North American

Wood Fiber
North American Wood Fiber Market Update Review
June 2007

Wood fiber prices are moving downward
Wood fiber prices were unchanged or falling in most
regions this quarter with the exception of British Co-
lumbia and Alberta, where tight fiber supply pushed
prices of both wood chips and pulplogs upwards. Wood
prices in the two western provinces were also impacted
by higher market pulp prices as some chip contracts
are linked with these prices. As the Canadian dollar
strengthened this quarter, wood costs in US dollar terms
did go up in all provinces of Canada and are generally
North America
the 1Q/07, Canada imported almost 500,000 odmt of
wood chips, of which most were destined to pulpmills
in British Columbia, Quebec and New Brunswick. With
continued cut backs in the lumber industry and a
strengthening Canadian dollar, it can be expected that
Canadian companies will continue to search for addi-
tional chip volumes on the US side of the border.
500
Trade of Wood Chips in Canada
450
400

higher than in the US. 350

300

1000 odmt
250
Only two regions in the US had higher wood costs than
200
Canada during the 2Q; Maine, and the states in the 150
Northwest. Pulpmills in western US have gone through 100

a roller coaster ride, with conifer residual chip prices 50

almost doubling from the 2Q last year to the 1Q of this 0

3q

3q

3q

3q

3q

3q
1

7
year, peaking at US$140/odmt (delivered). At their peak /0

/0

/0

/0

/0

/0

/0
1q

1q

1q

1q

1q

1q

this region had the highest conifer fiber costs in the
world. 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 days
in May), and wood prices have started to came back
down again.
In the US South, prices were practically unchanged
with pine chips averaging $68/odmt (delivered) and pine
roundwood ranging from $80-90/odmt. Wood chip
prices have been remarkably stable the past few years
with only small adjustments of a few dollars up or down.
Pine log prices have trended upward as stumpage and
1q
Net Trade Export Import
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. The
average benchmark NBSK pulp price in Europe has
increased by almost $150 in one year, reaching $785/
ton (CIF Europe) in June, the highest price since 1996.
800 Benchmark Prices for Market Pulp in Europe
750

transport costs have increased, particularly in the South 700

650
Central states where average prices are up almost 10%
US dollars/ton

600
from a year ago to $36/green ton ($90/odmt). 550
As of June 12, 2007:
500
NBSK: $785/ton
Canada increases imports of wood chips 450
Source: FOEX
BHKP: $686/ton

400

Wood chip trade between Canada and the US has in- 350

tensified as Canadian pulpmills are struggling to supply 300

03

04

05

06

07
3

6
3

7
5

6
3

4
l-0

l-0

l-0

l-0
-0

-0

-0

-0

-0
-0

-0

t-0
-0

their pulpmills with residual chips from a sawmill sec-

n-

n-

n-

n-

n-
pr

pr

pr

pr

pr
ct

ct

ct
Ju

Ju

Ju

Ju

Oc
Ja

Ja

Ja

Ja

Ja
O

O
A

tor in decline. Chip imports more than doubled in 12 Softwood Pulp (NBSK) Hardwood Pulp (BHKP)

months from early last year to March of this year. In

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)

1 © 2007 Wood Resources International, LLC

 North American
Wood Fiber
Review
North America

Conifer Wood Fiber Costs in North America

Second Quarter, 2007

Alberta
Chips 84 (67 - 96)

British Columbia
Chips 91 (83 - 112)
Roundwood 113 (79 - 122) Quebec
Chips 126 (99 - 149)
Roundwood 151 (117 - 180)

Ontario Canadian Maritimes

Chips 122 (95 - 140) Chips 86 (65 - 104)
Roundwood 149 (113 - 176) Roundwood 95 (59 - 106)

U.S. Pacific Northwest

Chips 118 (83 - 145)
Roundwood 91 (69 - 123) U.S. Northeast
Chips 94 (61 - 142)
U.S. Lake States Roundwood 98 (74 - 148)
Chips 79 (66 - 86)
Roundwood 81 (60 - 108)

