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Update: The Global Demand for Wood Fibre - Arena … · Update: The Global Demand for Wood Fibre...
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Update: The Global Demand for Wood Fibre Bob Flynn Director, International Timber October 25, 2010 Timber Invest Europe Conference, London
Transcript of Update: The Global Demand for Wood Fibre - Arena … · Update: The Global Demand for Wood Fibre...
Update: The Global Demand
for Wood Fibre
Bob Flynn
Director, International Timber
October 25, 2010
Timber Invest Europe Conference, London
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End-use Market Sectors for Timberland Investments
Pulp and Paper – Global outlook probably much better than
you think
Solid Wood Products – China is the Key; USA still weak
Biomass Energy – European markets must develop
Non-timber Products --- Carbon credits, REDD, ecosystem
values, etc. --- early days and uncertain markets
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Global trade in forest products plunged 21% in 2009, but is recovering quickly and should hit a new all-time record in 2011
Source: FAO; Note, does not include wooden furniture or waste paper
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20
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1201
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01
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03
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09
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E
Bill
ion
US$
Value of Global Trade in Forest Products
Paper
Pulp
Wood Products
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Paper and Paperboard usage rates (per unit of economic growth) are dropping rapidly due to development of electronic media
4.50
4.75
5.00
5.25
5.50
5.75
6.00
6.25
6.50
6.75
7.00
7.25
7.50
82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
Th
ou
sa
nd
To
nn
es
/Billio
n U
S 2
00
5$
World Paper & Paperboard Consumption Divided by World GDP, 1982-2026
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Demand for Printing & Writing grades will slow, Newsprint demand will decline, but demand for Containerboard and Tissue will be strong
0 50 100 150 200 250
Printing & Writing
Newsprint
Tissue
Containerboard
Other
Million Tonnes
Global Consumption of Paper & Board by Grade
2020
2010
+1.5%
-0.2%
+4.0%
+4.2%
+2.8%
(CAGR)
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The global shift in paper production to China and Other Asia has already begun, and will accelerate through the coming decade
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20
40
60
80
100
120
140
160
180
North America
W Europe E Europe and CIS
Japan China Oth Far East
Latin America
Other
Mill
ion
To
nn
es
Regional Growth in Paper & Paperboard Production
2010
2020
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Total paper grade pulp production will increase by 49 M tonnes from 2010-2020, requiring an additional 220 million cubic meters of wood
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20
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40
50
60
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80
90
Bl Softwood Bl Hardwood Unbleached Mechanical Other
Mill
ion
To
nn
es
Global Pulp Production by Grade
2000 2010 2020
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Massive demand for recovered paper in China and India will drive up prices for this raw material, making wood pulp more competitive
20
70
120
170
220
90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
US
$2
01
1/T
on
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USA Prices for OCC and Equivalent Softwood Fiber
Old Corrugated
Southern Softwood
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China’s timber deficit grew at an annual rate of 16% from 1997-2010, faster than GDP growth; in 2011, the timber deficit will increase more than 20%
0
20
40
60
80
100
120
140
160
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11E
Millio
n C
ub
ic M
ete
rs, R
WE
China's Growing Timber Deficit, 1997 - 2011E
Woodchips
Pulp
Wood Panels
Lumber
Logs
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China’s domestic softwood harvest will be limited by age class of plantations, slow growth rates, and restrictions on harvesting natural forest timber
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10
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25
30
35
40
Guangxi Heilongjiang Fujian Jiangxi NE China SOE
Millio
n C
ub
ic M
ete
rs
China: Timber Harvest Quota, 11th & 12th Five-Year Plans
11th Plan 12th Plan
Source: China’s Timber Supply Outlook, 2011-2015, RISI
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Realistically, China’s sources of softwood log imports are limited to 5 countries: Russia, New Zealand, USA, Canada and Australia
0
5
10
15
20
25
30
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11E
Mill
ion
Cu
bic
Me
ters
China: Softwood Log Imports by Source
Other
Canada
USA
Aust
N Zealand
Russia
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Prices for imported softwood logs have increased 50% in the northeast since April 2009, but have nearly doubled in price at major east coast ports
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200Ja
n-0
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r-0
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n-1
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r-1
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1
US
D/C
ub
ic m
ete
rs
China Imported Softwood Log Price Index
Northeast
Yangtze Delta
Bohai Bay
Source: RISI
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Softwood lumber imports have grown much faster than hardwood imports, primarily for construction; Canada is the leading source
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
98 99 00 01 02 03 04 05 06 07 08 09 10 11E
Th
ou
sa
nd
Cu
bic
Me
ters
China: Hardwood and Softwood Lumber Imports
Hardwood
Softwood
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China’s timber resource scarcity has forced companies to import chips to supply new mills; imports mushroomed from 1.0 M tonnes in 2008 to 6.0+ M tonnes in 2011
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1000
2000
3000
4000
5000
6000
7000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E
Tho
usa
nd
BD
MT
China Hardwood Chip Imports
Other Australia
Indonesia Thailand
Vietnam
Source: International Pulpwood Trade Review, RISI
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Woodchip import prices in China are escalating rapidly, good news for timberland investors in Australia and Southeast Asia
100
120
140
160
180
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240J
an
-09
Ma
r-0
