Wood PRN prices likely to rise

   Moscow. Jul 14, 2009. /Lesprom Network/. Wood recovery (PRN) prices have moved upwards from a relatively even price range that applied for the past two years, Wood Panels Online reports. Currently higher prices are cause for concern for two reasons. The recession has impacted demand for wood and wood-based products, along with other materials for which demand has been below normal. A price rise therefore is not indicative of rising demand, which raises the question of why are prices rising.

In the case of wood, it is because of the growing shortage of available recyclable material, such as less sawmill industry waste. The Director General of the Wood Panel Industries Federation observes that the panel sector has faced a steady reduction in availability of clean wood packing partly because such material has been used in other applications, e.g., animal bedding. Also, less wood packing has been used to transport goods.

While the current situation of supply and demand would normally be expected to resolve itself as economic growth re-emerges, the situation is compromised by a future scenario that envisages the use of wood as a subsidised input to energy. Wood packing material is passing direct to energy plants. This a prime instance of a government policy that is undermining an existing policy aimed to keep recyclable materials’ compliance costs low.

Wood used to generate energy works against segregation and a proportion of materials that would contribute a value-added component to wood-based panels for example is thus being lost. The wood panel sector accounts for about 70% of the 1.9m tonnes of waste wood used of which some 57% represents wood packing. The future position does not appear likely to change and thus the forward price projection for wood is likely to rise and may continue to do so, especially if new energy plants are built.

The Environment Exchange (t2e) provides the central marketplace on which participant companies may display firm buying and selling prices as ‘Packaging Recovery Notes’ (PRNs) in a spot and 4 forward markets for 7 different materials among which wood is one.