U.S. South Central

Chips 69 (60 - 77)
Roundwood 89 (80 - 102)
U.S. South East
Chips 67 (60 - 72)
Roundwood 82 (72 - 92)

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

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

© 2007 Wood Resources International, LLC 2

 North American
Wood Fiber
Review

North America
Non-Conifer Wood Fiber Costs in North America
Second Quarter, 2007

Quebec
Chips 77 (68 - 90)
Roundwood 86 (70 - 103)

Ontario
Chips 74 (68 - 86) Canadian Maritimes
Roundwood 81 (70 - 99) Roundwood 75 (63 - 90)

U.S. Pacific Northwest

Chips 134 (92 - 151)
Roundwood 94 (62 - 111)
U.S. Northeast
U.S. Lake States Chips 75 (48 - 97)
Chips 58 (51 - 66) Roundwood 74 (67 - 128)
Roundwood 73 (50 - 91)

U.S. South Central

Chips 65 (54 - 69) U.S. South East
Roundwood 82 (73 - 91) Chips 63 (57 - 69)
Roundwood 82 (74 - 92)

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

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

3 © 2007 Wood Resources International, LLC

 North American
Wood Fiber
Review
Wood Fiber Costs in North America
North America

Second Quarter, 2007

Wood Chips Roundwood

Avg Min Max Avg Min Max
US$/odmt (delivered) US$/odmt (delivered)
Conifer
U.S.
Northwest 118 83 145 91 69 123
Lake States 79 66 86 81 60 108
Northeast 94 61 142 98 74 148
South East 67 60 72 82 72 92
South Central 69 60 77 89 80 102
Canada
British Columbia 91 83 112 113 79 122
Alberta 84 67 96 ..... ..... .....
Ontario 122 95 140 149 113 176
Quebec 126 99 149 151 117 180
Maritimes 86 65 104 95 59 106

Non-Conifer
U.S.
Northwest 134 92 151 94 62 111
Lake States 58 51 66 73 50 91
Northeast 75 48 97 74 67 128
South East 63 57 69 82 74 92
South Central 65 54 69 82 73 91
Canada
Ontario 74 68 86 81 70 99
Quebec 77 68 90 86 70 103
Maritimes ..... ..... ..... 75 63 90

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 Co
All other regions Data collected by Wood Resources International and WRQ sources

© 2007 Wood Resources International, LLC 4

 North American
Wood Fiber
Review
Wood Fiber Costs in North America

North America
2Q/06 - 2Q/07
Wood Chips Roundwood
US$/green tons (delivered) US$/green tons (delivered)

2Q/06 3Q/06 4Q/06 1Q/07 2Q/07 Change 2Q/06 3Q/06 4Q/06 1Q/07 2Q/07 Change
y/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

Notes.
All prices in US dollars per green tons (2000 pounds) or equal to 0.907 metric tonnes
Roundwood prices are delivered to pulpmill or chipping facility
Chip prices are for residual chips and do not include chips manufactured from roundwood
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 Co.
All other regions Data collected by Wood Resources International and WRQ sources

5 © 2007 Wood Resources International, LLC

 North American
Wood Fiber
Review
WOOD CHIP EXPORTS
North America

United States

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 7
Change 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 -24
Change from
last Q (%) na -100 na na -3 -64 -24

TOTAL 225 111 16 0 234 50 636 -3

Change from
last Q (%) 42 -40 14 -100 5 -34 -3

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

200
1000 mt (dry weight)

150

100

50

0
Washington Oregon Other West Northeast South

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

© 2007 Wood Resources International, LLC 6

 North American
Wood Fiber
Review

North America
WOOD CHIP IMPORTS
United States

Change in Imports
Origin 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 -53

Canada, other 10 4 7 9 5 3 4 33 -43
Brazil 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

