Opportunities and Threats to the Forest Industry in the South

Transcription

1 Ergilio Claudio-da-Silva Jr São Paulo, Brazil Corporate Technology Manager, Aracruz Celulose SA

2 Opportunities and Threats to the Forest Industry in the South The Marcus Wallenberg Prize Symposium Stockholm, November 14th, 2007 Ergilio Claudio-da-Silva, Jr. Aracruz Celulose S. A. - Brazil 2

3 Congratulations, Prof. Ove Nilsson Eucalyptus E. Claudio-da-Silva flowers Jr. Jr MWP Symposium

4 HIGHLIGHTS The Industry in the South major numbers and trends Key characteristics of this industry in general A successful business case in the South What's expected from our industry/ demands by scenarios around us Threats and Opportunities an analysis based on ' key characteristics ' How may the future look like 4

5 FOREST PRODUCTS INDUSTRY IN THE SOUTH 5

6 FOREST PRODUCTS INDUSTRY IN THE SOUTH WHERE'S THE ACTION? TODAY'S NUMBERS AND TRENDS... 6

7 BHKP Production and Delivery Costs CIF West Europe, Q Source: Hawkins Wright 7

8 BEKP market share of total hardwood demand Hardwood Demand Hardwood Demand Euca 32% Other ( Tropical) 2% NBHK 44% Other ( Tropical) 13% NBHK 28% SBHK 22% Total Volume: 11 million tons Euca 50% SBHK 9% Total Volume: 22 million tons South: 34 % South: 63 % Source: PPPC * Numbers based on demand 8

9 Main Pulp & Paper Producers watch the 'southerners'... 1 China Plantation Forests total area, million ha India 32 All Planted Forests in the South 20 Russia 17 USA 16 Japan 10 Canada 6 Brazil 5,7 Chile 2 Pulp 2006 In thousand tonnes 1 USA Canada China Finland Sweden Brazil Japan Russia Indonesia India P&B 2006 In thousand tonnes 1 USA China Japan Germany Canada Finland Sweden South Korea France Italy Brazil Sources: FAO, Bracelpa / PPI 9

10 SO... WHAT ELSE CAN WE SAY TODAY ABOUT THIS INDUSTRY : E. Claudio-da-Silva Jr. Jr MWP Symposium

11 THE FOREST PRODUCTS INDUSTRY : an Agribusiness Sustainable Capital Intensive Extremely Competitive E. Claudio-da-Silva Jr. Jr MWP Symposium

12 THE FOREST PRODUCTS BUSINESS Sustainable - in everything we do starting with our raw materials, our processes, our actions Capital Intensive intelligent investments and cost reduction are everyday concerns clever definition of technology of production units Extremely Competitive - costs, energy management, product differentiation, services, knowledge management (human knowledge doubling every 9 months in Bioenergy, every 3 months!) E. Claudio-da-Silva Jr. Jr MWP Symposium

13 THE FOREST PRODUCTS INDUSTRY WHAT HAVE WE ALL OBSERVED LATELY IN THE 'SOUTH'? E. Claudio-da-Silva Jr. Jr MWP Symposium

14 THE FOREST PRODUCTS INDUSTRY: It is cheaper to produce in Southern Hemisphere Research and Technological developments have led to significant planted forest productivity gains ( genetics + forest management ) in the last 35 years - from 20 to m³/ha/year Shorter harvesting cycles Short distances from planted forests to pulp mills Low costs and fiber quality - key factors for competitiveness Large scales - dilution of fixed production and distribution costs Pulp quality : developed technology for differentiation/ new fiber uses Modern, 'state of the art' production units Capital costs Even with a relative disadvantage for the southern hemisphere producers, the region still displays a significant structural advantage Smart solutions must be applied to every production line, and this requires experienced, competent human resources E. Claudio-da-Silva Jr. Jr MWP Symposium

