Adding Value in Forestry The Role of Industry Forestry and Rural Development NRN Seminar Robert Wilson. Jaakko Poyry Consulting 20 May 2005 Robert.wilson@poyry.co.uk
Jaakko Pöyry Group Organisation Jaakko Pöyry P Group Part of a global network company: ~5300 staff, ~ 430 million revenues Forest Industry Forest Industry Consulting Energy Electrowatt-Ekono Infrastructure & Environment New projects Management consulting All energy, incl.bioenergy Transportation systems Rebuilds Operations improvement Consulting - Ilex Water & environment Maintenance engineering Investment banking Carb.Trade.Greenstream Telecommunications 1
The Global Forest and Paper Sectors Pulpwood (round and chips) 480 million m 3 Forest Fuelwood Harvest 1.8 billion m 3 Roundwood 3.4 billion m 3 Other Uses 157 million m 3 Saw & Veneer Logs, mechanical wood products 950 million m 3 USD 140 billion Pulp and Paper Converting Wood+Non-wood Pulp 167+15 million tons USD 94 + 13 billion Tissue And Corrugated Converting USD 70 billion Flexible and Folding Carton Packaging USD 30 billion Recycled Fibre 152 million tons USD 18 billion Paper & Paperboard 324 million tons USD 228 billion Printing (commercial, publishing, packaging) USD 350+ billion Merchanting USD ca. 30 billion Supporting Industries Machinery and Equipment Chemicals and Minerals Maintenance and Other Logistics Services Energy Financial/ Advisory Services 2
The Industry is a Chain with Recycling and Recovery Loops This is a sector map joined by flow of wood raw materials, recycled fibre and components. The chain revenues flow back to the land as stumpages and rural development. Bioenergy is a logical end-use in the chain. Most of this chain already exists in the North East a base on which to build. Forest Wood, Fibre Bioenergy Primary Secondary Tertiary Recovery Global climate Carbon trade Wood Fuel Town Power, Heat Standalone Power Integrated Bio-energy Rural development Rural employment Land wealth Land management Energy Stream Sawlogs Sawmills EWP Joinery Timber frame Construction Co-products Recycled wood Recreation Tourism Quality of Life Health Education Wood panels Furniture Flooring Fencing Windows Doors New housing Repairs Improvements Sustainability Renewability Wood Stream Garden furniture Small Roundwood Communication, Packaging, Speciality Converting Merchanting Printing Publishing Recycled fibre Fibre Stream Tissue paper Consumer Bus. 3
The Basic Nature of the Industry The forest products revenue streams from consumer, to industry, back to the regional forests create the vehicle for funding of resource management by forest owners to meet environmental, tourist, rural development and recreational aspirations targeted in regional strategic plans. Value is held in a local chain from resource, rural communities and the land base through to local (regional and UK) consumers. Of the jobs in primary forest products processing, up to 60% can be rural. The industry offers large (e.g. primary manufacturing) and small business opportunities (e.g. furniture, timber construction). This is an industry characterised by longevity a long term development platform industrial investment is usually in place for decades which in turn supports long term forest establishment. Resource is renewable, recyclable and the basis for bio-energy production. The UK is one of the largest European markets for wood and paper products growing consumption and highly import dependent. 4
Strategic Goals for the North East. Out-of-region processing would marginalise the North East wood basket. If the revenue stream shifts out-of-region, others then own the development pathway. The Kielder forest is unique in England. The consumer base is in England Inverness Aberdeen Scotland Pop. 5 Mn Glasgow Edinburgh Sawmills Wood Panel. OSB Wood Panel. Particleboard N.England Pop. 8 Mn Wood Panel. MDF Integrated paper mill (pulp and paper) Non-integrated paper mill (paper only) 5
