The US and Canadian Pellet Feedstock Price Indices increased in early
2018, driven mainly by higher demand for pellets in Europe and Asia,
according to the North American Wood Fiber Review
The pellet feedstock price indices for North America, launched by WRI in 2013, have
trended upward in Canada during most of 2017 and early 2018 but declined in the US
during the same period. The level of availability of sawmill residues was the major driver
for the price corrections the past year.
Seattle, USA. Wood fiber costs for pellet producers in both Canada and the US were
slightly higher in the 1Q/18 than in the previous quarter, continuing an upward trend that
started in early 2017. In Western Canada, the difficult weather conditions during the winter
months hampered harvest operations, forcing multiple sawmills to either slow production
or take limited downtime in the first quarter. The lower sawmill operating rates resulted in
reduced supplies of residues for pellet manufacturers, forcing some to use more costly
forest biomass in their feedstock mix. The total fiber cost for Canadian pellet producers
has slowly moved upward during 2017 and early 2018 to reach a three-year high in the
The Pellet Feedstock Price Index for Canada (PFPI-CA), reported in US dollars, rose by
8.1% y-o-y to reach US$44.21/odmt in the 1Q/18, according to the North American Wood
Fiber Review. Much of this increase was the result of a strengthening of the Canadian
dollar against the US dollar.
Pellet feedstock costs in Western Canada are likely to increase overall in 2018 because of
the shrinking availability of sawlogs for the region’s sawmills, a crucial source of biproducts
for the pellet industry.
In the US, the Pellet Feedstock Price Index (PFPI-US) also inched up from the previous
quarter, reaching US$63.60/odmt. However, as compared to the same quarter in 2017, the
PFPI-US index was down 3.0% as there were incremental changes in the feedstock mix,
with a higher share of lower cost shavings and microchips and a lower share of high cost
roundwood. As 2018 continues, U.S. South lumber production and its impact on sawdust
and shavings supplies will influence the index. With sawmill residual supply expected to
increase, pricing for sawdust and shavings will likely fall and thus benefit those pellet mills
able to handle residuals.
Note. The WRI pellet feedstock price indices for Canada and the US (PFPI-US and PFPICA),
launched in 2013, show a quarterly volume-weighted price for the fiber consumed by
each country’s pellet sector. The feedstock mix (roundwood, sawdust, shavings, microchips
and forest biomass), production capacity and operating rates, are gathered to calculate
the regional index price.