The plunging demand for lumber will lead to significant losses of residual chips, crucial input to North American pulp and paper mills. “This will likely be the worst-ever,” a company analyst has told International Woodfiber Report. “The chip slump, predicted for several quarters but realised to only a lesser degree through 2007, will arrive in earnest this year,” contacts said in March. “Most pulp and paper mills are “already preparing for the worst,” one said, “but there’s not enough available pulpwood to fill the gap.

“One recent projection by RISI indicates US softwood lumber production should slide throughout the year, ending down possibly 15-20% compared to robust levels last seen in 2006. The related volume losses in chips would total more than 14 Mt in the US. The worst hit region already is the Pacific Northwest. “Worst of all are mills in British Columbia and Eastern Canada,” which are 66% and 71% residual dependant, respectively, another source noted. “Throughout the decline, which began in earnest just in December, buyers have jockeyed to lock in sawmill chip contracts with gradually higher prices. This year, if a lumber mill will guarantee some volume, they can almost set their price,” a Northwest contact said.

Source: RISI