Seattle, WA (PressExposure) April 24, 2008 -- 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, according to the market report Wood Resource Quarterly. 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 US$70/m3 in the 4Q, according to the Wood Resource Quarterly (WRQ). 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.
Global pulpwood and sawlog market updates are included in the 50-page publication Wood Resource Resource. The report, established in 1988, also includes regular updates of pulp, lumber and biomass markets and has readers in over 20 countries.