17 th June 2015 Highland & Islands Forest Industry cluster event The Future of Forestry-The Local Impact of Global Trends Clive Suckling Weston Green Consulting 1
2 August 18, 2015 Contents The global picture-mega trends Perspectives on Scotland s forestry and timber
3 August 18, 2015 Industrial Roundwood: Consumption Trends & Projections million m 3 900 800 700 600 500 400 300 200 100 Projected rise in global IRW demand: 1.5bn m³ ( 2012) to 2.5bn m³(2030) Recovery of the US housing market Growth in every region, but highest in Asia Increasing regional demand and supply imbalances 0 1965 1990 2005 2030 Europe Russia, Belarus, Ukraine North America Latin America and Caribbean Asia-Pacific Africa Source: FAO 2009, FAOSTAT 2012, adapted by Dasos
4 August 18, 2015 Shares of Global Industrial Roundwood Consumption M³ Woodbased panels 19% Bio-energy 9% Sawnwood 40% Demand rising for wood in all industrial applications Sawlogs provide value platform -c.40% of volume, but 70-75% of wood sales revenue Pulp and paper 32% Softwood sawlogs are and will remain the industry s backbone Note: These figures ignore fellings specifically for fuel usage Source: FAOSTAT 2013 adapted by Dasos
Significance of the US Housing market Largest usage of timber worldwide -hugely cyclical Long-term trend around 1.5 mn new builds pa US Housing starts 1971-2014 Projected US Housing starts to 2024 Source: National Association of House Builders March 2015 (US) Source: Forisk April 2015
US sawn softwood timber price trends Key relationship between sawn softwood timber prices and housing starts Source: Random lengths lumber and panel composites(us)
China s growing fibre deficit China fibre imports equivalent to more than the size of Canada s roundwood harvest Fibre deficit projected to grow a further 30% by 2020 unless domestic output can be rapidly ramped up Source: RISI
China s log sourcing is changing NZ overtakes Russia as the principal supplier of softwood logs Introduction of log export taxes Source: FAO & International Wood Markets Group, China Bulletin March 2015
The Global business view: Forests and Forest Products central to a sustainable future Vision 2050 Today World Business Council for Sustainable Development-2010 Vision 2050 The new agenda for business
10 August 18, 2015 The low carbon economy favours wood construction Buildings a significant source of CO₂ emissions e.g. 40% of total energy consumed in EU Scientific findings show the carbon load of wood buildings much lower over a building s lifecycle. Can also act as carbon sink. Regulations and design trends are increasingly favouring wood 1500 1000 500 0-500 -1000-1500 -2000 8500 7500 6500 5500 4500 3500 2500 1500 500-500 Steel frame Light weight concrete block Aircrete block CO2 emissions of manufacturing, g/kg Consumption of energy (GJ) Carbon Footprint of Various Construction Materials: Wood as a Sink Brick Concrete Wood Carbon sink, g/kg Source: Puuinfo/Finnish Forest Industries Natural Resource Consumption of Concrete vs. Wooden Office Building Consumption of raw materials (tn) CO2 ekv (tn) Co2 ekv (tn, including carbon sink in wood constructions) Wood building Concrete building Source: CEI-Bois 2009
Great Potential to Increase the Use of Wood in Construction Strong growth in use of wood in construction in countries like France, Germany and UK. Share of wood frame houses in residential construction, 2010 But annual softwood used per capita only averages 0.1m³ across Europe, well below the 0.5-0.6m³ in Scandinavia EU average for wood frame housing is still only 10%, compared with 85% in US and 55% in Japan Major potential to use wood in multi-storey residential, office and public buildings across Europe (incl. Scandinavia) with building elements like CLT Spain France Netherlands Belgium Austria Germany Denmark Switzerland UK Russia Estonia Latvia Finland Norway Sweden 0% 20% 40% 60% 80% 100% Source: Euroconstruct Statistics, national statistics
Forest Industry value chains are being transformed by new fibre-based products Viscose fibres rise to 6% of global fabric market
Forest-sourced bioenergy is a game changer Global wood pellet production For industrial & heating end-uses Europe at forefront in using woody biomass to achieve RE targets EU forests unable to meet demand hence driving international wood pellet trade EU demand to grow >100% by 2020 Industrial demand forecast to plateau around 2018-20 Heating demand expected to show continued growth Key is availability of abundant, sustainable sources of low cost Global wood pellet demand 2013 Total 23.6 Mt Source: Hawkins Wright (2013) residual wood fibre Dedicated energy wood plantations for pellets not yet economic US South currently first choice for EU industrial pellet usage Various controversies around carbon reduction claims, sustainability, economics without subsidy etc Source: Hawkins Wright (2013)
