and a still recovering US economy.  We may need to brace ourselves, as survey-based price reporting mechanisms are likely to repeat their previous actions, magnifying anxiety, pushing prices lower than is rational and causing some in the industry to overreact in response.
 
Compare our last report (below) to what survey-based mechanisms reported for the same period, and you will see that this anxiety is already creeping in.
 
fig 1
 
Fortunately, there is an alternative this time, a transaction-based market snapshot that will allow informed businesses to review and analyze their buys and sells against an more accurate description of market performance. With better data and market trend information, an overreaction followed by an overcorrection might be avoided.  The fall of 2008 didn’t kill the recovered fiber market; this time, the availability of more accurate market information might even make it stronger.
 
source: forest2market
Published in Financial News
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Tuesday, 07 September 2010 10:56

Pacific Northwest Market Summary—July and August

Earlier this summer, world-wide pulp prices reached an all time high with NBSK prices up 30% over 2009. Northwest chip and fiber prices were flat, however, as supplies were adequate to meet production needs. This was one of the few times in recent history where raw material costs for the Northwest pulp and paper industry moved in the opposite direction of pulp and paper prices.

We are now seeing a reversal in this trend. Wood chip and pulpwood prices in the Pacific Northwest increased in July, a result of tight supplies of mill residual chips and limited pulpwood availability.

Total fiber chip cost increased by 6.5 % in July reflecting competition for whole log chip supplies. Conifer pulpwood prices were up by nearly 6 percent across all Northwest regions, indicating anxiety about future supply.

Discouraged by falling lumber prices, mill operators responded with production curtailments, which led to a scarcity of mill residues in the market.

A weak housing market have constricted logging rates and therefore the availability of pulp logs, which are a by-product of harvesting more valuable sawmill quality logs. The State of Oregon announced earlier in August that timber harvests in 2009 declined by 20 percent to 2.6 billion board feet. This is the lowest level since the Great Depression of the 1930s.

Log exports from Oregon and Washington private forestlands are one of the few bright spots in the market, as they help offset lagging sawmill demand. If not for off-shore markets, harvest levels would be lower and pulp logs even more scarce.

Small sawmill log prices are off as much as $50/MBF since May’s highs. Declining prices invited whole log chippers to dip into the chip-n-saw supply to secure pulp wood logs. In some cases, timberland owners have committed their entire third-quarter chip-n-saw production for chips.

During the last three weeks, world-wide pulp inventories increased, causing NBSK prices to decline. Prices are likely to soften further in coming months. With tight supplies of mill residual chips and limited availability of pulpwood, Northwest pulp mills will be challenged over the near term to meet demand and maintain their profit margins.

Source: Forest2Market

Published in North American News
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Thursday, 08 July 2010 15:00

Pacific Northwest Update

Following impressive gains in lumber and plywood prices, Douglas fir log prices delivered to mills in western Oregon and Washington increased from $432/MBF to $528/MBF, up more than 20 percent since the beginning of the year. For May, Southwest Oregon led log price levels, with increases of 10 percent on Douglas fir during the month.

For the first time in several years, the premium for export logs nearly disappeared over the past month. From January to May 2010, the average log length for 2S Douglas fir delivered for domestic use in the Lower Columbia region increased from 33.5 feet to nearly 35 feet. This additional 1.5 foot of average length indicates that sawmills have been challenging exporters for higher quality logs. However, this trend is quickly reversing. Even as dimension and stud lumber prices decline, export demand remains strong for most Doug fir and hem-fir log grades. Over the summer, the export premium spread will widen, making life tougher for mills struggling to stay in the black.

Inland Empire log prices lag behind those West of the Cascade Range. Douglas fir and hem-fir averaged about $360/MBF short-log scale. In comparison to long-log scale, these prices are still 10-13 percent below Westside prices for the month. Post-breakup, prices have generally been higher, though prices in North Idaho have been more conservative than those in the southern counties.

Expect a dramatic reversal to the feverish paced run-up in Northwest log prices since January. Sawmill log prices are tumbling and June purchase orders are off substantially. The uptick was driven by scarcity in the supply chain. Since it has become clear that demand for wood products has not improved, however, lumber and plywood orders and prices have dwindled. Prices for many items have now settled back to first of the year levels. Announcements of major production curtailments around the July 4 holiday have been commonplace.

Source: Forest2Market

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