INSTITUTE OF FORESTERS OF AUSTRALIA A Perspective on Tropical Plantation Development Over the Past Two Decades 15 August 2017 Margules Groome Consulting Pty Ltd
GEOGRAPHIC FOCUS The geographic focus of this presentation is SE Asia - Indonesia, Malaysia, Thailand, geographies further north: Southern China, Vietnam, Laos and Pacific countries Fiji Solomon Islands Focus Primary Secondary Tertiary 2 Margules Groome Consulting Pty Ltd
PULPMILLS CREATED REGIONAL DEMAND Big pulp mills developments have created a large increase in pulpwood demand and led to significant tropical plantation development to support the industry Mill examples Approx. start date Indicative Annual Wood Requirement (million m 3 ) Country PT. Indah Kiat Pulp & Paper 1982 12.0 Indonesia Sabah Forest Industries 1988 1.2 Malaysia PT Inti Indorayon Utama 1989 1.6 Indonesia PT Riau Andalan Pulp & Paper 1995 10.0 Indonesia PT Lontar Papyrus 1998 4.0 Indonesia Hainan Jinhai Pulp and Paper 2004 8.0 China Rizhao, Shandong 2005 8.0 China Zhanjiang Chenming Pulp & Paper Co., Ltd Nantong Zhongzhi Paper Pulp Co.,Ltd. 2011 6.0 China 2014 3.0 China PT Oki Pulp & Paper Mills 2016 10.0 Indonesia Phoenix Pulp 1975 1.6 Thailand Double A 1989 2.0 Thailand Australia s annual plantation hardwood harvest ~ 13 million m3 3 Margules Groome Consulting Pty Ltd
INDONESIA S INDUSTRIAL PULPWOOD PLANTATIONS Indonesia s industrial pulpwood plantations expanded the fastest and today covers an estimated area of about 2.5 million net planted hectares Plantations developed by Indonesian pulp companies Initial species selection focused on Acacia mangium and Acacia crassicarpa Early MAI observations in the late 1990 s for Acacia mangium in Sumatra was ~ 18-25m 3 /ha/a over a 6 7 year rotation; in later years improved to about 22 35 3 /ha/a before starting to decreasing significantly due to onset of disease A. mangium plantation productivity on Borneo island (West Kalimantan, Sarawak, Sabah) typically less, likely due to differences in soil productivity Tree plantations were competing for land with palm oil plantations in SE Asia. and lost; this resulted of large areas of plantations (A.crassicarpa) being developed on peat soils from 2000 onwards in some cases up to 10m deep peat Unique skills required to mange tree plantations on peat; initial productivities on peat were in the 15 20 m 3 /ha/a range but later improved. R&D efforts were directed towards tree genetics and silviculture. 4 Margules Groome Consulting Pty Ltd
THAILAND AND VIETNAM S PULPWOOD PLANTATIONS Plantation development in Thailand and Vietnam are largely smallholder owned Thailand Estimated 95% of the country s eucalypt resource of ~700 000 ha is privately owned 1 Plantation development by farmers were initially incentivized by the Thai Government and later by the Thai pulp & paper companies. Farmers grow tree crops on agricultural land and are provided with seedlings. Eucalyptus camaldulensis is predominant pulpwood species in Thailand. The Thai pulp & paper industry is self-sufficient and exports some woodchips. Vietnam The Vietnamese government, supported by ACIAR and CSIRO, encouraged farmers to growth A.mangium or A. mangium hybrid trees on their land. Estimated total acacia resources of 1.5 million ha (of which ~1/3 is unrecorded smallholders) 1 The market for Vietnam plantation logs include chip exports (China / Japan), domestic furniture industry and more recently pellets in South Korea and Japan. In the past decade, Vietnam became the largest woodchip exporter in the Asia Pacific region, bypassing Australia. 1 Hidden assets: Asia s smallholder wood resources and their contribution to supply chains of commercial wood, S.J. Midgley, P.R. Stevens & R.J. Arnold, Australian Forestry, Feb 2017 5 Margules Groome Consulting Pty Ltd
CHINA S SOUTHERN HARDWOOD PLANTATIONS China s eucalyptus plantations in the south predominantly supplies the local plywood industry About 80% of China s eucalyptus plantations are privately owned, 15% by industry and 5% by the State. Estimated net planted Eucalyptus area is about 4.5 million ha; the main provinces are Guangxi, Guangdong, Fujian. Main hardwood species in the south are hybrids of E.urophylla and/or E.grandis. Indicative average growth rates are 20 to 25 m 3 /ha. Plantations are often fragmented, on steep terrain with difficult access Logistics combined with manual labour costs results in relatively high delivered wood prices. Plantation logs is used most for plywood production, used for concrete forming / construction. China s large pulpmills relies largely on imported woodchips. 6 Margules Groome Consulting Pty Ltd
OTHER PLANTATIONS Plantations other than pulpwood included those for veneer and sawnwood and are of smaller scale Significant areas of plantations for veneer/plywood and sawnwood in tropical Asia are largely smallholder owned due to shortage of land for conventional forestry models: Common species: Gmelina arborea (white teak) in Solomon Islands Anthocephalus cadamba (jabon) in Indonesia (Java) Falcataria moluccana (falcataria) in Indonesia (Java) Tectona grandis (teak) Malaysia, Indonesia, PNG, Cambodia Hevea brasiliensis (rubber) - Malaysia, Indonesia, Cambodia Swietenia macrophylla (mahogany) plantations in Fiji, Eucalypts, Acacias and others These plantations are typically scattered; available statistics are limited but make very significant contributions to the national economy and wood supply Sufficient scale in any one location to support larger scale industries is important Silviculture management often suboptimal due to lack of skills / access to capital 7 Margules Groome Consulting Pty Ltd
