Global Timber and Solidwood Market
Highlights - Focus on Asia 2012
Bob Flynn
Director, International Timber
25th Annual Global Forest & Paper Industry Conference, PWC,
Vancouver, British Columbia, May 12, 2012
2
Highlights of Timber and Solidwood Markets: Key Points in 2012
North America – very slow recovery in housing/lumber
demand, growing importance of Asian markets
China – slow in the first half, but major driver of international
trade in softwood logs, lumber, pulp
China – also rapidly becoming a major importer of hardwood
chips for domestic pulp production
Timberland investment –
– primary focus of large investors is currently in Australia
– Most planted forest investment is with fast-growing hardwoods
3
RISI Forecast of US Housing Construction: Very slow recovery, and mostly in multi-family units
0
0.5
1
1.5
2
2.5
Mill
ion
Un
its
US Housing Starts, 2000-2014F
Multi-family
Single Family
Source: Lynn Michaelis, RISI
4
Off-shore exports, especially to China, have become increasingly important for Canadian lumber producers
0%
5%
10%
15%
20%
25%
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94
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95
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96
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97
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99
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F
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15
F
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F
Share of Canadian Lumber Production Exported Overseas, 1994-2016F
Source: Bob Berg, RISI
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The sharp divergence in timber pricing between the US West and South reflects demand-pull from China
Source: Peter Barynin, RISI
200
250
300
350
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650
700
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00
20
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20
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US Sawtimber Prices, 2000-2014F
West Coast (Douglas-fir #2, Delivered)
Southern Pine (Delivered)*
* Assumes 7.5 MBF per Short Ton
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China’s need for imported timber & primary forest products jumped 31% in 2011 but growth will be much slower in 2012
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20
40
60
80
100
120
140
160
180
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Millio
n C
ub
ic M
ete
rs, R
WE
China's Growing Timber Deficit, 1997 - 2011
Woodchips
Pulp
Wood Panels
Lumber
Logs
7
A close look at China’s domestic timber supply indicates major increases in fast-growing hardwood, but decline in softwood production
-
5
10
15
20
25
30
35
40
Guangxi Heilongjiang Fujian Jiangxi NE China SOE
Millio
n C
ub
ic M
ete
rs
China: Timber Harvest Quota by Province, 11th & 12th Five-Year Plans
11th Plan 12th Plan
8
The sources of China’s softwood log imports have changed dramatically, but Russia is still the largest supplier
0
5
10
15
20
25
30
35
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11E
Mill
ion
cu
bic
Me
ters
China: Softwood Log Imports by Source
Other
Canada
USA
Aust
N Zealand
Russia
9
Canada is the largest supplier of softwood lumber to China, with a 46% market share in 2011, followed by Russia at 36% and the USA at 8%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
98 99 00 01 02 03 04 05 06 07 08 09 10 11E
Th
ou
sa
nd
Cu
bic
Me
ters
China: Softwood Lumber Imports by Source
Russia Canada other USA
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Based on 2011 trade, our forecast of China’s softwood log and lumber imports for 2015 looks too conservative
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10
20
30
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50
60
70
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F
Millio
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ub
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ete
rs,
RW
E
China: Softwood Log & Lumber Imports, 1998-2015F
Logs Lumber
Source: RISI’s China’s Timber Supply Outlook, 2011-2015
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On a lumber-equivalent basis, 60% of softwood logs and lumber from North America to China in 2011 were in the form of lumber
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2
4
6
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2008 2009 2010 2011
Mill
ion
Cu
bic
Me
ters
, Lu
mb
er
Scal
e
North American Softwood Log and Lumber Exports to China, 2008-2011
US Logs
Canada Logs
US Lumber
Canada Lumber
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By 2014, based on projects under development, China is likely to surpass Japan as the leading hardwood chip importer
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12
142
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F
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Millio
n B
DM
T
Pacific Hardwood Chip Imports by Market, 2000-2014F
China
Japan
Korea
Taiwan
Source: RISI’s International Pulpwood Trade Review, 2012
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India has been the fastest growing softwood log market (39% CAGR 2004-2011), but volumes still below Japan or Korea
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ters
India: Imports of Softwood Logs by Source, 1999 - 2011
Other Australia New Zealand
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India’s softwood lumber imports more than tripled in 2011, but were still only 2% of the imports in China
0
80
160
240
320
2010 2011
Tho
usa
nd
Cu
bic
Me
ters
India: Softwood Lumber Imports, 2010 & 2011
Other
Germany
Russia
N Zealand
USA
Canada
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Major institutional timberland investors outside of North America have focused on Australia and New Zealand more than Latin America
0 200 400 600 800 1000
Australia
New Zealand
Brazil
Uruguay
Chile
Argentina
Colombia
Oth L. America
Thousand Hectares
Institutional Ownership of Timberland in Latin America and Oceania, 2011
Source: RISI’s Global Tree Farm Economics Review, 2012
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Our analysis of plantation forest investments reveals why few are focused on establishing new softwood plantations
Global Tree Farm Case Study Results
Species/Regime Average # of
IRR case studies
Rubberwood 14.4% 2
Teak 14.0% 12
Eucalyptus Sawlogs 10.7% 11
Eucalyptus Pulpwood Brazil 10.6% 4
Eucalyptus Pulpwood Australia 3.8% 4
Biomass Northern Europe 9.9% 6
Biomass (Euc) US South -1.0% 2
Softwood sawlogs 5.4% 26
Other Case Studies 8.6% 37
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Key Points
North America – plenty of timber, and the slow recovery in
demand for lumber means that China will continue to be very
important for timberland owners, log exporters and lumber
producers.
China – 2012 will be slow, but with demand for softwood log
and lumber imports increasing in 2013-2014 in line with
economic growth projections
China – Expansion in woodchip imports will continue to focus
primarily on hardwood, with only minor expansion in softwood
chip imports
Timberland Investment – Lack of focus on expanding softwood
plantations has long-term implications for fiber supply and trade
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Questions?
Bob Flynn
Director, International Timber, RISI
Phone: 1-253-565-4846
Mobile: 1-360-471-6578
Email: [email protected]
Web site: www.risi.com
Presentation based on
• China’s Timber Supply Outlook, 2011-2015,
www.risi.com/chinatimber
• International Pulpwood Trade Review, 2012
www.risi.com/pulpwood
• Global Tree Farm Economics Review 2012
www.risi.com/treefarm