Update: The Global Demand for Wood Fibre

Transcription

1 Update: The Global Demand for Wood Fibre Timber Invest Europe Conference, London Bob Flynn Director, International Timber October 25, 21

2 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 2

3 E Billion US$ Global trade in forest products plunged 21% in 29, but is recovering quickly and should hit a new all-time record in Value of Global Trade in Forest Products 1 8 Paper Pulp Wood Products Source: FAO; Note, does not include wooden furniture or waste paper 3

4 Thousand Tonnes/Billion US 25$ Paper and Paperboard usage rates (per unit of economic growth) are dropping rapidly due to development of electronic media 7.5 World Paper & Paperboard Consumption Divided by World GDP,

5 Demand for Printing & Writing grades will slow, Newsprint demand will decline, but demand for Containerboard and Tissue will be strong Global Consumption of Paper & Board by Grade Other +2.8% (CAGR) Containerboard +4.2% Tissue Newsprint +4.% -.2% Printing & Writing +1.5% Million Tonnes 5

6 Million Tonnes The global shift in paper production to China and Other Asia has already begun, and will accelerate through the coming decade Regional Growth in Paper & Paperboard Production North America W Europe E Europe and CIS Japan China Oth Far East Latin America Other 6

7 Million Tonnes Total paper grade pulp production will increase by 49 M tonnes from 21-22, requiring an additional 22 million cubic meters of wood 9 Global Pulp Production by Grade Bl Softwood Bl Hardwood Unbleached Mechanical Other 7

8 US$211/Tonne Massive demand for recovered paper in China and India will drive up prices for this raw material, making wood pulp more competitive USA Prices for OCC and Equivalent Softwood Fiber Old Corrugated Southern Softwood

9 Million Cubic Meters, RWE China s timber deficit grew at an annual rate of 16% from , faster than GDP growth; in 211, the timber deficit will increase more than 2% 16 China's Growing Timber Deficit, E Woodchips Pulp Wood Panels Lumber Logs E 9

10 Million Cubic Meters China s domestic softwood harvest will be limited by age class of plantations, slow growth rates, and restrictions on harvesting natural forest timber 4 China: Timber Harvest Quota, 11th & 12th Five-Year Plans th Plan 12th Plan Guangxi Heilongjiang Fujian Jiangxi NE China SOE Source: China s Timber Supply Outlook, , RISI 1

11 Million Cubic Meters Realistically, China s sources of softwood log imports are limited to 5 countries: Russia, New Zealand, USA, Canada and Australia 3 China: Softwood Log Imports by Source Other Canada USA Aust N Zealand Russia E 11

12 Jan-8 Mar-8 May-8 Jul-8 Sep-8 Nov-8 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar-11 May-11 Jul-11 USD/Cubic meters Prices for imported softwood logs have increased 5% in the northeast since April 29, but have nearly doubled in price at major east coast ports China Imported Softwood Log Price Index Northeast Yangtze Delta Bohai Bay Source: RISI 12

13 Thousand Cubic Meters Softwood lumber imports have grown much faster than hardwood imports, primarily for construction; Canada is the leading source 14, China: Hardwood and Softwood Lumber Imports 12, 1, 8, Hardwood Softwood 6, 4, 2, E 13

14 Thousand BDMT China s timber resource scarcity has forced companies to import chips to supply new mills; imports mushroomed from 1. M tonnes in 28 to 6.+ M tonnes in China Hardwood Chip Imports Other Indonesia Vietnam Australia Thailand E Source: International Pulpwood Trade Review, RISI 14

15 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar-11 May-11 Jul-11 US$ per BDMT, C&F Woodchip import prices in China are escalating rapidly, good news for timberland investors in Australia and Southeast Asia 24 China: Average Hardwood Chip Import Prices 22 2 Australia Vietnam Thailand

16 Thousand Units Japan was traditionally the largest timber market in Asia, but times have changed: total housing starts in Japan will remain well below 9, units in the future 14 Total Housing Start Forecast in Japan 12 Source: Nomura Research

17 E Thousand Cubic Meters 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 18 India: Imports of Softwood Logs by Source, E Other Australia New Zealand

18 Million Cubic Meters Russia is the world s largest log exporter, but a combination of the financial crisis and log export tax cut volumes by nearly 6% from Russia Log Export Volume 5 Softwood Hardwood

19 Million US$ The value of Russian forest products exports grew at an annual rate of > 14% from 2-27; despite the weak global economy (and log export tax) Russian exports have resumed upward trend 12, 1, 8, Russia: Value of Forest Products Exports Paper Pulp Wood Products 6, 4, 2, 19

20 E Million Cubic Meters Russia s softwood exports have been shifting from logs to lumber; on a roundwood basis, 64% of softwood exports are now in lumber form Russia: Softwood Log and Lumber Exports Softwood Logs Softwood Lumber 2

21 Millions In the US market, housing construction is the primary demand driver for timber, but single family housing starts are forecast to remain below 1. million units through US Housing Starts and Mobile Home Production Mobile Multi Source: RISI Singles

22 Million Cubic Meters Timber supply limitations in Canada (due to the mountain pine beetle and reductions in timber harvest) spell good news for US lumber producers 11 USA and Canada Softwood Lumber Production Forecast USA Canada

23 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. 23

24 $/MBF Scribner Stumpage prices recover faster in the Pacific Northwest than in the US South, due to demand for log exports to China 5 Stumpage Price Forecast Doug-fir Southern Pine F 212F 213F 214F 215F 24

25 Biomass Vancouver, BC Fibreco is the world s largest loading terminal for wood pellets 25

26 New Demand for Biomass: Energy: Rapid growth -boom in the UK ~5 years, steady growth the rest of Europe. Source: European Biomass Review, RISI 26

27 E Thousand Tonnes North America is the primary supplier of wood pellets to European markets, with the largest volume still sourced from western Canada 2,1 North America Wood Pellet Exports to Europe 1,8 1,5 USA W Canada E Canada 1,

28 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 8-1 million tonnes of pellets, but again very slow to develop 28

29 Million People Million Cubic Meters The bottom line: even assuming a very conservative drop in per capita consumption, demand for timber will expand rapidly Global Population Growth and Industrial Roundwood Demand, Population Ind. Rdwd

30 Questions? Bob Flynn Director, International Timber, RISI Phone: Mobile: Web site: 3