globalisation of forest products markets marc boutin quebec lumber manufacturers ’ association...

Globalisation of forest Globalisation of forest products marketsproducts markets

Marc Boutin

Quebec Lumber Manufacturers ’ Association

October 2, 2001

QLMAQLMA

QLMAQLMAFactors which are driving Factors which are driving extraterritorial trade of forest productsextraterritorial trade of forest products

Emerging economies with commensurate rising

consumer demand

The information technology revolution

Investor preference for « pure play » companies

that focus on fewer products on a larger scale

QLMAQLMAFactors which are driving Factors which are driving extraterritorial trade of forest productsextraterritorial trade of forest products (cont ’d)(cont ’d)

Switch to lower cost fiber from forest plantation regimes

Increased capital mobility, continued integration of the

world economy and, investor portfolios seeking more

global diversification

Improving transportation logistics

QLMAQLMAFactors which are driving Factors which are driving extraterritorial trade of forest productsextraterritorial trade of forest products (cont ’d)(cont ’d)

Larger buying groups, especially home center chains

and retailers, sourcing wood products (primary,

secondary and finished goods) on a global scale

Labor shortages in developed economies favoring a

shift to abundant, lower cost, labor in developing regions

QLMAQLMAFactors which are driving industry Factors which are driving industry consolidationconsolidation

Higher capitalization of companies

Synergies and economics of scale

Better opportunities to manage trade

International / regional diversification

Lower average cost structure

Forest companies are small compared with other manufacturing sectors

QLMAQLMAForest Products IndustryForest Products Industry

Top 5 global forest products companies

– around 20% of global sales

versus

– 40% in the oil industry

– 50% in the steel industry

– 60% in the automotive industry

Source

CIBC World Markets

QLMAQLMA

Why growth?Why growth?

Securing available fibre

Only way to gain market share

Economic imperative - it is often cheaper to buy rather than build (the pulp paper industry is very capital intensive)

New facilities tend to be subjected to higher environmental standards

QLMAQLMA

Why growth?Why growth? (cont ’d)(cont ’d)

Acquisition of know-how and human capital

Less impact on supply-demand equilibrium

Customer base is increasingly global and also growth driven

Establishes a framework for future growth

QLMAQLMAWorld ’s biggest paper and paperboard World ’s biggest paper and paperboard producers capacity, m tonnesproducers capacity, m tonnes

Extracted from

The Economist September 15th 2001

QLMAQLMATrade of Forest ProductsTrade of Forest ProductsRecent cyclic and structural eventsRecent cyclic and structural events

Break up of the USSR

Environmental and sustainability constraints

Upswing of the U.S. housing market since 1992

Asian financial crisis of 1997

Events of September 11, 2001

QLMAQLMA

Global Forest Resource Global Forest Resource (1990)(1990)(Million ha)(Million ha)

Source

Wood Markets 2000 Edition. The Solid Wood Products Outlook 200-2004

0

200

400

600

800

1000

1200

NorthAmerica

LatinAmerica

WesternEurope

EasternEurope

Ex-USSR Asia Oceania Africa

QLMAQLMA

Standing Timber Standing Timber (1990)(1990)

Source


0

10

20

30

40

50

60

70

NorthAmerica

LatinAmerica

WesternEurope

EasternEurope

Ex-URSS Asia Oceania Africa

Billion m3

QLMAQLMA

Change in Forest Area Change in Forest Area (1990-2000)(1990-2000)

Change in Forest Area, 1990-2000 ('000 hectares)

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

Africa Asia Europe North and CentralAmerica

Oceania South America

Sources : FAO ; QLMA

Total forest, 1990 Total forest, 2000

QLMAQLMA

World Distribution of standing timber World Distribution of standing timber (%)(%)

14

522

15

1

15

28

North America

Central and SouthAmericaEurope

Ex-USSR

Asia

Oceania

Africa

Source


QLMAQLMA

Southern Hemisphere Pine Plantations Southern Hemisphere Pine Plantations (1999-2000)(1999-2000)

Southern Hemisphere Pine Plantations - 1999/2000(Million hectares)

1,83

1,53

1,47

0,95

0,78

0,50 0,45

Brazil

New Zealand

Chile

Australia

South Africa

Argentina

Uruguay

Sources : Wood Markets ; QLMA

QLMAQLMAIndustrial Roundwood Production by Industrial Roundwood Production by

Continent Continent (x 000 m(x 000 m33))

Source


0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

1 800 000

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

South America

North and CentralAmerica

Oceania

Africa

Europe (+ Baltic States)

Ex-USSR

Asia

TOTAL

QLMAQLMAThe six largest softwood industrial The six largest softwood industrial

roundwood producing countries roundwood producing countries (000 m(000 m33))

Source


0

50 000

100 000

150 000

200 000

250 000

300 000

350 0001

98

9

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

United States

Canada

China

Sweden

Finland

Russian Federation

QLMAQLMAForest harvest in the United States by Forest harvest in the United States by

region region (in million m(in million m33))

Source


0

50

100

150

200

250

300

350

400

4501

95

1

19

62

19

70

19

76

19

86

19

91

20

00

*

20

10

*

20

20

*

20

30

*

20

40

*

North

South

Rocky Mountains

Pacific Region

TOTAL

QLMAQLMAForest capacity and actual harvest - Forest capacity and actual harvest -

Canada Canada (Millions m(Millions m33))

Source


150 145

120

150165 165 170

180 178 180

155 153168 170 170 176 178

187

230 230 230

210 210 210

230240 238

225

253 250 248

228 230 233 234 237

0

50

100

150

200

250

300

Harvest

Capacity

QLMAQLMAThe imperative to develop new The imperative to develop new products and marketsproducts and markets

World demand should not change significantly over

the coming decade. Strong demand is expected in

Asia, mainly from Japan and increasingly from China

Demand will be stronger for wood based panels and

paper products

QLMAQLMAThe imperative to develop new The imperative to develop new products and marketsproducts and markets (cont ’d)(cont ’d)

Large scale producing countries will maintain their

relative market share, although export distribution will

be significantly realigned

Significant growth is anticipated from countries which

hold large plantation resources in the Southern

hemisphere

QLMAQLMAThe imperative to develop new The imperative to develop new products and markets products and markets (cont ’d)(cont ’d)

Size and quality of roundwood changing

Environmental pressures come into play

New source of supply will be from high yield

plantations but fiber quality will pose its own set of

problems


A movement towards trade in value-added wood

products is evolving in many countries. There

are growing constraints in the export of

unprocessed goods

Forestry management practices and inputs could

allow for increases in future harvest


Increasing pressure towards certification

Securing fiber supply, technological efficiency,

certification of products and/or of systems, and

value-added will be the future focus of industry

QLMAQLMA

ConclusionConclusion

Output of forest products increasing in most producing regions: Europe, North America, South America and Australia/New Zealand

Strong incentive for all producers to stimulate demand on a global scale: supply of wood products exceeds demand at a growing rate

Industry and customer consolidation to continue: fewer manufacturers, bigger production units, larger customers

globalisation of forest products markets marc boutin quebec lumber manufacturers ’ association...

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