forestry products marketing workshop - unece · forestry products marketing workshop novi sad...

Forestry Products Marketing Workshop

Novi SadSerbia and Montenegro

5 April 2006

Nicol SinclairArea Operations ManagerArgyll and [email protected]

Monday, 24 April 2006

2

Overview

Forestry CommissionStructureForest OwnershipTimber Production

GB Forest IndustryBalance of tradeProcessing sector

Timber MarketingObjectivesSale MethodsEmerging Opportunities


3

The Forestry Commission

•Founded 1919

•Three distinct Departments of

Forestry for Scotland, England

& Wales

•Separate Department for

Forest Research covering UK.

•3,151 staff.


4

The Forestry Commission Organisation

Structure Chart of Countries

Head of Policy Head of Grants and Licences Head of Corporate Services Chief Executive of Forest Enterprise

Country Director

Deputy Minister

Lead Minister for Forest Policy


5

Forest Enterprise Functions

An agency to manage the State Forests in each country.

Demonstrate good practice in the delivery of Forest Policy.

Corporate Plan with targets:Economic

Environment

Social


6

Aims & Objectives

• To maximise the value to the economy of the wood resource becoming available over the next 20 years

• To create a diverse forest resource of high quality• Ensure forestry makes a positive contribution to the

environment• Create more opportunities for people to enjoy

woodlands, forests and trees• Help communities benefit from woods and forests


7

Vital Statistics

Forestry Commission Land Holding– 778,000 ha productive forest – 276,000 ha other land (grazing, conservation & recreation)

– No new planting– 8200 ha of Restocking– Current production around 5.5 million m3 obs and

rising


8

Forestry in Britain

Forest Ownership

ForestryCommission - 28%

Private - 42%

Farmers - 20%

Public/voluntarybodies - 10%


9

Age Profile of Forests in Britain

050

100150200250300350400

Thou

sand

ha

Pre 18

61

1861

-1900

1901

-1910

1911

-1920

1921

-1930

1931

-1940

1941

-1950

1951

-1960

1961

-1970

1971

-1980

1981

-1990

1991

-1997


10

GB Timber Production 2002-2021 (by ownership)

0

2,000

4,000

6,000

8,000

10,000

2002-2006 2007-2011 2012-2016 2017-2021

000

m3

Forest Enterprise Private Sector


11

GB Timber Production 2002-2021 (by country)

0

2,000

4,000

6,000

8,000

10,000

12,000

2002-2006 2007-2011 2012-2016 2017-2021

000

m3

Scotland England Wales


12

GB Timber Production 2002-2021 (by dia. class)

02,0004,0006,0008,000

10,00012,00014,00016,00018,000

2002-2006 2007-2011 2012-2016 2017-2021

000

m3

7-14cm 14-16 cm 16-18 cm to 18 cm


13

GB Softwood Planning Potential

0500

10001500200025003000350040004500

000

m3

2002-2006

2007-2011

2012-2016

2017-2021

SRWSawlogs


14

The GB timber market ...

Finland land area = 30.5m ha Finland Population = 5.1 millionForest area = 66% 6 Ha of Woodland per person

UK land area = 24.2m ha Population = 60.5 millionForest area = 11.6%0.4 Ha of Woodland per person

0% 20% 40% 60% 80% 100%

Ireland

Netherlands

UK

Greece

Belg/Lux

Italy

France

Germany

Spain

Portugal

Austria

Sweden

Finland

Land use - International Comparisons

Forestry Agriculture Other


1

UK Timber Market

UK consumption of wood and wood based products (2005) = 45.0 million m3/ yr. WRME

UK roundwood production (2005)= 11.05 million m3. (19%)

UK is the World’s second largest

net importer of wood and wood

based products.


16

Standing timber and sawlog price indices 1994 - 2002

0

50

100

150

200

250

300

Apr-94

Oct-94

Apr-95

Oct-95

Apr-96

Oct-96

Apr-97

Oct-97

Apr-98

Oct-98

Apr-99

Oct-99

Apr-00

Oct-00

Apr-01

Oct-01

Softwood Sawlogs Standing Timber Linear ( Softwood Sawlogs )


1

UK sawnwood consumption

0

2,000

4,000

6,000

8,000

10,000

12,000

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

000

m3

Sweden UK Finland Latvia Russia (USSR)Canada Estonia Lithuania Eire Others


18

GB sawnwood market share

0

1000

2000

3000

4000

5000

6000

m3

Construction Joinery Pallet &Packing

Fencing &Garden

Other

GB Production Imports


19

GB potential market share - 2014

0

1000

2000

3000

4000

5000

6000

m3

Construction Joinery Pallet &Packing

Fencing &Garden

Other

GB Production Imports


20

GB Sawmilling Industry Structure

Total Production by output category

0

100

200

300

400

500

600

700

800

<100

0

1000

- 50

00

5000

- 10

000

1000

0 - 2

5000

2500

0 - 5

0000

5000

0+

000

m3

Wales

England

Scotland

Sawmills by output category

0

50

100

150

200

250

<100

0

1000

- 50

00

5000

- 10

000

1000

0 - 2

5000

2500

0 - 5

0000

5000

0+

No.

Mill

s

Wales

England

Scotland


21

Developments in UK Sawmilling

Introduction of strength

grading

Visual grading

Machine grading

Kiln drying

Regularising/planing

Engineered wood products


22

Sawlog Market development

Will depend upon…….

