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Global Timber and Solidwood Market Highlights - Focus on Asia 2012 Bob Flynn Director, International Timber 25 th Annual Global Forest & Paper Industry Conference, PWC, Vancouver, British Columbia, May 12, 2012

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Page 1: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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

Page 2: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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

Page 3: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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RISI Forecast of US Housing Construction: Very slow recovery, and mostly in multi-family units

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US Housing Starts, 2000-2014F

Multi-family

Single Family

Source: Lynn Michaelis, RISI

Page 4: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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Off-shore exports, especially to China, have become increasingly important for Canadian lumber producers

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Share of Canadian Lumber Production Exported Overseas, 1994-2016F

Source: Bob Berg, RISI

Page 5: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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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

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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

Page 6: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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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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China's Growing Timber Deficit, 1997 - 2011

Woodchips

Pulp

Wood Panels

Lumber

Logs

Page 7: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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A close look at China’s domestic timber supply indicates major increases in fast-growing hardwood, but decline in softwood production

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Guangxi Heilongjiang Fujian Jiangxi NE China SOE

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China: Timber Harvest Quota by Province, 11th & 12th Five-Year Plans

11th Plan 12th Plan

Page 8: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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The sources of China’s softwood log imports have changed dramatically, but Russia is still the largest supplier

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China: Softwood Log Imports by Source

Other

Canada

USA

Aust

N Zealand

Russia

Page 9: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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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%

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China: Softwood Lumber Imports by Source

Russia Canada other USA

Page 10: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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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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China: Softwood Log & Lumber Imports, 1998-2015F

Logs Lumber

Source: RISI’s China’s Timber Supply Outlook, 2011-2015

Page 11: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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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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North American Softwood Log and Lumber Exports to China, 2008-2011

US Logs

Canada Logs

US Lumber

Canada Lumber

Page 12: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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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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Pacific Hardwood Chip Imports by Market, 2000-2014F

China

Japan

Korea

Taiwan

Source: RISI’s International Pulpwood Trade Review, 2012

Page 13: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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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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India: Imports of Softwood Logs by Source, 1999 - 2011

Other Australia New Zealand

Page 14: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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India’s softwood lumber imports more than tripled in 2011, but were still only 2% of the imports in China

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India: Softwood Lumber Imports, 2010 & 2011

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Page 15: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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Major institutional timberland investors outside of North America have focused on Australia and New Zealand more than Latin America

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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

Page 16: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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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

Page 17: Global Timber and Solidwood Market Highlights - Focus on ... · 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

17

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

Page 18: Global Timber and Solidwood Market Highlights - Focus on ... · 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

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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