15 THE FOREST PRODUCTS INDUSTRY THEN, WHAT? in the South HOW DID WE GET HERE? or... WHAT ARE THE MAJOR ACHIEVEMENTS AND LEARNINGS, SO FAR... THAT WE SHOULD PURSUE, TOWARDS THE FUTURE? E. Claudio-da-Silva Jr. Jr MWP Symposium

16 THE FOREST PRODUCTS INDUSTRY in the South let me tell you about an interesting 'case story' from a 'forest industry in the south'... E. Claudio-da-Silva Jr. Jr MWP Symposium

17 THE FOREST PRODUCTS INDUSTRY in the South THE ARACRUZ EXPERIENCE 17

18 ARACRUZ: A BUSINESS CASE CENTERED ON Competitiveness and Value creation, both supported by INNOVATION and SUSTAINABLE PRACTICES 18

19 In the begining, Innovation for: 1 - Survival 2 - Model Definition Quality / Product Differentiation Productivity / sustainability 19

20 Land Use History Atlantic Rainforest Period before Aracruz Pastures Eucalypt Post Aracruz E. Claudio-da-Silva Jr. Jr MWP Symposium

21 General aspect of the first planted forests established by Aracruz 21

22 Canker disease E. Claudio-da-Silva Jr. Jr MWP Symposium

23 Defining most adapted species E. grandis from Atherton, Australia E. urophylla from Flores Island, Indonesia GU hybrids 23

24 Clonal propagation at commercial scale 24

25 months!!! 12 meters Clonal planted forest: higher productivity / uniformity E. Claudio-da-Silva Jr. Jr MWP Symposium

26 Sustainable Forest Management Exclusive use of planted forests for pulp and lumber productions Soil and plant interactions nutrition balance Monitoring of insects and pests - biological controls Biodiversity balances Interspersing of planted forests and native reserves Maintenance of understory vegetation Preservation of water resources 26

27 Product Focus Long term commercial relationships with key players Target on high value added and consumer end products High quality, homogeneous pulp... technology Product development... technology High quality service 27

28 Shareholder Value adt/ha/year 's 80's 90's 00's Decade 28

29 Presently: Innovation to strengthen the competitive advantages. 29

30 Aracruz proposition is to generate a superior return for its shareholders, while promoting the efficient use of renewable planted forests, to meet the demands of the global pulp and paper and solid wood products markets, and other uses. FOREST PULP MILL PRODUCT CLIENTS Productivity/Sustainability Logistics Mechanization Operational Efficiency Production flexibility Quality demands Pulp Uniformity Differentiated products Added value - efficiency - product quality - services OPERATIONAL EFFICIENCY : máximum sustainable production, at lowest cost INNOVATION AND TECHNOLOGY E. Claudio-da-Silva Jr. - MWP Symposium 2007

31 Forest Genetics - Traditional Breeding Advanced generations x sustainable gains 10 months 18 months Tropical x Temperate hybrids E. urophylla x E. globulus 31

32 Forest Genetics - Biotechnology Genetic transformation of elite clones Only lab and greenhouse research Outsourced genes: wood quality and productivity Important partnerships Legal and emotional challenges 32

33 Sustainable Forest Management Soil and nutrition Forest Protection and Biodiversity Eco-physiology 33

34 New Opportunities Solid wood Biofuels Biodiesel Agro-forestry Systems 34

35 Agroforestry Systems in Brazil 35

36 Pulp Technology Development... understanding/ optimizing Eucalyptus fiber properties O Sm oo ity c pa ft o S th ne ss s s ne E. - MWP Symposium 2007 E. Claudio-da-Silva Claudio-da-Silva Jr.Jr lk u B s s e n f f ti S / 36

37 Shareholder Value adt/ha/year Now projected Decade E. Claudio-da-Silva Jr. Jr MWP Symposium

38 ... in a sustainable way!!! E. Claudio-da-Silva Jr. Jr MWP Symposium

39 THE FOREST PRODUCTS INDUSTRY - TODAY So, here we are... and there are many more success stories, and more yet to come, mostly developed in the South, and strongly based on : - innovation and technology development - land availability and soil quality - suitable climate - sustainable practices - fiber and lumber quality / market focus. 39