A PARALLEL DECLINE IN NATIVE FOREST HARVEST AND TRADE A global trend towards certified sustainable forestry as well as national policies fighting illegal tropical forest logging resulted in a significant decline in native forest exports China Industrial Tropical Roundwood imports, thousands m 3 4,000 3,000 2,000 1,000-83% Malaysia /Indonesia Plywood exports, thousands m 3 0 5,000 10,000 00 03 0 00 03 06 09 SKorea Industrial Tropical Roundwood imports, thousands m 3 4,000 3,000 12 15 16 06 09-38% 2,000 1,000-85% 12 0 00 03 Malaysia Myanmar 06 Laos 09 Indonesia 12 Vietnam Thailand 15 16 15 Indonesia Malaysia Source: GTA, Margules Groome databases 8 Margules Groome Consulting Pty Ltd
USES OF TROPICAL PLANTATION WOOD Output of engineered wood products manufactured largely from tropical tree plantations increased significantly over the past two decades China Wood Products Production (All HWD and SWD), millions m 3 (2000-2015) +945% 11.1 116.4 Ply +3,597% 2.1 76.2 MDF +580% 20.1 3.0 PB +108% 3.16.5 Other fibreboard Vietnam Wood Products Production, thousands m 3 (2000-2015) +1,014% 6.7 74.3 Timber 2000 2015 Rapid economic growth as well as sustained investment in wood panels capacities strongly developed in China over the last decade Vietnam and Thailand wood products sectors are growing, based on regional and global demand as well as on strong government programs and economic stimulus Thailand Wood Products Production, millions m 3 (2000-2015) +103% +240% +1,304% +1,355% +1,214% +1,567% 460 35 11 160 15 250 6,000 2,950 30 30 2000 2015 +28% 0.2 0.3 +376% 0.5 2.2 0.8 2.6 +99% 0.2 0.3 0.2 2.9 Ply MDF PB Other Timber fibreboard Source: European Panel Federation Report 2015, FAO, GTA, Margules Groome databases Ply MDF 9 Margules Groome Consulting Pty Ltd PB Other fibreboard Timber
PRODUCTION CAPACITIES DEVELOPMENT Significant PB and MDF capacity increases in Asia are pushing the global capacities to their highest ever levels and pressure the APAC resources PB / MDF Capacity Development, CAGR, % (2010-2014) New PB /MDF capacity development, millions m 3 (2016-2017) Country PB MDF China 7.3 15.5 China 1,14 1,61 PB MDF Malaysia -4.8-1.0 Thailand 2.6 6.3 Thailand 0,60 0,78 Indonesia -3.7 6.8 Vietnam 88.0-3.1 Vietnam 1,00 Currently, sawnwood and plywood are the most important products with MDF/PB becoming more popular due to a changing fibre resource and increasing demand for cheap furniture and laminate flooring. USA and China continue to be the largest WP markets (engineered wood panels / furniture) attracting significant investment in new PB/MDF capacities Source: WBPI, FAO, Margules Groome databases 10 Margules Groome Consulting Pty Ltd
USES OF TROPICAL PLANTATION WOOD Output of woodchip and wood pellets manufactured from tropical plantations increased significantly in recent years Woodchip Export Production, millions BDMt (2000-2015) +21% 0.25 0.30 +2,128% 8.34 +496% 1.40 0.37 0.23 2000 2015 +471% 2.46 0.43 Regional and global booming woodchip markets supported strong growth on woodchip export across the region Malaysia Vietnam Indonesia Thailand Pellet Production, thousand tonnes (2012-2015) +385% 100 485 China +725% 40 330 Malaysia +2,540% 50 1,320 Vietnam Source: FAO, GTA, Margules Groome databases +300% 20 Indonesia +3,900% 11 Margules Groome Consulting Pty Ltd 80 1 2012 2015 40 Thailand Sustained by government policies and incentive, renewable energy generation in South Korea and Japan have attracted rapid growth on wood pellets production capacities, with Vietnam becoming the major player in the region.
CRITICAL ISSUES FOR TROPICAL PLANTATIONS Tropical plantations faces significant issues going forward; underinvestment in R&D, skills and technologies risks the future of these plantations Strong and capable regional / national level research organizations are lacking Clear and unequivocal ownership of the land and the trees Unsympathetic legal and regulatory frameworks Environmental and social license Indonesia Disease is driving species change and R&D is in catch-up mode: Ganoderma root rot fungus Ceratocystis fungal disease Declining yields on mineral soils (relative to 10 years ago) Speed is a major issue; large Indonesian companies plant ~200,000+ ha/yr. Reaction times need to be really fast Access to skills and technology Forestry school curricular lag behind China Wood cost competitiveness in the long-term (both R&D and technology problem) Earlier social backlash against expanding Eucalyptus resource Malaysia (~400 000 ha Acacia / Eucalyptus plantations) Wood cost competitiveness (both R&D and technology problem) Stagnant domestic market 12 Margules Groome Consulting Pty Ltd
13 Margules Groome Consulting Pty Ltd