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

350
Wood Chip Imports to the U.S.

300

250
1000 odmt

200

150

100

50

0
7

7
/9

/9

/9

/0

/0

/0

/0

/0

/0

/0

/0
1q

1q

1q

1q

1q

1q

1q

1q

1q

1q

1q

US West US Other Total

7 © 2007 Wood Resources International, LLC

 North American
Wood Fiber
Review
WOOD CHIP EXPORTS
North America

Canada

Origin British Columbia Other Provinces Total

1000 odmt
Destination U.S. Japan Total US Japan Other Total All

1q/06 51 26 77 7 0 37 44 121
2q/06 46 84 130 9 0 0 9 139
3q/06 63 61 124 5 0 0 5 129
4q/06 35 57 92 3 0 0 3 95
1q/07 24 130 154 3 0 0 3 157

Change, last Q (%) -31 128 67 0 na na 0 65

Change, last year (%) -53 400 100 -57 na -100 -93 30

250
British Columbia Wood Chip Exports

200
1000 metric ton (dry weight)

150

100

50

0
0

7
/0

/0

/0

/0

/0

/0

/0

/0
/0

/0

/0

/0

/0

/0

/0
1q

3q

1q

3q

1q

1q

3q

1q

3q
3q

1q

3q

1q

3q

1q

US Japan Total

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

© 2007 Wood Resources International, LLC 8

 North American
Wood Fiber
Review
WOOD CHIP IMPORTS

North America
Canada

Destination British Columbia Ontario Other Total

1000 odmt
Origin Wa Other Total Total Total Total

1q/06 80 13 93 30 108 231

2q/06 71 15 86 24 92 202
3q/06 148 27 175 38 171 384
4q/06 159 19 178 27 194 399
1q/07 225 16 241 33 202 476

Change, last Q (%) 42 -16 35 22 4 19

Change, last year (%) 181 23 159 10 87 106

300 British Columbia Wood Chip Imports

250
1000 metric ton (dry weight)

200

150

100

50

0
0

7
/0

/0

/0

/0

/0

/0

/0

/0

/0

/0

/0

/0

/0

/0

/0
1q

3q

1q

3q

1q

3q

1q

3q

1q

3q

1q

3q

1q

3q

1q

Washington Other Total

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

9 © 2007 Wood Resources International, LLC

 North American
Wood Fiber
Review
Western U.S. Wood Fiber Market Update
June 2007
Surprisingly swift turnaround in wood fiber inven- fell by as much as $25/BDU ($22/odmt) in the 2Q
tories. compared to the previous quarter. The biggest price
drops occurred in the subregions of the Lower Co-
Wood fiber inventory levels at pulpmills in the North-
lumbia River and Western Oregon, where some saw-
west have experienced an amazing turnaround the past
mills received up to $30/BDU less for their chips this
six months; going from a record low of only 10 days in
quarter. In those two regions, which are the most com-
December to the highest June inventory in seven years,
petitive areas in the Northwest, residual prices ranged
equivalent to 30 days fiber consumption. The north-
between $125-130/BDU. The lowest wood fiber
east Washington (Puget Sound) and western Oregon
costs continue to be in the Puget Sound regions and in
(Willamette Valley) were the only regions where pulp-
Western U.S.

eastern Washington, Idaho and Montana.

mills did not substantially increase their wood fiber in-
ventories in the 2Q. Much of the increase was the Residual and Roundwood Chip Prices 2Q/2007
result of lower demand from pulpmills which were tak- 200
Western U.S.

ing maintenance downtime during the spring, as well 180

148 149
164 162
152
160 146 140
as to higher availability of roundwood chips. US$/BDU (delivered)
140
114
130 132
124 125
139

