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US black liquor tax credit limits wood chip and pulp wood prices in the second quarter of 2009

In 2008 US pulp factories started to use the US taxation law gap which helped to make billions dollars investments into the developing industry. Industry experts consider that such investments have helped to keep the prices for wood chips and pulp wood on the stable level in the US.

They think, that such significant tax credit for black liquor, pulp production by-product, had been temporary investment for US paper and pulp industry and had changed the way many pulp mills operate their factories within past six month.
Firstly, US government had been implemented such tax credit in 2005 to support the use of alternative fuel, over fossil fuel for cars and trucks. Though, since the end of 2008 the chemical pulp manufacturing companies have started to use the same credit and got profit in the amount of 150-200 USD per ton of pulp. Such additional investments, amounted between three to eight billions dollars, to US paper and pulp industry have helped a lot in 2009 as the profit for most of mills was on a very low level.

Wood industry professionals have any doubts that without such investments most paper companies would have reduced their manufacturing volumes. The reduction might have caused the wood raw material demand drop down and wood fiber prices drop down in the most US regions.

In the second quarter of 2009 the wood chip prices drop down accounted 5-8 percents with the highest drop down in the US Northeast. Industry experts announce that this is the fourth quarter of wood fiber prices drop down in the US, where US Western regions suffered most of all. The prices in the US South, the biggest wood fiber user worldwide, dropped down for a few positions only.

Industry experts do not provide exact forecasts on how long tax credit will take place as lot of people from US government and administration want this program ended and specify that from the 1st of October the US pulp mills may operate without US taxpayers support.

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