Market Opportunity day 17.5.2013

Asia & Sub-Saharan Forestry

Finpro / Jussi Havia Seppo Keränen,

Esa Rantanen, East Africa

Heta Pyhälahti, Southern Africa

Global Forestry Signals

“Where will China get its logs and lumber after mid-decade…Both US

and China will need to import increasing volumes of lumber and logs

that will be tied more and more to international market forces as global

timber and lumber supplies tighten.”

-Russell Taylor, President of International WOOD Markets Group Inc.

“An African commodities boom is in full swing, stimulated greatly by

Chinese market demand and growing Chinese investment in Africa’s

forests and timber. In Mozambique, for example, it is estimated that

some 90% of timber exported is destined for China, and all of this is

produced and bought by small enterprises”

-James Mayers, International Institute for environment and development

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Forestry Signals from Africa and Asia

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Awareness of the forest’s value has been growing.

First Finnish log-houses have been delivered to Kenya.

In Sub-Saharan Africa new pulp & paper mills will be built In

medium term. Effects on wood harvesting.

High end housing expands the market.

Demand for low tech wood processing equipment serving governments’ job creation schemes.

Demand for high class furniture and interior materials.

Finland has funded in last years many forestry projects and also some saw mills

have been delivered.

Wood processing is getting closer to the raw material stocks and the end customer.

Plantation size and steady supply need of raw material, drives the use of mechanized harvesting methods.

Certification requirements drive the use of plantation timber replacing gradually natural forest tropical timber.

Housing starts will

expand the market.

Global Opportunity Drivers

• After a “cooling-off” period in 2012, China’s

requirement to feed its growing wood deficit

will see a return to steady demand growth for

imported logs and lumber

• Canada’s lumber production will plateau by

about 2015, allowing no increases in exports

to the U.S. and will, therefore, see its’ U.S.

lumber import market share plummet to two-

thirds of its historical level.

• A stronger U.S. market demand is predicted

and this is expected to push imported

Chinese log and lumber prices higher

• The housing starts in Japan for 2012 were

better than had been anticipated and also

marked the third straight year of growth after

the market began to recover

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Imports of sawnwood 1000 USD

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

200620072008200920102011

China

Japan

Republic ofKorea

India

United States ofAmerica

Opportunity Drivers in Africa

• Markets in Sub-Saharan African countries like Mozambique, Tanzania, Uganda and Zambia are following Kenya, and shifting from aid-driven to market-driven business.

• China’s relationship with Africa is deepening. It has become Africa’s biggest trading partner

• East African timber trade is set to expand, largely driven by growing regional and international demand.

• The economies and population are growing rapidly: housing need and middle class demand for high quality interior products.

• New technologies and competences are urgently required to utilize the natural resources the most optimal but also sustainable way.

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0

20000

40000

60000

80000

100000

120000

140000

2006 2007 2008 2009 2010 2011

Mozambique

United Republic ofTanzania

Zambia

Kenya

Exports of Forest Products 1000 USD

Opportunity Drivers in Asia

• China has a massive fibre deficit that is expected to continue to grow – more imports of logs,lumber and other products will be required to fill the widening gap.

• Changes to the Russian log export tax that continues to leave Russian log exports less available and expensive for Asian markets

• In Japan the major push continues to be the planned rise in the consumption tax in 2014, but favourable sentiment is now also being driven by the new Prime Minister’s economic policies

• Developing economies in Asia are answering to ever greater exports and domestic demand of forest products with a massive increases of their production

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Exports of Forest Products 1000 USD

0

500000

1000000

1500000

2000000

2500000

3000000

2006 2007 2008 2009 2010 2011

Viet Nam

Myanmar

Lao People'sDemocraticRepublic

Thailand

Australia

Why Sub-Sahara and Asia

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• The bulk of African forests occur in Sub-Saharan area. Estimated total forest cover is 674 million hectares, accounting for 23% of the continent’s land area.*

• Finnish forestry know-how is very well known among the governments’ decision makers.

