Canadian Pulpmills are Paying Higher Wood Costs as Supply Tightens, WRI Reports - Wood costs continue to be much lower for pulpmills in British Columbia and Alberta as compared to the provinces in Eastern Canada. In the 3Q, there was more than a 30% fiber cost discrepancy favouring Western Canada. Historically, pulpmills in Eastern Canada have had substantially higher wood costs with the exception of a few quarters in 2001 when costs were on par. Since wood costs account for between 40-50% of the variable production costs when producing wood pulp, there are likely to be the most casualties in the pulp industry in Eastern Canada in 2009 when pulp and paper prices are expected to decline.
Lumber production in Canada is continuing its downward spiral with no end in sight, reaching a new low in the 2Q.
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