Four drivers but one result: the emerging bio economy

Transcription

1 Trends in Global Trade in Wood Products 213 Summary Global Trends The Big Picture 2. Forestry Drivers 1. Global Shift to Bioeconomy (using FAOSTAT data, Statistics Canada through Strategis, IMF WEO, Global Trade Atlas and more) UBC Global Trade in Forest Products Forest Resources Where What is harvested for what 3. Business Transformation 2 Four drivers but one result: the emerging bio economy 1. Population growth 2. Growing economic power of developing countries AND growth of global middle class 3. Squeeze on world resources (both renewable and non renewable) 4. Increasing environmental degradation Billions of people Global Population Growth Source: UN World Population Prospects 21 Revision, medium variant 3 4 1

2 2. Changing Economic Importance 25 Proportion of World GDP (PPP) by Country Percent of global GDP USA China India Canada Germany Source: International Monetary Fund, (IMF) World Economic Outlook (WEO) Database, October What is Purchasing Power Parity 3) Squeeze on World Resources it is the number of units of a country s money required to buy the same quantity of goods and services as $1 buys in the United States UN HDR 24 Box 6 page 257 based on a basket of 15 2 goods & services adjusts the measurement of items, such as GDP, to be free of distortions from price & exchange rates based on the concept that it is not the size of a persons income that is important but what it can purchase i.e. Is $3, a year a good income in Vancouver? in Vietnam? Rush for long term resource supply existing & new agricultural land in Africa forest concessions in Asia mineral deposits in Mongolia private equity ownership of forest land Fundamental shift in commodity pricing (change since 186s) 7 8 2

3 Commodity Price Growth Commodity price index Source: Dobbs et al., 213 Resource Revolution: Meeting the world s energy, materials, food and water needs. McKinsey Global Institute. 44 pages Source: Bank of Canada February Global Ecological Footprint Life Cycle Assessment (LCA) Source: Global Footprint Network August

4 Why is bio economy growing? More people (population growth) need more stuff that require more resources higher prices & environmental degradation Bioeconomy the sustainable, eco efficient transformation of renewable biological resources into food, energy and other industrial products Schmid et al., 212 quoting DG Research, 25 Resource scarcity Eco efficiency (leaning operations) Sustainable business Secure supply Resource access higher prices for non renewables extraction innovation + shift from non renewable to renewable Clean tech Energy efficiency BIOECONOMY Good governance Social equality Licence to operate Impacts of Shift to Bioeconomy Vancouver Sun May 25, 212 pg12 Renewables replacing nonrenewables bioplastics, ethanol, cellulose/plastic composites Environmental externalities valued water rates, green energy premium, carbon tax Already occurring but not yet recognized Shared green value profit by solving environmental problems e.g. tall wood buildings, GE ecomagination,

5 Impacts of Shift to Bioeconomy Renewables replacing nonrenewables bioplastics, ethanol, cellulose/plastic composites Environmental externalities valued water rates, green energy premium, carbon tax tax shift toward pollution + taxes 3%BCrinnenverkleidung_Hanf-PP_nova.jpg/642px- T%C3%BCrinnenverkleidung_Hanf-PP_nova.jpg buildings.jpg Shared green value profit by solving environmental problems e.g. tall wood buildings, GE ecomagination, Resource Shortage 5 F s (Nilsson) Competition for (forest) land use : Food conversion to agricultural land Fuel fuelwood + biofuels Forestry Drivers Global Shift to Bioeconomy Fodder grazing Fibre pulp, rayon, Business Transformation Feedstock for emerging bio products

6 Graphic paper production in NA and NW Europe ( ) Selective Cuttings 5/29/13 cuttings/36 (FAOSTAT data) Percent change Global GDP growth = 59% Europe USA Canada Newsprint Printing & writing Folding box board FBB is made up of multiple layers of chemical and mechanical pulp used for health and beauty products, frozen goods, confectionaries, pharmaceuticals, etc Bottom Line Computers (tablets & smart phones) + internet finally paper use lower demand/value for chips P&P transformation underway in Europe & NA Firms in developed countries know past P&P profits unsustainable Great interest, concern, expenditures, & fear for firm and sector transformation Lumber production requires profitable market for waste (chips)

