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China’s Role in the Global Forest Sector: Future Demand and Supply of Timber and Forest Industry Products
Hu Yanjie, Chinese Academy of Forestry Alicia Robbins, University of Washington
John Perez‐Garcia, University of WashingtonForest Sector Modeling ConferenceLillehammer, NorwayOctober 2013
Expectations about China’s Role in the Global Forest Sector
Review of:
Demand and Supply of Tropical Wood Products in China Towards 2020. Draft Report issued March, 2012 by Chinese Academy of ForestryDr. Hu Yanjie 收件人: "yanjie" <[email protected]>
US export statisticsNew Zealand export statisticsRussian export statistics
Modeling China’s Forest Sector with partial equilibrium model
Source: FAOSTAT
Softwood Lumber
-5.0-4.0
-3.0-2.0
-1.00.0
1.02.0
3.04.0
0 10 20 30 40 50 60 70 80 90 100
Share of Consumption (%) in 2004 of 309 million m3
Aver
age
10 y
r. G
row
th R
ate
(%)
North Am
Japan
W. Europe
Oceania
Latin Am
AsiaChina
E. Europe
Africa
Market Share Changes: 2004 and 2011
285 MM m3 Consumption
Hardwood Lumber
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
0 10 20 30 40 50 60 70 80 90 100
Share of Consumption (%) in 2004 of 106 million m3
Aver
age
10 y
r. G
row
th R
ate
(%)
North Am
Japan
W. Europe
Oceania
Latin Am
Asia China
E. Europe
Africa
Source: FAOSTAT117 MM m3 Consumption
Market Share Changes: 2004 and 2011
Source: FAOSTAT
-0.10
-0.05
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Gro
wth
Rat
e
Market Share
Wood-based Panels Production 2005
North America
Japan
Australian Region
Southeast AsiaAfrica
Europe
Latin America
IndiaMiddle East
Russia
China
-0.15
-0.10
-0.05
0.00
0.05
0.10
0.15
0.20
0 0.2 0.4 0.6 0.8 1
Gro
wth
Rat
e
Market Share
Wood-based Panels Production 2009
North America
JapanAustralian Region
Europe
Southeast Asia
Latin America
Russia
Africa
IndiaMiddle East
China
Source: FAOSTAT
-0.10
-0.05
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Gro
wth
Rat
e
Market Share
Plywood Production 2005
Southeast Asia
Africa North America
EuropeJapan
Australian Region
IndiaMiddle East
Latin AmericaRussia
China
-0.15
-0.10
-0.05
0.00
0.05
0.10
0.15
0.20
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Gro
wth
Rat
e
Market Share
Plywood Production 2009
North AmericaJapan
Europe Southeast AsiaLatin America
Russia
Australian Region
IndiaMiddle East
China
China Forest Products Ranking 2011
% Share Growth Rate Rank (out of 8)
Chips 13% 11% 2
Plywood 45% ‐5% 7
Sawlog C 6% 0% 7
Sawlog NC 8% 0% 6
Sawnwood C 35% 12% 1
Sawnwood NC 29% 20% 1
Veneers 24% 0% 5
Domestic Resource Deficit
Scatter diagram of prices and quantity for the period 1994 to 2010
$-
$50
$100
$150
$200
$250
$300
$350
- 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000
Uni
t Val
ue p
er m
3
Quantity (1000 m3)
China (Blue) and Japan (Red)
1994
1994
2007
2010
2007
2001
2010
Timber Usage
• Industrial timber is mainly consumed by five industries in China. – wood‐based panels, – wood pulp and paper‐making, – furniture, – roads, other infrastructure and building construction and
– interior use and renovation in housing
Average Annual Harvest Levels (MM m3)
National forest
inventory
Timber Harvest Level
Cutting quota
Extra quota cutting
As% of cutting
quota (%)The third
(1984‐1988) 277.60 243.60 34.00 14
The fourth(1989‐1993) 332.88 290.88 42.00 14
The fifth(1994‐1998) 353.28 266.48 86.79 32The sixth
(1999‐2003) 331.23 255.69 75.54 29The seventh(2004‐2008) 379.11 271.05 67.76* 25*
Data Source: CAF Report
Timber harvests: 379 MM m3Non‐industrial Use (Fuelwood): 76 MM m3 (20%)Industrial Uses: 303 MM m3 (80%)
Log Basis (.7): 212 MM m3Chips, residues: 97.09 MM m3Sawlogs: 115.13 MM m3
Consumptive uses of logs: 436 MM m3Wood‐based Panels: 270.4 MM m3
Small‐diameter logs ( < 8 cm), flakes, residues: 76.7 MM m3Industrial logs: 193.7 MM m3
Pulp: 66 MM m3Domestic pulp log consumption: 20 MM m3
Wood Furniture: 22 MM m3Panels (70%)Sawnwood (30%)
General Construction: 72 MM m330% of GDP50% share to wood‐based panels
Interior Use and Renovation: 52 MM m3Urban/Rural/Public floor space: 3 trillion m2 new space
Other: 30 MM m3IMPORTS: 436 – 212 = 214 MM m3
Data Source: CAF Report
0
5 000 000
10 000 000
15 000 000
20 000 000
25 000 000
30 000 000
35 000 000
40 000 000
2007 2008 2009 2010
m3
Log Imports by Port
All other
Qingdao
Shanghai
Huhehaote
Nanjing
Harbin
Manzhouli
Manzhouli29%18%
Harbin23%12%
Qingdao2%
13%
Nanjing21%29%
‐
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Thou
sand
cubic meters
Korea, Rep. of
Japan
China
‐
2 000
4 000
6 000
8 000
10 000
12 000
14 000
Thou
sand
cubic meters
Cambodia Myanmar Thailand
Indonesia Malaysia Papua New Guinea
Imports
Exports
Source: ITTO
Softwood Log Import UsesThere are mainly 5 end uses for imported softwood log:
• 1) Construction: including concrete forming support, plywood• 2) Interior uses: including backing strip, floor spacer, wood
doors and flooring• 3) Landscaping treated wood especially in parks• 4) Packaging• 5) Furniture: including outdoor furniture
• Main softwood species include larch, red pine, spruce, radiatapine, scotch pine.