Wood supply trends Projected roundwood gap of c.700mn m³ by 2030 C. 45-55 mn ha of new industrial planted forests needed -and necessary to alleviate pressure on natural forests CANADA: Mountain pine beetle disaster increasing short-term supply and reducing long term supply of wood in Canada USA:Stable supply in NW, log and SW exports China In South, increasing plantation wood supply, bioenergy export to Europe 14 EUROPE: Increasing bioenergy demand Short-rotation crops in Central, and eastern Europe RUSSIA: Increasing industrial investments; wood supply limited by infrastructure Wood exports to China CHINA:Increasing investments in paper and wood products industry Tight domestic wood fiber supply plantation potential India starting to compete with China for fiber ASEAN: Plantations expanding in SE Asia LATAM: Increasing supply from new plantations to feed increasing pulp and energy production Rising land prices and labor costs Strong competition for wood fiber between pulp manufacturers and energy producers Expansion to frontier areas AFRICA:Plantation sector expanding gradually Bioenergy to Europe Export to India and China Major investments foreseen ANZ:Increasing exports to China from existing and new plantations Source: Map- FAO; content- Dasos
Regional fibre imbalances stimulating increasing international wood flows Balances and Flows 15 Deficit area Stable supply Increasing supply Source: Map- FAO, Content-Dasos
16 August 18, 2015 Key messages from Global review Forest and Timber are experiencing a new lease of life: Demand for (most)established products is growing in all markets New fibre-based materials Great opportunities for wood construction Energy wood is a game changer New monetisation opportunities arising from standing forests Fibre value chains being re-shaped Drivers go beyond demographics and increasing global wealth to the extra boost from a global shift towards low carbon Economy But many challenges too: Securing sufficient wood Enabling the highest value usage from forest resources Securing capital to invest in new forests, in R&D, new processes etc Drawing the talent needed into the industry And getting the regulation right to enable the shift to a low carbon economy
17 August 18, 2015 Opportunities for Scottish Forest & Timber Product/ Service Sawn timber Panels/engineere d wood Pulp (& paper, cellulose products, biofuels and chemicals)) Energy productschips, pellets etc Opportunity Attractive, with import substitution UK imports c.55% of SW lumber needs- and end use market growth. Backbone of forestry sector Fair. Some attractive segments with innovation increasingly a value driver. Fibre supply chain security an issue Limited. Mixed growth prospects & limited import substitution possibilities for paper; pulp requires huge capital investment /fibre resourcing. Stand-alone mini biorefineries not a viable proposition Attractive. Driven by growth in RE agendas, strong markets for low value fibre. Opportunities with residential, small/medium commercial heat/chp, not large scale power. Opportunities extend beyond conventional forest products to the economic value of forest as a standing resource e.g.leisure & recreation, land base for renewable energy which are usually not captured by forestry GVA data. Future opportunities arise as market economics develops to incorporate carbon, biodiversity and environmental protection benefits
18 August 18, 2015 Some final thoughts on Scotland On a world scale, Scotland s forest & timber sector is small; however it is productive and expanding Economic contribution understated in conventional analysis Still it meets key criteria for a successful industry sector: Good timber growth rates Cost competitive wood resource Strong investment in modern processing Well located for sizeable and growing markets nearby Good growth possibilities over the medium term at least and able to make a bigger contribution to GDP Looking to the longer term( over 30 years), strong demand fundamentals alone would seem to justify expanding the existing Scottish forest Low carbon economy and broader sustainability factors may add extra justification Forest & Timber is an old industry, with a strong future
19 August 18, 2015 Contact details Clive Suckling Weston Green Consulting 20 Imber Park Road Esher Surrey KT10 8JB Tel: +44(0)7802 877913 Email:csuckling@virginmedia.com