Some Views on the Future of the Forest IndustryPhil Riebel, M.Sc.

foret shot

State of the Global Forest Industry

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Some Key PointsSource: Jaakko Poyry, World Fibre Outlook, 2009

� In past years the growth of paper production has shifted from mature markets (NA and western EU) to emerging markets

– China, rest of Asia, Eastern EU

� Rapid growth in Asia– Fibre requirements 41% of global consumption (1990 - 24%)

– Will grow to 50% by 2025

� NA and Western EU has declined from 62% (1990) to 47%– Forecasted to continue down to 35% by 2025

� Market pulps - from 21% of global pulp consumption (1990) to 32%– New pulp mills close to fast-growing plantantions

– High demand in fast-growing markets

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Source: Jaakko Poyry, World Fibre Outlook, 2009

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Source: Jaakko Poyry, World Fibre Outlook, 2009

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Source: Jaakko Poyry, World Fibre Outlook, 2009

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Source: Jaakko Poyry, World Fibre Outlook, 2009

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Concerns

� The growth in Asia and China is putting pressure on wood availability in Russia, Indonesia, and South America

� There is a danger that a large amount of biodiversity will continue to be lost in the Southern Hemisphere due to conversion of natural forests to plantations

� Buy certified forest products (ex: FSC, SFI)

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Indonesia: 9000 ha clearcut starting

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Forestry Needs to Promote Biodiversity

Native tree species Deadwood Valuable habitats

Water resourcesForest structure Natural Forests

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North America

� Many closures in Canada– Deteriorated cost competitiveness /

Poorly maintained asset base

– CAD vs US exchange rates

– Wood availability

� And...– Affordable subsitute for paper in

communications and advertising

– E-MEDIA

– Declining advertising revenues = less paper purchased

� Probably no new pulping capacity unless there is a dramatic change in business conditions

Source: Jaakko Poyry, World Fibre Outlook, 2009

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Questions?

� Where will the wood come from in growing markets? What are the impacts on the planet?

� How have other countries / companies coped with these global changes? ex: Finland

� What new strategies are being looked at by leading companies?

� Is there hope for our Canadian forest industry and the economy it supports?

Canada vs Finland

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Finland....Many similarities with Canada

� Beautiful country

� Nature, fishing, hunting

� Clean � Well developed economy

� Turbulent history, proud heritage

� People:– Honest, by the book– Reserved by our standards

� Long summer days…short and cold winter days

� Sauna, reindeer meat

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Finland and Canada

CANADA

� Population: ~33 million

� Forest area 310,134,000 ha

� Corruption Index: 14th� Environmental Sustainability

index: 46th� Gross value of forest industry's

production: $54.2 billion � 16% of the total value of

industrial production in Finland

� R&D investments of forest cluster = $500 million

FINLAND

� Population: ~5 million

� Forest area: 22,500,000 ha

� Corruption index: 2nd� Environmental Sustainability

index: 12th

� Forest Sector Revenues: $ 27.5 billion

� Share of GDP: 1.7%

� R&D: $364 million

6.6x

13.7 x

2 x

0.7 x

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Lesson #1: A modern and state-of-the-art infrastructure is cost competitive

� Modern asset base – Automated, low production costs– Good training system– Lower wages than US and Canada

� Regular upgrades and re-investments in paper, pulp and energy

� Ex: 1.5 billion in biomass energy in 10 years (just UPM)

� Driven by long term thinking and strategy development + EU policy

� Technology focus – BAT

� Government support

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Effluent Flow

0

20

40

60

80

100

120

140

160

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Company

Flo

w, m

3/M

t

EU Best-available-technology level 10-15 m³/t

Water use at European and North American non-integrated printing paper mills

(ex: magazine / catalog paper)

Lesson #2 :..it also improves environmental performance and helps product marketing

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Lesson #3 : Renewable Biomass Energy = Lower Production Costs ...lower carbon footprint + creates value on EU ETS + better for product marketing