40 THE FOREST PRODUCTS INDUSTRY THE FUTURE...then, in this context, the major opportunities and threats for this industry... should be discussed around its key characteristics, and new trends and expectations in the business and societal perspectives. 40

41 WHAT'S EXPECTED FROM OUR INDUSTRY? In a nutshell, it's all about... CREATION OF LONG-TERM SHAREHOLDER VALUE! (" depends on ability to understand and respond to increasingly intense demands from society ") 41

42 WHAT'S EXPECTED FROM OUR INDUSTRY? And what can we say about major trends and demands from business and society : 42

43 WHAT'S EXPECTED FROM OUR INDUSTRY? From market 'trend setters' around the world - EU's FP7, A 2020 Advance the wood products revolution next generation fibers and their utilization Faster changes in consumers demands innovative products at a faster pace New, resource-efficient manufacturing processes Availability and use of forests for products and energy production Sustainable development and management of forests, used for multifunctional demands Value-generating businesses in a societal perspective 43

44 WHAT'S EXPECTED FROM OUR INDUSTRY? From market 'trend setters' around the world - EU's FP7, A 2020 Advance the wood products revolution next generation fibers and their utilization Faster changes in consumers demands innovative products at a faster pace New, resource-efficient manufacturing processes Availability and use of forests for products and energy production Sustainable development and management of forests, used for multifunctional demands Value-generating businesses in a societal perspective 44

45 AND WHAT'S DEMANDED BY THE SCENARIOS AROUND US? Climate change Global, consolidated, and more powerful clients faster changes in demands Product substitution a neverending threat Biotechnology and nanotechnology as present and next frontiers Better competitors high productivity forests/ modern production units Increasing social demands land availability costs and disputes ( for other uses ) water availabilty and use forest, processes and product certifications, S-Ox carbon footprint reduction Energy self-sufficiency ( surplus ) wood for fuel/ derived fuels Increasing costs capital related accessibility, taxes, exchange rates... more stringent environmental controls more taxes ( e.g. water usage ) land costs energy and logistics infrastructure 45

46 AND WHAT'S DEMANDED BY THE SCENARIOS AROUND US? Climate change Global, consolidated, and more powerful clients faster changes in demands Product substitution a neverending threat Biotechnology and nanotechnology as present and next frontiers Better competitors high productivity forests/ modern production units Increasing social demands land availability costs and disputes ( for other uses ) water availabilty and use forest, processes and product certifications, S-Ox carbon footprint reduction Energy self-sufficiency ( surplus ) wood for fuel/ derived fuels Increasing costs capital related accessibility, taxes, exchange rates... more stringent environmental controls more taxes ( e.g. water usage ) land costs energy and logistics infrastructure 46

47 Threats and Opportunities... Back to our key industry characteristics : Sustainable Development Capital Intensiveness High Competitiveness 47

48 Threats and Opportunities... Threats Climate change Productivity Pests and Diseases Carbon footprint Land availability Water scarcity Social pressures ('monocultures') Energy availability Sustainable Development Opportunities Better Eco-physiology/ Adequate planning Stress tolerant materials (genetics/biotech) Enhanced state of alertness/innovative monitoring A 'New' Industry-fuels/ bioproducts/ wood Highly productive clones(biotech)/agroforestry syst/tree farm programs Efficient manufacturing/ stress tolerant clones Mosaic planting/ harvesting Agroforestry syst/tree farm programs Wood as biofuel/ plantation fuels/ efficient processes 48

49 Threats and Opportunities... Threats Sustainable Development Opportunities Climate change Productivity Pests and Diseases Carbon footprint Land availability Water scarcity Social pressures ('monocultures') Energy availability Better Eco-physiology/ Adequate planning Stress tolerant materials (genetics/biotech) Enhanced state of alertness/innovative monitoring A 'New' Industry-fuels/ bioproducts/ wood Highly productive clones(biotech)/agroforestry syst/tree farm programs Efficient manufacturing/ stress tolerant clones Mosaic planting/ harvesting Agroforestry syst/tree farm programs Wood as biofuel/ plantation fuels/ efficient processes 49