7 Two Business Responses Forestry Drivers Global Shift to Bioeconomy Based on current (Cohen/Nikolakis) research with 43 interviews with executives in N. Europe (14 firms) & NA (21 firms) and 12 with industry experts Business Transformation 1. Traditional business response efficiency, productivity, process innovation, leaning operations, expansion, contraction, specialization, etc. 2. Transform to compete in bioeconomy technology driven product and process innovation (high risk, high reward) Traditional business response Downsizing: shrink & focus on improving P&P efficiencies Focus on lumber production: increase efficiencies as low cost lumber producers Change product mix: P&P & lumber or panel production Specialty products: develop specialty pulp and/or paper products for niche markets (intellectual property rights) Move up value chain: closer to consumer e.g. packaging, media, consumer products e.g. adult incontinence products Move down the value chain: focus on forest land & manufacturing (e.g. TIMOs) Transforming to Bioeconomy Bioenergy: develop commercial bioenergy production e.g. co generation, pellets, ethanol production, etc. New bioproducts: developing new bioproducts and to commercialize new technology (e.g. NCC) Create new biocomplex: create a sustainable biorefinery (in planning and research stage high risk, high reward) Become forest products producers: Shift to produce wider array of forest products e.g. environmental services, recreation, carbon offsets, water management, community forest, etc

8 Forestry in 23 forests providing food, fuel, forage, fibre, feedstock, and environmental services in complex interactions of human economic, social & environmental needs wood still a very important component of environmentally broad and sustainable product portfolio from forests forests become important part of restorative economy biorefineries replacing oil refineries as they age once pricing for environmental externalities becomes a reality partnerships key gov t/industry, civil society/industry, interindustry, intra industry, developing/developed and more 2. Forestry Drivers 3. Business Transformation 1. Global Shift to Bioeconomy 29 3 Thinking Points Will the response to resource scarcity be the same for non renewable & renewables? How will they differ? Summary Global Trends The Big Picture 2. Forestry Drivers 1. Global Shift to Bioeconomy 3. Business Transformation How might if affect wood use, supply & prices? Global Trade in Forest Products Forest Resources Where What is harvested for what

9 Global Forest Resources 21 area in millions ha: annual change 2 21 Region #,### ### View from Toronto Global Forest Resources 21 area in millions ha: annual change 2 21 Region #,### ### View from Vancouver N/C America 75 S America Africa Europe 1, Asia Oceania Africa Europe 1, Asia Oceania N/C America 75 S America Source: FAO 2 Yearbook of Forest Products, published in Source: FAO 2 Yearbook of Forest Products, published in Global Forest Resources 21 Country data (% of world s forest area) Global Forest Resources 21 Country data (% of world s forest area) Sweden/ Finland 1.2 Russia 2.1 Canada 7.7 Sweden/ Finland 1.2 Russia 2.1 Canada 7.7 China 5.1 USA 7.5 China 5.1 USA 7.5 Indonesia 2.3 Brazil 13. Indonesia 2.3 Brazil 13. Source: FRA 21 Source: FRA

10 Forests 3% of land in world is forested, increasing in some areas (e.g. Asia) decreasing in others (e.g. Africa, Oceania, S. America) great fluctuations in deforestation in countries e.g. Brazil Overall forest cover is increasing Hotbed of NGO activism WHY? Source: David 37Cohen What is harvested Harvest of 3.3 billion m 3 /yr from ~4 billion m 3 of trees on 4 billion ha of forest land (.8% annually) Subsistence (~5%) vs Industrial (~5%) good and bad of subsistence use? Coniferous (1/3) vs Non coniferous (2/3) C (2/3 industrial) vs NC (~2/3 subsistence) Missing data due to illegal, underreported, and unreported logging =1 25% of total Some forest issues Deforestation Role of plantations (extensive vs intensive) Forests / Wood & GHG storage Forests and: indigenous peoples poverty alleviation rural sustainability agriculture Forest preservation, conservation or multiple use Urbanization and loss of connectivity with forests