120 110 108 113

100
The FRA Western Technical Division data reveal that 80
60
last month's inventory of pulplogs was the highest for 40
the month of May for at least the past 8 years. 20
0
Douglas- Hemlock Douglas- Hemlock Douglas- Hemlock Douglas- Hemlock
1200 Softwood Chip and Pulplog Inventory - US NW fir fir fir fir

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

1000 Residual chips Roundwood chips

800
1000 BDT

600 Despite the sharp price reductions this quarter, wood

fiber costs are still substantially higher than a year ago
400
and it is expected that prices of both residual chips
200 and whole-log chips will continue downward in the
0
3Q.
Se 9

Se 0

Se 1

Se 2

Se 3

Se 4

Se 5

Se 6

7
M 99

Ja 9
M 00

Ja 0
M 01

Ja 1
M 02

Ja 2
M 03

Ja 3
M 04

Ja 4
M 05

Ja 5
M 06

Ja 6
M 07
-9

-0

-0

-0

-0

-0

-0

-0

-0
9

0
n-

n-

n-

n-

n-

n-

n-

n-

n-
p-

p-

p-

p-

p-

p-

p-

p-
ay

ay

ay

ay

ay

ay

ay

ay

ay
Ja

Source: FRA/WTD Pulplogs Softwood chips Total Increased exports of wood chips from the US to
British Columbia
A number of independent wood chip producers in the
region have started to cut back on pulplogs as de- As fiber supply has tightened in neighboring British
mand for roundwood chips has declined. This has re- Columbia, pulpmills close to the US border have in-
sulted in reduced pulplog prices region-wide: from creasingly been purchasing wood chips in the US
$42/green ton to $37/green ton, a drop of over al- Northwest. Wood chip imports to BC in the 1Q were
most five dollars. Some log buyers saw prices fall from
241,000 odmt, which was up 35% from the previous
almost $50/ton in the first quarter to less than $35/ton
quarter and 159% higher than a year ago! With ex-
in June. pected continued decline in residual supply in the prov-
ince and strengthening of the Canadian dollar against
Dramatic fall of wood fiber prices in the 2Q the US dollar, it is likely that the northbound move-
ment will continue, thus putting price pressure up in
After peaking at 12-year record highs, regional aver-
the northern part of Washington state.
age softwood residual chip prices in the Northwest

© 2007 Wood Resources International, LLC 10

 North American
Wood Fiber
WOOD CHIP PRICES - Western U.S. Review
April - June 2007

Douglas-Fir Hemlock Pine Cedar Hardwood

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

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)

Western U.S.
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

180
Douglas-fir Chip Prices in Western U.S.

160

140

120
US$/BDU

100

80

60

40

20

0
W. Washington Lower Columbia R. W. Oregon Inland Empire
1q/06 2q/06 3q/06 4q/06 1q/07 2q/07

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

11 © 2007 Wood Resources International, LLC

 North American
Wood Fiber
Review

WOOD CHIP INVENTORIES - Western U.S.

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 12

Wallula, Wa 19 33 30 40 40
Western U.S.

Evergreen Pulp Samoa, Ca 10 8 14 20 45

Georgia Pacific Corp. Camas, Wa/Wuana, Or 20 10 14 24 58

Toledo, Or 19 8 15 11 21
Coos 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 38

Longview, Wa 25 42 25 52 60
Springfield, 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

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

© 2007 Wood Resources International, LLC 12

 North American
Wood Fiber
Review

900
Chip Inventory in Western U.S.
800

700
Source: NAWFR
600
1000 BDU

500

400

Western U.S.
300

200

100

0
99

00

01

02

03

04

05

06
9

7
-9

-0

-0

-0

-0

-0

-0

-0

-0
p-

p-

p-

p-

p-

p-

p-

p-
ar

ar

ar

ar

ar

ar

ar

ar

ar
Se

Se

Se
Se

Se
Se

Se

Se
M

M
Lower Columbia River Or, West (Willamette V.) Wa, West (Puget S.)
East Wa/Id/Mt/Ca Export Total

1200 Softwood Chip and Pulplog Inventory - US NW

1000

800
1000 BDT

600

400

200

0
May-99

May-00

May-01

May-02

May-03

May-04

May-05

May-06

May-07
Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07
Sep-99

Sep-00

Sep-01

Sep-02

Sep-03

Sep-04

Sep-05

Sep-06

Source: FRA/WTD Pulplogs Softwood chips Total

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

13 © 2007 Wood Resources International, LLC

 North American
Wood Fiber
Review

UTILITY LOG PRICES - Western U.S.