North East Resource Fibre Logic for Increased Processing The North East catchment area - England s North and the Scottish Borders - will have increasing supply potential over the next years, with scale (2 Mn m 3 p.a additional) sufficient to consider industry investment. Volume in million m3 sob 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Potentially Available Volumes by Assortment Southern Scotland 2002-2006 2007-2011 2012-2016 2017-2021 2022-2026 2027-2031 2032-2036 2037-2041 2042-2046 2047-2051 2052-2056 2057-2061 Volume in million m3 sob 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2002-2006 Potentially Available Volumes by Assortment Northern England 2007-2011 2012-2016 2017-2021 2022-2026 2027-2031 2032-2036 2037-2041 2042-2046 2047-2051 2052-2056 2057-2061 Biomass 18+ cm (Large sawlogs) 14-18 cm (Small sawlogs) 7-14 cm (Pulpwood) Failure to act means the very large forest sector development underway in Scotland marginalises the North East resources and investment attractiveness. 6
Strategic Platform for the North East. 1. Regional Resource. The Kielder forest resource is the largest in England, and already supports over 20% of the forest production in England. The value of the resource is captured by keeping processing within the region about half of the forest production is processed locally. 2. Existing Industry. There is an existing and significant industry on which to build. The North East has some of the largest single facilities in the UK for wood panels, sawmilling and value added products (e.g. flooring, furniture, animal bedding, timber construction, paper converting and secondary processing). 3. Access to Markets. The UK markets for wood and paper products are growing. There is a significant consumer belt and wood-using industry around the M62 motorway corridor, which can be embraced as a North East market catchment. 4. Competitiveness. New processing investments can be competitive JPC cost models. 5. Development Options. The North East forest resource base on its own is not sufficient to consider some of the large scale sector investments such as pulp and paper mills. Large scale sector opportunities would require wood brought in from nearby. But many options remain open for the North East, including; sawmilling, further wood panel investment, bio-energy, and secondary processing businesses for example; furniture, joinery, components, engineered wood products, timber construction, paper converting, wood and paper recycling. 7
Some Economic Impact Analysis The opportunities offer large capital investment, rural jobs, and value creation from wood. These impacts do not include the total chain value created, for example, as the product moves to secondary processing and converting. Cartonboard Magazine Paper Tissue Sawn wood MDF Panel Estimates Only Bioenergy Output. '000t or m3 300 400 130 250 350 30 MWe Capital Mn 345 470 245 40 80 28 Wood Input Mnt or m3 0.40 0.50 0.35 0.50 0.24 0.38 Total Jobs 1 2000 1900 1200 900 600 % in rural 15 20 25 60 35 Value (of Output) GBP Mn 210 190 95 30 55 310 61 16 Value/job. 000GBP 105 100 80 35 90 50 Value/Wood Input GBP/m3 525 380 275 60 230 45 Jobs/Wood Input #/ 000 t or m3 5.0 3.8 3.4 1.8 2.5 0.8 1 Includes: direct, indirect, induced, replanting 8
Vision The proximity to markets and consumers means the direction of forest industry development in the North East will be more towards secondary processing, value added and the consumer. This favours activities such as furniture, joinery, engineered wood products, timber products, laminated flooring, surfacing, components, paper converting (tissue, packaging) and utilisation of recovered wood and fibre. The vision begins with tying in competitive and integrated primary processing to utilise the best of (economically rationalised) the raw materials. There is increasing wood availability in the North East - not to the scale of Scotland, but sufficient to support investment concepts around sawmilling, wood panels and bio-energy. This can be supplemented by wood raw material from the Borders and also the North, to anchor the processing activities in the North East. This secures the value added pathway and provides the highest revenue stream from resource to end-user. Investment activity needs to build around existing facilities to enjoy synergies, economies of scale and integration benefits from multiple site occupation. At the same time this begins the clustering process, concentrating the industry and creating influence leading to industry attractiveness and promoting wood using cultures. Through forest industry development, the North East as a whole will gain in direct economic terms, but also in the ability to manage and sustain the aspirations for quality of life, tourism, recreation, the environment and sustainability, that the forest offers. 9
Adding Value in Forestry The Role of Industry Forestry and Rural Development NRN Seminar 20 May 2005