Cost: 75-100 million euros

Annual fossil CO2 reductions range from 75,000 to 350,000 MT CO2 per facility

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Lesson #4 : Energy-efficiency in Logistics also helps lower cost …and carbon footprint

Fossil CO2 emissions from transport

US truck = 45 – 55 g/tkm

EU truck = 33 – 45 g/tkm

US diesel train = 30 g/tkm

EU Diesel rail = 23 g/tkm

Ship = 13-20 g/tkm

Electric rail EU = 4-12 g/tkm

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Lesson #5 : Take care of the forest...and keep it sustainable

� More intensive forest management system, i.e. semi-commercial forests

– High timber quality

� Some company owned forest but mainly privately owned

– Avg woodlot size ~3-5 ha

� High level of certified forests (90%+ PEFC)

� Companies offer a Forest Service to private woodlot owners

� Every person's right to use any forest

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Lesson #6 : Advanced utilization of biomass creates more value

� Finland is one of the most advanced countries for full use of biomass from the forest.

� Pulp, paper, timber, other wood products

� Energy from biomass - Tops, branches, stumps, thinnings

� Use of fossil fuels in Finland is low (biomass, hydro ,nuclear)

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Stumps from private woodlots piled at roadside for use as energy wood - Finland

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Thinnings from private woodlot piled at roadside fo r use as energy wood - Finland

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Wood residue left in a cut block (NB, Canada)

Missed opportunity and missed value creation?

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What is the New Forest Industry?

� Full and more versatile utilization of biomass

� A key sector in the development of the next industrial wave: thebio-economy - Products from plant-based materials

� Leading companies are changing their strategies to capture this future

� Some government incentives and programs for innovation (EU, Agenda 2020 in the US, biorefineries)

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The sixth industrial revolution is bio-based

Inno

vatio

n

1. waveIron

Water powerMachines

TextileTrade

2. waveSteam engine

RailwaysSteel

Cotton

3. waveElectricityChemicals

Combustion engine

6. waveSustainableBio economy

Renewable energyGreen chemicalsIndustrial ecology

Green nanotechnology

1785 1845 1900 1950 1990 2020

4. wavePetrochemicals

Aircrafts and space

Electronics

5. waveDigital web

BiotechnologyInformationtechnology

Source: Worldwatch Institute / State of the World

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Bio-based products have substantial markets

Wood-based biomass procurement and logistics

Bioenergy – heat and electricity for industry and households

Biofuels for transport

Biomaterials

Biochemicals

Nanoproducts

Added value

Volumegrows

Second generation biodiesel: emissions 85% lower than with

fossil fuels

Pulp, paper, plywood and timber products

e.g. bio oil and bio ethanol

e.g. composite products

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Example: Liquid Biofuels from Wood

� Wood waste can be processed using a modified Fischer-Tropsch method

– Gas to liquid technology that produces petroleum substitute

– i.e. 2G biodiesel for transportation

� No food crops needed..just wood

� R&D underway for 5 years

� Biorefinery producing liquid biofuels -adjacent to kraft pulp mill

� EU policy - % of transportation fuel must be renewable by 2020

85% less CO2 emissions than fossil fuels

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Forest Products have a Great Environmental Story to Tell

� Sustainable managed forest provide unique social, environmental and wildlife values

� They take up carbon and help mitigate the effects of climate change

� They protect air and water resources

� Products are renewable, recyclable, re-usable...key sustainability features that few products have

� We are sitting on a gold mine of opportunity for the next bio-based industrial revolution...if we make the right decisions

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Opportunities in NB

� Biomass…yes

� Modern mills?� Market for biomass?� Green government policy that drives an economy?� Green energy incentives?� Good R&D infrastructure?

� Will NB be an exporter of chips and pellets…to countries that have done their homework?

� We need to "get out" and learn from what other have done…the world is changing quickly

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Additional Information

Phil RiebelSenior Advisor, Sustainability & Environmental Servicesphilriebel@bellaliant.netOffice: 506-773-7304Cell: 506-625-7304