April - June 2007

Douglas-fir Hem-fir 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
Western U.S.

(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)

SAWMILL RESIDUE PRICES - Western U.S.

April - June 2007
Shavings Sawdust Hog fuel
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)

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

© 2007 Wood Resources International, LLC 14

 North American
Wood Fiber
Canadian Wood Fiber Market Update Review
June 2007
A strengthening Canadian dollar impacts fiber Wood Fiber Costs in British Columbia 1997-2007
140
procurement strategies
120 BC, Coast
BC, N. Interior
In the middle of June, the Canadian dollar reached BC, S. Interior

Can$/odmt (FOB sawmill)

100 Alberta
0.93 on the US dollar, and market analysts are pre-
80
dicting that the US and Canadian dollars will be on
par later this year. With this strengthening of the Cana- 60

dian dollar, now at an over 15-year record high against 40

the US dollar, many Canadian companies both in the 20

western and eastern provinces are struggling to keep 0

their mills running. Few are profitable given the cur-

7
/9

/9

/9

/0

/0

/0

/0

/0

/0

/0

/0
1q

1q

1q

1q

1q

1q

1q

1q

1q

1q

1q
rent lumber prices in the US market.

According to WWPA's most recent statistics, the in-
dustry was running at 83% of practical capacity in
March. This is likely to be lower in the 2Q as more
sawmills, particularly in Interior BC and Quebec, have
announced curtailments during the quarter. Lumber
production in BC was 9% lower in March this year as
compared to last year, while production in the rest of
the country ran 15% lower than in March 2006. Even
many integrated companies with both pulpmills and
sawmills took the unusual step at curtailing lumber pro-
duction despite the impact this will have on the internal
wood fiber supply for the pulp manufacturing. This
development has forced pulpmills all over Canada to
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 fiber
furnish, as the lumber industry is fairly large relative
the pulp sector. As this supply source has diminished
the past six months, many pulpmills have been forced
to start up whole-log chip programs with increased
utilization of smaller trees (mostly beetle-killed) and
treetops.
Over the next 8-10 months it can be expected that the
share of manufactured chips will increase to between

Canada
increasingly rely on more expensive roundwood chips. 10-20% of the total fiber supply. Increasingly, coastal
pulpmills are also hauling roundwood chips from the
Wood fiber prices reaching seven year highs in Interior out to the coast, as prices are competitive with
the western provinces the high-cost volumes on the coast. Declining residual
volumes on the coast have pushed up pulplog prices
In British Columbia and Alberta, chip prices have gone from C$32/ton for hem-fir a year ago to $52/ton in
up for four consecutive quarters after dipping to the 2Q/07.
record-lows in 1Q/06. Wood chip prices in the two
western provinces are now at the highest levels in seven Wood fiber costs down in Eastern Canada
years, with Coastal BC prices averaging over C$100/
odmt (FOB sawmill) while average prices in Alberta Wood fiber prices did not change much in Ontario
and Interior BC were around C$80/odmt in the 2Q. and Quebec as the overall supply and demand were
in balance. However, there were regional differences
Assuming the Canadian dollar continues to strengthen within the provinces and some pulpmills have to in-
and pulp prices remain flat, wood chips prices could creasingly travel further, including into the US, to pro-
very well decline a few dollars next quarter as many cure roundwood for chipping. Wood chip prices av-
pulpmills still use formula pricing based on mill net prices eraged just over C$135/odmt (US$124/odmt) down
(in US dollars). about 13% from a year ago.