Timber Quality

Cost competitiveness

Industry restructuring

Our Customers customers


23

UK Pulp & Paper

Number of Papermills -

91

Number of Pulpmills - 2

(both integrated)

-1000

0

1000

2000

3000

4000

5000

6000

RecoveredPaper

Chemical Mechanical Semi-Chemical

000

tonn

es

Imports

GBProduction


24

GB Pulp & Paper Industry

Currently 2 Pulp & Paper mills using approx 0.7 million tonnes SRW/yr

UPM KymmeneCaledonian Paper, Irvine -LWCShotton Paper - Newsprint

Iggesund PaperboardWorkington - GC2 FoldingBoxboard

St Regis Paper

Chepstow - Corrugating Medium


2

Pulpwood Market Development

0

200000

400000

600000

800000

1000000

1200000

1400000

tonn

es

1991 1993 1995 1997 1999 2001 2003

PulpwooddemandSpruceSawmill Chips

Export (pulpand chips)


26

Wood based panels

Currently 7 panel mills using approx2.0 million tonnes SRW/yrNexfor

Dalcross - OSBCowie - MDF, Particle boardSouth Molton - Particleboard

Egger UKHexham - ParticleboardBarony - Particleboard

KronospanChirk - MDF, particleboard

SonaeKnowsley - Particleboard


2

Wood-based Panel Industry

Highly FragmentedLow entry barriers

High exit barriers

Private ownership

GB Panel Industry 2002

0

200

400

600

800

1000

1200

1400

1600

Nex

for

Egg

er

Kro

nosp

an

Son

ae

Pro

duct

ion

capa

city

( 00

0 to

nnes

)

OSBMDFChipboard


28

Potential Panel Production 1996 - 2005

0

1000

2000

3000

4000

5000

6000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Chipboard MDF OSB Panel Demand (inc plywood)


29

GB panel industry recycled timber demand 1997 - 2005

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005


30

But...

Excess of production capacity in N EuropeComparative strength of sterlingSignificant falls in price of WBPs since 1998 Price of chipwood and co-products fallen by 25%Reduction in demand in chipwood market Rising energy costs

0

20

40

60

80

100

120

MDF OSB Chipboard

1995 2000 2001 2002


31

Woodfuel

Significant emerging market in UK• Driven by government targets on renewable

energy• Most recently by high energy costs globally• Has more stable generating abilities

compared to wind energy• Currently projects being developed with

estimated demand for 5.1 million m3 obs in Scotland alone.

• Potential clash with WBP manufacturers


32

Potential Availability of Low Grade Timber in Scotland

in So

020000400006000080000

100000120000140000

2003-2006

2007-2011

2012-2016

2017-2022

Average annual production in Period

OD

T's

BroadleavesConifers


33

Stemwood 7-14 Production in Scotland

630000640000650000660000670000680000690000700000710000

2003-2006

2007-2011

2012-2016

2017-2022

Average annual production in Period

OD

T's

BroadleavesConifers


34

Methods of sale

FE currently sell around 5.52 million m3 /yr.Currently 50+% of total softwood production

c. 50% Standingc. 50% harvested

Current sale methodsNegotiation on Long Term Contracts (LTC)Open market via Electronic Tender


3

Strategic marketing objectives

To secure market share

ensure necessary market share for the timber we plan to harvest

To maximise value

Maintain the best possible price over the long-term

To assist market development

Support development of existing markets

Help create and maintain new markets

To support country forest strategies


36

Long-term contracts

Have been key in

supporting new

investment in pulp and

panel sectors

Introduced for log and

standing sales in 1998

Currently account for 65%

of all sales


3

Long-term contracts

AdvantagesProvide security of supply - for both

partiesReduced risk for customerProvides basis for improving trading

relationships - potential for reduced transaction costs

Reduction in timber haulage - optimisation of timber flow

Improves our ability to match supply to customer’s requirements - marketing vs selling


38

Long-term contracts

DisadvantagesReduced flexibilitySome customers miss outReduced competition….Distortion of market price

But….Timber market characterised by a lack of

competition (Top 10 UK customers = 85% of volume supply)

Characteristic of dominant monopoly supplier


39

Open market sales

• Currently account for 35% of total volume• Traditionally sealed paper tenders and public

auctions.• Usually two tenders and two auctions in each

country every year• Now electronic sales only - 5 times a year


40

Background to eSales Development

• Major component of FC e-Business Strategy

• FC required to implement e-Government strategy

– Key Govt service to be electronically enabled by 2005

– FC reporting back to Government on progress

• Developing systems for Business reasons

• Progressing through Forestry e-Business Forum

• Regular discussion at local Customer meetings

• Involved in specific projects with key customers


41

Electronic Sales - Aims & Objectives

Improved service to customers

Ability for faster and more frequent sales

More targeted information on Sales

Simplified sales procedures

Reduced costs to FC & Customers

less administration

less paper

less staff time


42

eSales home

http://www.forestry.gov.uk/auctions


43

Events - Lot Information


44

Contract maps -Map Browser


4

Summary of key challenges

Increasing productionMarket developmentMarket share

Decreasing priceMaintaining valueTargeting higher value marketsEfficiency, wood chain costs

Partnership…….


46

Thank you

forestry products marketing workshop - unece · forestry products marketing workshop novi sad...

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