• Finpro has a strong presence and network covering the target markets.

• Scaling business benefits due to regional integration.

Kenya

Mozambique

Tanzania

Uganda

Zambia

*Source: Chidumayo, 2004

Why Asia and Sub-Sahara

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• Finpro has a strong presence

and network at the market:

‘We understand local business

and ways of working. Through

our connections we are able to

help you establish important

trade relations and sign

business contracts.’

Identified Customer Needs in the Mechanical

Wood Processing Value Network

• Forest management and R&D

• Tractor mounted harvesting equipment for farmers

• Forest plantation, seed multiplication, nursery and

research

• Harvesting technologies, machinery and logistics

solutions for plantations

• Wood products for housing, construction and

interiors

• ICT solutions e.g. improving collection and

dissemination of forest data including real-time fire

alerts, game density mapping, verification for legal

timber operations and tracking systems

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Plantations

Contractors

Private sector (including farmers)

Pulp mills

Plywood manufacturers

Government

Local authorities

Opportunities in SEA and in India

• Economic role of forests has been noticed in countries such as

Laos, Cambodia, Myanmar, Vietnam, Philippines and Thailand.

– Private, small scale trial plantations are widely spread.

– Vietnam is now exporting secondary products as bone dry chips

overtaking Indonesia.

– Myanmar has the largest untapped forestry resources in Asia.

• India is a major importer of wood and plywood material.

– Also need for technology and machinery e.g. packaging lines for

the pulp and paper industry.

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Opportunities in Indonesia and Malaysia

Its time to activate contacts and introduce new equipment to the market:

• In Sumatra, Malaysia and in Kalimantan, Indonesia P&P mills require input of 10 000 m3 of wood per day. This is the main driver to engage modern harvesting methods and equipment.

– Plans for a new pulp mill in Sarawak. Currently there is a shortage of raw

material but plantations start to mature in 2- 4 years. This will have effect on wood harvesting.

– New plantations also in Sumatra and Malaccus islands and Middle Kalimantan.

• In both countries trial harvesting has started in new sites.

• Continuous business opportunity to cover existing, large plantation renewal and improvement of the whole harvesting process.

• Need for tractor mounted equipment for farmers and small growers in Java where plywood industry supply chain mills are buying material from adjoining plantations.

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Kenya and Tanzania: Market for Sustainable

Forest Management

• Kenya is in the process of recovering its forests with strict

conservation measures.

– Business opportunities arise with sustainable forest

management know-how.

• In Kenya 60 % of forests are privately owned

– Currently, Kenyan forests are used as tea plantations and

by communities (mainly for fuel wood collection)

• In Tanzanian forests are covering 41 % of the total land area.

– Forests are an important economic sector: contribution to

GDP has grown from 2.6% to 4.6 % (2011).

– The sector employs 3 million Tanzanians through forest

industries, forest plantations, government forest

administration and self-employment in forest-related

activities.

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Mozambique: Forest investments and forest

industry

• Various international investors and forest companies have shown interest in plantations

– Nine different investors have requested a total area of 887 800 ha for plantations, mostly in Niassa Province

– Companies involved include: UPM, Portucel, Suzano

– Currently 65 000 ha planted

• Private forest companies can apply for concessions to use indigenous forest resources

– Currently there are 165 approved concessions out of which 81 have development plans

– These concessions cover a land area of over 6 million hectares

– There are not many requirements to get a concession and the concession holders do not usually understand much about forest management but only want a quick sell to the Chinese

– A lot of wood is exported illegally, especially to China

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Identified Customer needs

• Sawmill technologies, including services: operating and training

• Wood products for construction: electricity poles, plywood

• Wooden buildings: high end

• Wood products for interior: furniture, flooring, decoration

• Wood products for exterior: Thermo wood (treatment)

• Verification for legal timber operations: tracking systems and

technologies

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