15 © 2007 Wood Resources International, LLC

 North American
Wood Fiber
Review
WOOD FIBER PRICES - Western Canada
April - June 2007

WOOD CHIP
Can$/BDU (FOB sawmill)
Douglas-Fir Hem-fir Spruce/pine/fir Cedar
Ave Range Ave Range Ave Range Ave Range
British Columbia
North Interior ..... ..... 85 67-95 85 67-95 ..... .....
South Interior 82 75-94 82 75-94 82 75-94 65 57-69
Coast 106 95-128 113 103-135 ..... ..... 75 65-90

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

ROUNDWOOD
Can$/m3 ub (delivered)
British Columbia
North 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 ..... ..... ..... .....

120 WOOD CHIP PRICES - Western Canada

100
Can $/BDU (FOB sawmill)

80
Canada

60

40

20

0
BC, Coast BC, N. Interior BC, S. Interior Alberta
1q/06 2q/06 3q/06 4q/06 1q/07 2q/07

Notes.
* Only small quantities traded during this quarter
Domestic chip prices in Can$ per BDU at sawmill
Domestic 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)

© 2007 Wood Resources International, LLC 16

 North American
Wood Fiber
Review
WOOD FIBER PRICES - Eastern Canada
April - June 2007

WOOD CHIPS ROUNDWOOD

Can$/odmt Can$/odmt

Conifer Non-conifer Conifer Non-conifer

Ave 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

CONIFER WOOD FIBER PRICES - Eastern Canada

200

180
160

140
Can$/odmt (del)

120

Canada
100

80

60
40

20

0
Ontario Ontario Quebec Quebec Maritimes Maritimes
Chips Roundwood Chips Roundwood Chips Roundwood

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

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

17 © 2007 Wood Resources International, LLC

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

The Pulp and Paper Market
The supply of softwood market pulp
is continuing to be tight as many
pulpmills in the Nordic countries,
Canada and Western US have had
difficulty running at full operating
rates due to wood fiber shortages.
As a result, NBSK prices have gone
up this quarter, reaching $760/ton in
Europe and $790/ton in the US.
With many pulpmills taking mainte-
nance shut downs in the spring, it
can be expected that global pulp sup-
ply will continue to be tight and that
pulp prices will strengthen further.
The global production of market pulp
was 3.1% higher in 2006 than 2005,
and this trend continued in early 2007
when pulpmills, particularly in Latin
America, ran at substantially higher
rates than in early 2006.
The only region that did not increase
production in 2006 was North
America, where the pulp sector in
Eastern Canada was hard hit by high
production costs and reduced wood
fiber supply.
The Lumber Market
The declining trend in housing starts
in the US that lasted for much of
2006 ended in November, and num-
bers have since then stabilized at
around 1.5 million starts (seasonally
adjusted annual rate).
With lower housing starts, demand
for lumber has been in decline for
almost 12 months, resulting in con-
tinued reductions in lumber manu-
facturing. In early 2007, production
in both Canada and the US was
much lower than in 2006 and there
are few signs that demand for lum-
ber will pick up any time soon.
With the lower demand for lumber
in the US, imports fell by an aston-
ishing 24% in January as compared
to the same month in 2006. The big-
gest decreases in shipments were
from Canada, Germany, Austria and
Sweden.
In March, lumber prices in the US
were close to record low levels. The
Random Length composite price for
framing 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 and
in Russia. The tight market has in-
creased lumber prices to record-
high levels.
Lumber consumption in Japan was
higher this winter than last year, re-
sulting in an increase in domestic
production as well as a rise in im-
ports. In January, imports were up
from the US, Russia, Europe and
New Zealand, while Canadian ship-
ments were down almost 20%.
Global Sawtimber Prices
The WRQ Global Conifer Sawlog
Price, based on sawlog prices in 18
major regions around the world, was
up substantially this quarter, reach-
ing a all-time high of US$82.31/m3
in the 1Q/07. This can be compared
to US$72.71/m3 the same quarter
in 2005, and to US$71.84/m3 in
2004. The biggest price increases
this quarter occurred in western US,
Finland, Germany and the Baltic
States.
The Global Average Wood Fiber
Price
The average global conifer
pulpwood price was up 3.5% to
$101.76/odmt in the 1Q/07, and as
much as 16.8% from a year ago as
fiber prices increased in practically
all markets covered by the WRQ.
Eastern Canada was the only region
with both lower wood chip and
pulplog prices this quarter.
The average global price for non-
conifer wood fiber was practically
unchanged at $91.47/odmt with
lower prices in Canada and Japan,
while prices increased in Europe,
Russia and Australia.
The Wood Pellet Market in
North America
Wood pellet markets in the US and
Canada have really taken off the
past few years. Total production in
North America increased sharply
between 2003 and 2006, doubling
from almost 900,000 tons to 1.7 mil-
lion tons.
This year, it is expected that pro-
duction will reach approximately 2.3
million tons. Despite this dramatic
change, the per capita consumption
is still much lower than in Europe.

