April 2008
By Robert Flynn
Imports of wood chips in the Pacific Rim countries of Japan, China, Korea, and Taiwan increased 5.6% in 2007 to an all-time record volume of nearly 16.8 million bone dry metric tonnes (bdmt). A new publication just released by RISI (The International Pulpwood Trade Review) is forecasting that hardwood chip imports in the Pacific Rim will increase 1.7 million bdmt between 2007 and 2010, to 16 million bdmt, while softwood chip imports will increase by 400,000 BDMT, to 2.9 million bdmt. However, while this traditional market for wood chips is moving into record territory, a new market for wood chips is emerging in the Atlantic region.
There has long been a relatively modest trade in pulp logs (primarily eucalyptus) from South America to Spain, Portugal, and to a lesser extent pulp producers in Nordic countries and medium density fiberboard (MDF) producers in Italy. However, record high ocean freight rates have made this pulp log trade uncompetitive. For instance, freight cost for eucalyptus pulp logs from Uruguay to Europe jumped from US$40-45/m3 in mid-2006 to $90-100/m3 in late 2007. This escalation in pulplog ocean freight costs has been the deciding factor in forcing most European pulplog importers to switch to imports of woodchips in 2008; it is much more cost efficient to ship wood chips, which readily compact, rather than bulky pulp logs.
ENCE was the first
Spanish pulp producer ENCE was the first to make the move from pulplogs to woodchips, when it began importing wood chips from Uruguay for its pulp mill in Huelva, Spain, in late 2003. In 2006, Creative Logistics Management began exporting pine woodchips from Savannah to MDF producers in Turkey. Then, in 2007, with high ocean freight rates and the threat of Russian log export taxes greatly reducing available supply of birch in Finland and Sweden, a number of Nordic companies imported one or two vessels of wood chips in a "testing" stage. In addition to ENCE in Spain and several companies in Turkey, companies in Finland, Sweden, Portugal and Italy all imported woodchips from overseas in 2007, from suppliers in Canada, Brazil, and Uruguay.
In 2008, the wood chip trade in the Atlantic region will expand rapidly. Södra will shift from importing eucalyptus pulp logs to importing eucalyptus wood chips for its mill in Tofte, Norway. US-based Fulghum Fibres will produce the chips in a new mill it is building outside of Montevideo, Uruguay. Other Uruguayan wood chip producers will also be exporting to Nordic pulp producers, including Stora Enso and UPM Kymmene.
In Portugal, the major company Portucel will begin regular imports of wood chips from a new Andritz chip mill being built in the Republic of Congo. That same new mill may also export chips to Spain and other locations. A Canadian woodchip producer, Great Northern Timber (Nova Scotia), will follow up its 2007 shipments with regular exports of maple wood chips to Stora Enso mills in Sweden and Finland. An MDF producer in Italy, Fantoni, has imported eucalyptus wood chips from AMCEL in Brazil and may follow-up with further shipments in 2008 as well.
Talking Turkey
But perhaps the biggest story in the Atlantic trade has been Turkey. MDF and particleboard producers in Turkey have been expanding capacity at an astounding rate. Many of these facilities are located far from domestic forests, which in any event do not have the potential to rapidly increase fiber supplies, so wood chip and log imports are crucial.
Ukraine has become the most important regional supplier of pulplogs, but in 2006 and 2007, Turkish companies also built up imports of wood chips from overseas suppliers quite rapidly. In 2007, a total of at least 23 full vessels of wood chips were imported, from Savannah in the US, from Nova Scotia in eastern Canada, and from Brazil. Both hardwood and softwood chips are imported. Demand in 2008 is estimated at close to 40 vessels, although it will be quite difficult to find that much supply in the Atlantic region due to the limited number of vessels available, and RISI believes imports will likely be no more than 30 vessels in 2008.
However, as more specialized wood chip carriers are added to the fleet over the next several years, freight rates could reduce and RISI estimates that woodchip import demand in Turkey alone could reach 1.5 million green tonnes by 2011-2012.
Farther north, the Nordic countries have experienced a sharp decline in log and wood chip imports over the past two years, due to both poor logging conditions in the winter of 2006/07 and the increased Russian log export tax. Total imports in Norway, Sweden, and Finland had increased from around 12 million m3 in the early 1990s to a peak of 34 million m3 in 2005. However, in 2007 RISI estimates that total imports declined by close to 6 million m3 from the 2005 peak, a 17% drop in just two years. While companies in this region have tried to expand domestic timber production (with quite good success in 2007), the available supply of hardwood fiber in Nordic forests is limited. This explains their push to import eucalyptus from the Southern Hemisphere and maple from Nova Scotia, but it remains to be seen how long these companies can remain competitive with such expensive fiber.
On top of all this new interest in wood chip imports for pulp and MDF production in Europe and Turkey, a number of European companies have been looking for reliable sources of large quantities of biomass chips to import for power production and liquid biofuel production in Europe. While there have been no announcements of any firm contracts being signed, 2010 is usually discussed as the year in which such major shipments might begin. A major trade flow of wood pellets from the US South to Europe is also emerging in 2008, with construction of the two largest wood pellet production facilities in the world in Florida and Alabama. Those facilities are to begin production this year, with the product intended for the European market.
Robert Flynn is Director, International Timber, RISI: rflynn@risiinfo.com. See The International Pulpwood Trade Review, at www.risiinfo.com/pulpwood
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