Brazilian real depreciation helps increase forest products exports

Sawmills in Brazil have become more competitive in the export market the past few years because of lower sawlog costs as a result mainly of a depreciation of the Brazilian industry, an expert told Latin Business Daily.

“With the weakening economy in Brazil, demand for housing, and therefore lumber, has declined the past year," Hakan Ekstrom, president of Wood Resource Quarterly, a forest industry consulting and publication covering Brazil, Chile and Uruguay in Latin America, said via email. "On the positive side, exports of lumber have gone up in 2014 and 2015.”

Brazil is the biggest producer in Latin America and pine is the main type of wood exported, added Ekstrom, who also tracks markets in Europe, North America, Asia and Oceania.

Brazilian producers are of “all sizes but most are fairly small by international standards,” Ekstrom said. There are not many multinationals other than Chilean. Pine wood production is concentrated to southern Brazil, he added.

The wood produced in Brazil has “more or less the same wood properties as for pine in Chile, Uruguay, New Zealand and Australia. It is not the same quality as in North America, Russia and Europe,” Ekstrom said.

The Brazilian supply provides wood material for lumber, pulp, panels and firewood.

The sharp price swings in Brazil over the past ten years can mostly be attributed to the fluctuation in the value of the Brazilian Real, Ekstrom said.

The price trends for sawlogs in local currency differs from U.S. dollar values. Average prices in the real currency from 2007 to early 2014 were stable. Since early 2014, prices rose and reached an all-time high in the second quarter of this year. They rose about 10 percent in 18 months, according to a report from Wood Resource Quarterly.

The global financial crisis of 2008 hit Brazil hard resulting in log prices falling. After the global recession came a period of price recovery, which lasted almost three years until the all-time high was reached in 2011. Then came a long period of declining prices, Ekstrom said.

The Brazilian real depreciation has made its wood exports much more competitive

According to the latests figures from the Brazilian tree industry association, from January through August 2015 the volume of pulp exports reached 7.5 million tons, 8.6 percent higher year-over-year.

For the wood panels segment, the amount exported in the first eight months of the year reached 389,000 cubic meters, a 37 percent growth. Paper exports achieved 1.3 million tons from January through August 2015, a 6.1 percent increase year-over-year.

The association had said early in September that “from January through July this year, the exports revenues of the planted trees industry totaled $ 4.4 billion, a 1.8 percent increase year-over-year.”