© 2007 Wood Resources International, LLC 18

 North American
Wood Fiber
JAPAN Review
Wood Chip Inventory

700
Wood Fiber Inventory in Japan - Conifer

600

500
1000 odmt

400

Inventory Change
300 March, 2006 532,000 odmt
March, 2007 505,000 odmt (-5.1 %)
200

100

0
03

04

05

06

07
3

6
6
3

5
3

6
l-0

l-0

l-0

l-0
-0

-0

-0

-0
-0

-0

-0

-0
n-

n-

n-

n-

n-
pr

pr

pr

pr
ct

ct

ct

ct
Ju

Ju

Ju

Ju
Ja

Ja

Ja

Ja

Ja
O

O
A

1400
Wood Fiber Inventory in Japan - Non-Conifer

1200

1000
1000 odmt

800

600
Inventory Change
400 March, 2006 1,092,000 odmt
March, 2007 957,000 odmt (-12.4 %)
Pacific Rim
200

0
03

04

05

06

07
3

6
3

6
3

6
l-0

l-0

l-0

l-0
-0

-0

-0

-0
-0

-0

-0
-0
n-

n-

n-

n-

n-
pr

pr

pr

pr
ct

ct
ct

ct
Ju

Ju

Ju

Ju
Ja

Ja

Ja

Ja

Ja
O

O
A

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

19 © 2007 Wood Resources International, LLC

 North American
Wood Fiber
Review
JAPAN
Imports of Conifer Wood Chips

Origin 4q/05 1q/06 2q/06 3q/06 4q/06 1q/07 Change q/q Avg value
1000 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 from
last quarter (%) -12.0 12.4 -5.7 -1.6 -5.8 0.7

Imports of Conifer Wood Chips 2005/2006

300 Japan

250

200
1000 odmt

150

100
Pacific Rim

50

0
USA Australia New Zealand Canada Fiji Other
1q/06 2q/06 3q/06 4q/06 1q/07

Notes. Average value in US$/odmt (CIF)

Source: Japan Customs Statistics
© 2007 Wood Resources International, LLC 20
 North American
Wood Fiber
Review
JAPAN
Imports of Non-Conifer Wood Chips

Origin 4q/05 1q/06 2q/06 3q/06 4q/06 1q/07 Change q/q Avg value
1000 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 from
last quarter (%) 4.3 0.5 -5.9 1.9 -2.5 10.2

Imports of Non-Conifer Wood Chips 2005/2006

1200
Japan

1000

800
1000 odmt

600

400 Pacific Rim

200

0
Australia S. Africa Chile Vietnam Brazil Other
1q/06 2q/06 3q/06 4q/06 1q/07

Notes. Average value in US$/odmt (CIF)

