The global pulp market is mired in uncertainty: uncertainty as to when China will move into buying mode, uncertainty about where the European economy is heading and uncertainty as to whether low spot prices for softwood market pulp will push pulp mills in Europe and North America to take market-related downtime.
In this environment, pulp mills are trying to squeeze their costs to remain competitive and to be able to run at full capacity. Because wood fiber costs currently account for between 52 and 71 per cent of the total production costs, depending on the region of the world (source: Fisher International), the primary focus in the cost-cutting has been on reducing the price they pay for wood chip and pulpwood prices over the past six months.
This has created the situation in which many fiber suppliers have been forced to accept lower prices for their fiber. As a consequence, wood fiber prices fell throughout the world in the 1Q/12, which caused the two global wood fiber price indices to decline to their lowest levels in over a year.