50 Threats and Opportunities... Threats Currency appreciation and higher taxes Land prices increase due to less availability and use for energy production Shipping and equipment Capital Intensiveness industries consolidation. More expensive freights and capital investments. More complex engineering / systems and more expensive production lines (water, energy, env. control vs better products) Opportunities Higher Cost Curve industry in the north Pulp prices improvement Cost of capital reduction. Brazilian companies as "investment grade" Lower cash operational cost >Big mils with scale and state of art technology. State-of-the-art Biorefinery units, with alternative cash generation options and higher profitability. 50

51 Threats and Opportunities... Threats Capital Intensiveness Currency appreciation and higher taxes Land prices increase due to less availability and use for energy production Shipping and equipment industries consolidation. More expensive freights and capital investments. More complex engineering / systems and more expensive production lines (water, energy, env. control vs better products) Opportunities Higher Cost Curve industry in the north Pulp prices improvement Cost of capital reduction. Brazilian companies as "investment grade" Lower cash operational cost >Big mils with scale and state of art technology. State-of-the-art Biorefinery units, with alternative cash generation options and higher profitability. 51

52 Threats and Opportunities... Competitiveness Threats Opportunities Faster changes in consumer demands Product substitution Higher production costs ( wood, energy, water, logistics related) More stringent environmental permits Energy availability Water scarcity Social pressures (e.g. leading to more expensive operations) Strategic Product Stewardship/Nanotech "/ New Paper uses A 'New' Industry/ Biorefinery (intensive use of Biotech-derived matls) " Wood as biofuel/ plantation fuels/ self... New and more efficient manufacturing/stress tolerant clones Sustainable development/ agroforestry/tree farm programs 52

53 Threats and Opportunities... Competitiveness Threats Opportunities Faster changes in consumer demands Product substitution Higher production costs ( wood, energy, water, logistics related) More stringent environmental permits Energy availability Water scarcity Social pressures (e.g. leading to more expensive operations) Strategic Product Stewardship/Nanotech "/ New Paper uses A 'New' Industry/ Biorefinery (intensive use of Biotech-derived matls) " Wood as biofuel/ plantation fuels/ self... New and more efficient manufacturing/stress tolerant clones Sustainable development/ agroforestry/tree farm programs 53

54 How may the Future look like... Crops - Biodiesel/Ethanol Forest Wood (Reject/lefts) Chem/enzymes Hydrolisis Cellulose and Hemis Pyrolysis/Gasiification Any kind of carbon from biomass - Alcohol - Alcohol/other fuels Mill Wood (Pulping) VPP Pulping Black Liquor Market Market Pulp Pulp - Hemicelluloses -Alcohol - Fiber additives (xylose) - Chemical Barriers - Hydrogels -? -Lignin - Carbon Fibers - Solid fuels - Agriculture additives -? 54

55 Pinhão Manso Jathopha curcas 55

56 Final Remarks... The Forest Products Industry in the South has experienced a significant growth in the last 40 years while doing its homework... Present and future trends and demands from business and society define significant threats/ challenges and opportunities to this industry. It is expected that the Forest Products Industry in the South continues to be well fit and competent to maintain its successful path towards the future. 56

57 World Consumption of Market BHKP Two-thirds of the growth in market BHKP will be Eucalyptus pulp. Demand for Acacia pulp is also expected to grow, while demand for mixed tropical hardwood pulp will decline. 40 Million tons Forecast Birch Euca Mixed northern Mixed southern Acacia Mixed tropical Sources: Poyry and Aracruz 57

58 Bleached Hardwood Market Share Demand million tons million tons 68% North 32% South 38% North 62% South million tons million tons 32% North 68% South 30% North 70% South Sources: Poyry & Aracruz 58

59 Thanks for your Attention! A typical tree-farm property in Brazil 59