The wood cost used in Analytical Cornerstone refers specifically to pulpwood consumed in the pulp and paper industry. It does not reflect the cost of logs used in sawmills.

1. Pulpwood vs. Logs (Sawmill Wood)

Pulpwood (used for pulp & paper)

• This is the wood fiber input represented in Analytical Cornerstone for virgin pulp mills.
• Cost is modeled as a market price for pulpwood delivered to pulp and paper mills.
• Quality requirements are different: pulpwood is selected for fiber properties relevant to pulping.

Logs (used for sawn timber production)

• Logs for sawmills have higher cost due to:
  • Higher quality/grade requirements
  • Their use in producing lumber rather than pulp
• These are not the basis of the wood fiber cost in Analytical Cornerstone.

2. Why Chips vs. Logs Can Be Priced Differently

Reasons chips could be more expensive:

• Chips are ready to be processed at the pulp mill
  → logs require debarking and chipping, adding extra processing cost
• Chips may offer better fiber quality for some mills
• Chips are increasingly used in energy production, especially in Finland
  → biofuel plants rely more on domestic wood due to halted Russian imports
  → this increased demand pushes up chip prices

Reasons chips could be cheaper or competitive with logs:

• Many pulp mills have integrated sawmills on-site
  → this lowers logistics costs significantly
  → easier, cheaper chip supply

3. How Fastmarkets Estimates Wood Cost

Key aspects of the estimation methodology:

• Costs are based on publicly available data, market references, and engineering models.
• Integrated companies (those owning both sawmills and pulp mills) are assumed to perform internal transfers at market prices:
  → This ensures apple‑to‑apple comparison across all mills in benchmarking.
  → Actual internal transfer prices are not available and therefore not used.

4. Summary for User Guide

In Analytical Cornerstone, wood cost = pulpwood market cost.
Not sawn logs.
Not integrated transfer prices.
Not chip prices distorted by local energy markets.

Why:
To ensure consistent, comparable, market‑based cost benchmarking across all global pulp and paper mills.