Wood Costs in Brazil Reached Highest Recorded Levels

on Jul 7, 2012
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According to data from Wood Resource Quarterly, a source for global wood price data and market information, wood costs in Brazil reached a peak in 2011,. Yet, toward the end of the year, Eucalyptus as well as pine log prices fell, mostly on account of the strengthening of the US dollar against the real. Nevertheless, the current price levels remain the highest since the Wood Resource Quarterly started monitoring prices of Brazilian wood in 1990.

Brazilian Eucalyptus pulpwood prices are high not only from a historical point of view but also in comparison with other regions around the world, with only pulp mills in Europe and Australia reporting higher hardwood fibre costs than Brazil in the late 2011. Chile, Indonesia, Russia as well as North America on the other hand had lower hardwood log prices than Brazil.

!m[](/uploads/story/177/thumbs/pic1_inline.png)2011 in general was an important year for Brazil’s sawmilling industry, with demand rising both from the country’s domestic market and abroad. In 2011, timber exports increased with 6 percent, reaching their highest level in three years. The biggest increase was observed in shipments to China, Mexico, Morocco and Saudi Arabia. The higher export levels from the country led to higher sawlog prices, which, according to data from Wood Resource Quarterly, reached an all-time high in the second quarter of 2011.

It seems that 2012 will be another good year for the Brazilian timber industry, particularly in terms of demand. Among the factors expected to contribute to higher domestic demand are the upcoming World Cup in 2014 as well as the Olympic Games in 2016, since both events are likely to increase wood demand from the construction sector.
In terms of exports, one of the most important factors will be the performance of the Brazilian real against the US dollar since a weaker real will make wood shipments from Brazil more profitable. During the second half of 2011, log prices fell as far as the US dollar was concerned, whereas there were no significant changes with regards to prices in real.

Bloomberg reports that in 2012 the real lost 9.3 percent against the US dollar. According to Joao Rabelo, undersecretary of economic policy at Brazil’s Ministry of Finance, as quoted by Bloomberg, Brazilian exporters in general will manage to profit from the weaker performance of the real until the end of 2012. Higher exports and higher demand in general, however, are likely to put yet additional pressure on sawlog prices in Brazil.

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