Managing energy price risk for the pulp and paper industry

The pulp and paper industry is an energy-intensive manufacturing business. With declining output prices, it has become increasingly important for firm s to minimize and/or fix thr variable components of their production costs. Energy costs occupy a significant portion of the cost-of-goods-sold for pa per firms. A number of opportunities exist for paper companies to hedge the ir exposure to unpredictable swings in energy prices. The following reviews the methods for implementing an effective hedging program, and the potenti al opportunities arising from the changing North American supply and demand picture.