11 Industrial Roundwood Production 212 total of 1,661 mcum (little change in 25 years) Rest of presentation focuses on Industrial Wood Supply and Use Sweden 3.8% Finland 2.7% Germany 2.6% Russia 1.7% China 6.2% Indonesia 3.7% Can. 9.1% US 2.2% Brazil 8.4% Chile 2.4% Forest Resource vs Industrial RW in % of world for 21 and 212 Trends in Forest Management equity ownership of private forest land private ownership 2.7 million ha annually increase harvest? multi use forest management shift to forest (not wood) products e.g. PES ecosystem management people as part of ecosystem Source: UN Food and Agriculture Organization FORSTAT Database 212 and FAO 21 FRA harvest maxxed? market driven deforestation & illegal logging plantation forestry from >92 million ha increase of 54%

12 Others Turkey France Thailand Chile Indonesia Sudan Brazil Russia USA China Ten countries with largest area of productive forest plantations 25 in % Source: FAO 25 FRA Good for the World Rapid growth less land needed natural forest conservation Good use of scarce resources Creates continuous, long term wood supply Economically beneficial Forest Plantations Bad for the World Biological deserts NO biodiversity Depletes soil / requires fertilization Creates hydrological problems Monoculture increases pest & disease problems US$ Billions Current Global Recession $267 billion Trends in Industrial Log Supply in supply from fast grown plantations e.g. Eucalyptus (7 year rotation) heavily subsidized by governments supply from developed GFC natural forest costs, NGO s, bark beetle, other uses, etc.) supply Russia, E. Europe, Baltics, etc Value of world exports of forest products increasing at 8.5% annually (Source: CIBC) CHINA 48 12

13 China 21 st Century Game Changer At start of 21 st century China was worried about wood supply due to National Forest Protection Plan (NFPP) Study predicted sufficient wood available for import for rapidly growing sector In 2 China was not in top 1 producers, importer or exports of any wood products LESS THAN 1 YEAR LATER CHINA 29 China now a powerhouse in wood production 1 st largest exporter (by value) 2 nd largest importer (by value) Furniture #1 Plywood, MDF, blockboard #1 HW lumber #2 Particleboard #3 SW lumber # China s Forest Product Production China s wood import & exports Billions of US$ millions of US$ 45, 4, 35, 3, 25, 2, 15, 1, 5, Imports Exports China usually adds 3% of value to imports, uses ¼ domestically and exports slightly higher value than it imports Source: International Wood Markets Group 21 through UNECE Forest Products Annual Market Reviews

14 China and Logs By 2 China s forest seriously overharvested soil erosion, reduced harvests, water pollution, etc. NFPP Great in imported logs & establishment of plantations China has largest area of forest plantations using GM trees to ameliorate soil degradation, improve fibre quality, & quantity Global Log Imports 5% 4% 3% 2% 1% % China s Share of World Log Imports (about 1/3 rd of imports Russia about 1/3 rd of exports) NFPP WTO Source: WTA and FAO data set Suifenhe Rail Yard 23 Russia s Share of World Log Exports 5% Global Log Exports 4% 3% 2% 1% Source: WTA and FAO data set

15 Proposed Russian Tax Rate TBA X Russia Joins WTO 22/8/12 EC support for entry required access to logs Set quotas and new tariffs based on region within quota tariff reduced: 25% to 13% for spruce & fir logs and 8% outside quota 213 quota 5,95,6 m3 to Europe and 285,9 m3 outside of Europe (Japan remains at 25%) 7% for birch logs which go to Europe China SW Log Imports What is the Story Thousand of cum 3, 25, 2, 15, 1, 5, NZ USA Canada Other Total Russia Canada 1. China bans logging on natural forests 2. Wood industry grows using imported logs 3. Russia increases log exports to China Also from NZ & illegal logging (e.g. Indonesia) 4. China global leader in wood production 5. Russia wants more manufacturing so tax 6. China decreases log imports & increases lumber imports 7. Russia backs down but for Europe & not China

