RISI Addresses Wood Chip Supply & Demand Changes at FRA Meeting

RISI analyzed the economic health of North American timber markets at the 75th Forest Resources Association’s annual meeting in Hilton Head, S.C.

RISI states that North American supply and demand for sawmill residual chips has taken some twists during the past year, with lumber demand tanking, pulp and paper nose-diving since the fourth quarter and biomass development running steady throughout. Furthermore, the rapid expansion of higher cost in-wood chip production steadily increased through 2008 to meet pulp demand, which was strong until third quarter, RISI says.

Currently, however, about 24 pulp and paper mills in the U.S. and another 12 in Canada are taking varying degrees of curtailment, anywhere from single machine to full mill shutdown, RISI says. RISI anticipates some relief is in store due to their forecast of a moderate recovery in U.S, housing starts beginning by the end of the year and continuing throughout 2010.

A pickup in starts will return limited residuals to the wood market, a good thing considering RISI's Wood Biomass Market Report suggests more than 54 million green tons of new wood demand will come from North American energy, pellet and liquid biofuel development through 2015, the press release says. An increase of in-wood chip volumes is expected to find a home among wood energy and pellet consumers, RISI says.

Rocky Goodnow, RISI director of North American Timber says, “We’ve seen a dramatic decline in consumption at pulp and paper mills, but demand will improve with a recovering economy, although some capacity will come back and some will not.” He adds, “Chip consumption will also benefit from growing demand from biomass consumers.”