Source: Japan Customs Statistics

21 © 2007 Wood Resources International, LLC

 North American
Wood Fiber
Review
SOUTH KOREA
Imports of Wood Chips

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 from
prev. quarter (%) -30.8 73.0 -34.4 16.8 -9.0 34.9

Imports of Wood Chips in 2005/2006

90 South Korea
80
70
60
1000 odmt

50
40
30
20
Pacific Rim

10
0
Australia US China Vietnam Other
1q/06 2q/06 3q/06 4q/06 1q/07

Source: Korean Official Trade Statistics

© 2007 Wood Resources International, LLC 22

 North American
Wood Fiber
Review
TAIWAN
Imports of Wood Chips

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

1000 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 from
last quarter (%) -29.8 -40.0 93.8 -6.5 -26.4 9.4

Imports of Wood Chips in 2005/2006

140 Taiwan

120

100
1000 odmt

80

60

40

20 Pacific Rim
0
P.R. China Indonesia Australia Vietnam
1q/06 2q/06 3q/06 4q/06 1q/07

Note. Average value in US$/odmt (CIF)

Source: Taiwan Customs Statistics

23 © 2007 Wood Resources International, LLC

 North American
Wood Fiber
Review
A Few Facts About the Global Forest Industry:
Global Industrial Roundwood Usage
Global Usage of Industrial Roundwood

Other Industrial Sawnwood

Almost half of harvested industrial roundwood in the
Roundwood
7.7%
46.0%
world is used to produce sawnwood, of which the
majority is conifer species. Approximately 1/3 of the
global roundwood removals are consumed by the pulp
industry mainly in the US, Sweden, Finland, Brazil
Composite Board
and Indonesia. Pulpwood removals have increased
Pulp
6.3% Plywood
8.8%
31.2% faster than that of sawlogs the past ten years resulting
in a higher share of pulpwood harvests today than in
Source: Wood Resources International LLC
the mid-1990’s.

Wood Fiber Consumption by the Global Pulp Industry Fiber Consumption by the Global Pulp Industry
The global wood-based pulp industry relies on round-
Non-conifer
chips
8.5%
Conifer
roundwood
wood for up to 65% of its wood fiber needs. The
Conifer chips
27.0%
35.1%
logs are either from fast-growing plantations such as
in Latin America and Oceania or from thinnings and
tree tops in the slower-growing regions of North
America and the Nordic countries. Residual chips are
Non-conifer most commonly consumed in the US, Canada, Swe-
roundwood
29.4% den and Finland as these countries have large saw-
Source: Wood Resources International LLC
milling sectors.

Production Costs for Wood-Based Kraft Pulp Production Costs for Wood-Based Kraft Pulp
Other
16.0%
Wood Wood fiber costs account for between 38-52% of
42.0%
Labor the total variable production costs when producing
15.0%
chemical wood-based pulp. Pulpwood costs have
traditionally been higher in North America and Eu-
rope than in regions with faster-growing plantations
such as in Brazil, Chile and Indonesia. The spread in
Chemicals
11.0% Energy wood costs between the Northern and Southern
16.0%
Hemisphere has declined the past few years.
Source: Wood Resources International LLC

Production Costs for Conifer Sawnwood Production Costs for Conifer Sawnwood
Other
11.0%
Wood cost is, by far, the largest cost component in
Labor the production of conifer sawnwood. Wood costs
15.0%
range from 60% to 75% of the total variable cost
depending on the region of the world. Sawmills in
North America and Europe typically do have higher
Energy
4.0% wood costs both in real terms and as a percentage of
Wood
70.0% the total production cost, as compared to countries
Source: Wood Resources International LLC with short-rotation plantations, such as Brazil, Chile
and New Zealand.

© 2007 Wood Resources International, LLC 24