16 Current Topics Log Supply Zhang Jiagang Port near Shanghai 21 Illegal Logging (Brazil & Indonesia) Certification / Legality / Import Regulation Climate Change and Forests REDD++ Forests and Indigenous Peoples Forests and Poverty Alleviation Forests and Carbon Sequestration Source: Millions of cum Global Lumber Production & Exports millions of cum Largest Sawnwood Producers 212 Sawnwood Production Exports Production

17 Global Log Imports 5% 4% 3% 2% 1% China s Share of World Log Imports (about 1/3 rd of imports Russia about 1/3 rd of exports) NFPP WTO millions of cum Chinese Lumber Imports all Sawnwood C Sawnwood % Source: WTA and FAO data set What is the Story Trends in Sawnwood Taxes, corruption, overharvesting, etc. costly unstable log supply from Russia Shift to importing softwood lumber with Canada supplying almost half Rising costs in China plus higher cost for logs makes imported lumber more competitive Continued growth or short window of opportunity? in supply from lower cost natural forests & southern plantations technology enables sawnwood replacement with EWP, other materials, HW lumber, etc. real decline in price over time what to do with the wood chips given the decline in writing & graphic paper and newsprint

18 China and Wood Panels China is largest producer of MDF, blockboard & Plywood in the world China uses wood panels for its large furniture production Chinese production but exports as domestic consumption has grown Many old plywood plants being replaced by modern facilities millions of cum Largest Panel Exporters 212 Panel Exports OSB Replaces Plywood Chinese Panel Production, Exports & Imports 3, millions of cum Production Export Import US Panel Production, million square feet, 3/8 inch basis 25, 2, 15, 1, 5, US Total S. Plywood W. Plywood OSB

19 Trends in Panels OSB gaining in Europe entry in Asia China produces >1/3 of world supply of MDF use of alternative materials for panels Kenaf, strawboard, bamboo board, etc. production & exports from China & Brazil trade & production of wood panels new types of panels e.g. CLT What is the Story China dramatically increasing production of wood panels (MDF & plywood) MDF used for furniture & other manufacturing plywood used for concrete forming use of wood panels world wide much in wood housing which is growing rebirth of some panel types (eg SIP and CLT) use wood, store carbon Millions tonnes Pulp & Paperboard Production millions of tonnes Largest Pulp Producers 212 China USA Japan Germany Canada Total

20 Chinese Pulp Production and Imports millions of tonnes Production Import Trends in Pulp & Paper Most pulp used to make 3 types of paper (derived demand) 1. P&W (printing & writing) declining due to spread of internet 2. Packaging holding steady with use balanced by in recycled material 3. Hygiene growing faster than GDP Newsprint End use Factor in thousand tonnes / billion dollar of real US GDP from CIBC World Markets 1/28/9 Trends in Pulp technology high quality pulp from poor fibre impact of internet on paper use newspaper readership (newsprint) growth in absorbent pulps (for tissues, etc.) fast grown southern hardwoods e.g. eucalyptus material from the urban forest use of waste driving up cost of some pulp

21 Millions of tonnes Recovered Paper Production steady growth in recovered paper technology & design keeps increasing % of paper recovered urban pulp supply needs strong pulp added each time it is recycled millions of tonnes Largest Recovered Paper Producers Recently China has surpassed USA as largest producer of recovered paper Trends in Recovered Paper What is the Story trade in recovered paper mechanical pulp used to add strength backhaul waste paper to China and Korea recovery rates due to technology NA public willing to subsidize recycling (strong support for blue box programs) Some states require % recycled content Is recycled paper always better? China importing pulp to produce paper paper use for newsprint, office paper & packaging (except in rapidly developing economies) but for fluff pulp decline in northern SW pulp & increase in pulp from eucalyptus plantations Increase in pulp prices due to competing uses for waste input (eg biofuels, rayon No new pulp mills in developed countries WHY? Shift to agroforestry monoculture plantations

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