Increased wood chip exports from Latin America in 2007
• Latin America is not only attracting foreign investors to build pulpmills based on fast-growing and relatively inexpensive Eucalyptus fiber sources, but is also increasing to exports of Eucalyptus chips to Asia, North America and Europe reports Wood Resource Quarterly. Over the past five years, chip vessels have sailed to 11 countries with the Japanese pulp industry being the dominant consumer. Total shipments have increased from 3.7 million tons in 2003 to 5.1 million tons in 2007.
• Japan has imported Eucalyptus chips from Chile and Brazil since the 1980’s and was for many years the only buyer of chips from Latin America. The past couple of years, Japan has imported about 85% of the total chip exports from Latin America.
• In 2003, Spain started to import Eucalyptus from Uruguay and it is now the second largest buyer with a share of almost 8% in 2007. Other countries, which have sourced wood chips on the continent the past year include Finland, Sweden, Norway, Portugal, the US, Turkey and Italy. In 2007, this group together procured 350,000 tons of Eucalyptus chips mainly from Uruguay. This trade may decline as additional pulp mills are likely to be built in the country over the next few years.
• The majority of the chips have gone to pulpmills in Europe and Asia but end-users also include MDF manufacturers and energy producers. There is growing interest from Europe, in particular, to explore opportunities to bring biomass from Brazil to energy plants in Belgium, the Netherlands, Denmark, United Kingdom or Sweden. In the future, this trade can possibly be in the form of wood pellets rather than wood chips.
• The leading country for exports is Chile, which shipped about 3 million tons of hardwood chips, or about 56% of the total exports, in 2007. Shipments from Brazil, including both softwood and hardwood chips, reached 1.4 million tons in 2007, but the export volumes have probably peaked as the domestic market for wood chips is becoming tighter. The newcomer in the group, Uruguay, started exporting Eucalyptus chips in 2003 and has since increased shipments to about one million per year the past three years.
High log costs and weak export markets have forced many sawmills to reduce production
• Wood Resource Quarterly reported that both pulplog and sawlog prices remained practically unchanged in the local currency in Brazil in the 2Q, but as the Brazilian Real continued strengthening, wood cost reached a new high in US dollar terms. The higher costs for sawlogs and the weak export market have resulted in a reduction in lumber production this spring.
• A number of medium- to large sized softwood sawmills have closed operations or reduced production substantially this spring. Some of the export volumes have found their way into the strong domestic market, and this has helped some sawmills to avoid reducing producing capacity even more. It is not expected that log prices will come down next quarter because the minimum wage has gone up in Brazil, and costs for energy continue to increase.
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