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y-0
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p-0
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n-1
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n-1
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r-1
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1
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1
US
$ p
er
BD
MT
, C
&F
China: Average Hardwood Chip Import Prices
Australia Vietnam Thailand
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Japan was traditionally the largest timber market in Asia, but times have changed: total housing starts in Japan will remain well below 900,000 units in the future
0
200
400
600
800
1000
1200
1400
2006 2007 2008 2009 2010 2011 2012 2015 2020 2023
Tho
usa
nd
Un
its
Total Housing Start Forecast in Japan
Source: Nomura Research
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India is the fastest growing softwood log market, although the volumes are still small compared with China; resource scarcity and rapidly growing demand are strong positives for imports
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India: Imports of Softwood Logs by Source, 1999 - 2011E
Other Australia New Zealand
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Russia is the world’s largest log exporter, but a combination of the financial crisis and log export tax cut volumes by nearly 60% from 2006-2009
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10
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30
40
50
60
Mill
ion
Cu
bic
Me
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Russia Log Export Volume
Softwood
Hardwood
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The value of Russian forest products exports grew at an annual rate of > 14% from 2000-2007; despite the weak global economy (and log export tax) Russian exports have resumed upward trend
0
2,000
4,000
6,000
8,000
10,000
12,000
Mill
ion
US$
Russia: Value of Forest Products Exports
Paper
Pulp
Wood Products
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Russia’s softwood exports have been shifting from logs to lumber; on a roundwood basis, 64% of softwood exports are now in lumber form
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E
Mill
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Cu
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Me
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Russia: Softwood Log and Lumber Exports
Softwood Logs
Softwood Lumber
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In the US market, housing construction is the primary demand driver for timber, but single family housing starts are forecast to remain below 1.0 million units through 2026
0.0
0.5
1.0
1.5
2.0
2.5
95 97 99 01 03 05 07 09 11 13 15 17 19 21 23 25
Millio
ns
US Housing Starts and Mobile Home Production
Mobile
Multi
Singles
Source: RISI
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Timber supply limitations in Canada (due to the mountain pine beetle and reductions in timber harvest) spell good news for US lumber producers
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USA and Canada Softwood Lumber Production Forecast
USA
Canada
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Softwood lumber supply issues
British Columbia provides half of Canadian lumber exports to
USA, but mountain pine beetle will reduce timber supply by at
least 25% after mid-decade.
Canadian sawmills will not give up the China market when
housing construction recovers in the USA, so this will further
limit actual exports from Canada to USA.
E. Canada timber harvest reduced due to concerns about
sustainability, and closures of pulp mills (no residue market)
Southern hemisphere pine is imported for non-structural uses
only
European lumber imports – Exchange rates may be a problem
if US dollar remains weak
Russia – historically not competitive in US market due to
transportation costs, and this is unlikely to change
In sum, demand for US-produced lumber will be strong,
helping to support higher timber values.
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Stumpage prices recover faster in the Pacific Northwest than in the US South, due to demand for log exports to China
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2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F 2014F 2015F
$/M
BF
Scri
bn
er
Stumpage Price Forecast
Doug-fir Southern Pine
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BiomassVancouver, BC – Fibreco is the world’s
largest loading terminal for wood pellets
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New Demand for Biomass:
Energy: Rapid growth -boom in the UK ~5 years, steady growth the rest of Europe.
Source: European Biomass Review, RISI
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North America is the primary supplier of wood pellets to European markets, with the largest volume still sourced from western Canada
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600
900
1,200
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2,1001
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North America Wood Pellet Exports to Europe
USA W Canada E Canada
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Biomass Market Issues
Policy driven market--- governments can and do change
policies --- is the EU willing to pay the price required to
generate the wood pellet supply needed to meet targets?
Large wood supply in the US South --- but relatively small
share has forest management certification. Biomass chips not
an option due to EU phytosanitary regulations.
Dedicated wood biomass plantations may play a growing role,
especially if total carbon accounting becomes necessary
(Germany, Poland, Hungary, Spain).
Almost all pellet imports in the EU currently from North
America or Russia --- Brazil looks interesting, but slow to
develop due to competition for land, strong currency, etc.
Asian markets – Japan and Korea – could be a market for 8-
10 million tonnes of pellets, but again very slow to develop
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The bottom line: even assuming a very conservative drop in per capita consumption, demand for timber will expand rapidly
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1970 1980 1990 2000 2010 2020 2030 2040 2050
Millio
n C
ub
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rs
Millio
n P
eo
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Global Population Growth and Industrial Roundwood Demand, 1970-2050
Population Ind. Rdwd
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Questions?
Bob Flynn
Director, International Timber, RISI
Phone: 1-253-565-4846
Mobile: 1-360-471-6578
Email: [email protected]
Web site: www.risi.com
