Brazilian pine sawlog prices were up despite lower demand in the 4Q
The
export-dependent sawmilling industry in Brazil has been cutting back
production in 2007 as shipments to the US fell. With the reduced
operating rates, demand for sawlogs declined and timber prices leveled
off in the local currency in the 4Q, Wood Resource Quarterly reported.
However, with the strengthening of the Brazilian Real, wood costs
continued up to a record high in US dollars terms.
The
Brazilian currency continued to strengthen against the US dollar in the
4Q, making it increasingly difficult for sawmills and plywood mills to
export and compete in an already weak market in the US. Lumber exports
to the US fell 25% in 2007 as compared to 2006, and this year is not
going to be any better due to the continued sluggish economy in the US.
Because the export market looks dismal, Brazilian sawmills are instead
turning to the domestic construction market, which looks quite
promising for 2008.
With
the reduced production of lumber, pine sawlog prices have flattened out
in Real terms last fall. However, as the US dollar has weakened,
average sawlog costs moved up, reaching a record high of $70/cubic
meter in the 4Q. Wood costs for sawmills in Brazil are now higher than
in many markets in North America. As a result of a weakening US dollar
and increased domestic demand for sawlogs in Brazil the past few years,
sawlog prices in 2007 were over three times higher than in 2003.
The
weaker demand for sawlogs is expected to continue in the coming months
with downward pressure on sawlog prices. In Southern Brazil, where a
majority of the pine plantations are located, there are some forest
companies that are now selling sawlog-size timber to the pulpmills as
they pay higher prices than sawmills do.