• Imported softwood log mainly come from Russia, New Zealand, US/Canada, Chile and European countries.
China Softwood Logs Imports from 2005 to 2010
Year Imports Volume(million m3)
Imports Value($US million)
2005 18.27 1387.982006 19.71 1713.622007 23.27 2404.882008 18.58 2414.192009 20.30 2234.432010 24.27 3239.61
Source: China’s Customs Statistics
$300
$350
$400
$450
$500
$550
$600
$650
$700ja
n.05
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jul.0
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p.06
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n.13
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p.13
Export Prices 12+ Hi China: Hemlock
Log Exports from PNW
Data Source: USDA Forest Service
‐
1
2
3
4
5
6
7
8
9
10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
MM m
3To China To all Countries minus China
New Zealand Log Exports
‐
2
4
6
8
10
12
2004 2005 2006 2007 2008 2009 2010 2011
MM m
3China Log Exports Rest of Log Exports
Source: Statistics New Zealand. Compiled by Information and Analysis, Ministry of Agriculture and Forestry
Russia
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
US$
Billions
Sawnwood to China Roundwood to China
Source of Data: Customs Committee of Russia
Russia
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
US$
Billions
Sawnwood to China Roundwood to China Both to China
Source of Data: Customs Committee of Russia
Two Strategic Business Questions:
• Under what conditions will China continue to import softwood logs?
• What is the likelihood that these conditions will continue into the future?
The answer lies in an examination of the important supply and demand factors in log trading and a focus on key economic indicators to discern possible future trends.
Some Key Chinese Macroeconomic Data from 12th Five‐year Planning Period Ending 2015
• the total population will reach 1.39 billion (an annual growth rate of < 1%),
• the GDP 58.98 trillion yuan(an average annual growth rate of 8%),
• urbanization rate will reach 51.5% (an average annual growth rate of 2%),
• affordable housing projects (urban area) will reach 36 million units.
Data Source: CAF Report
Key Macro‐Economic Indicators for 2015‐2020
Indicator 2010 2015Annual average growth rate
2020Annual average growth rate
GDP(Trillion yuan) 40.12 58.98 8% 82.6 7%
Total population(million people) 1,341 1,390 0.72% 1,450 0.85%
Urbanization rate(%) 47.5 51.5 2% 60.0 3%
Per capita disposable income of urban residents(yuan)
19,109 28,077 8% 39,379 7%
Per capita net income of rural residents(yuan)
5,919 8,897 8% 12,479 7%
Source: CAF Report
Factor 1: Demand in China
• Chinese Demand: Forecast of national industrial timber consumption in 2015‐2020 (million m3)
Consumption structure 2010 2015 2020Wood‐based panel① 194 204 235Pulp and papermaking industry② 66 120 155Interior uses 52 55 62General construction 72 63 55Furniture industry③ 22 38 54Other④ 30 35 40Total 436 515 601
Factor 2: Supply
• What are the Log Supply Issues– International: What countries can supply to China?
• Russia– The Far East is a traditional softwood log supplier to China– New direction? Chinese investments in Russia?
• New Zealand– Limited supplies?
– North America: Other demands (housing)?
Russia Exports to China
Source of Data: Customs Committee of Russia
0
5
10
15
20
25
30
351997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Million Cu
bic Meters
Logs
LumberEverything Else
Russia Exports to China
Source of Data: Customs Committee of Russia
0
5
10
15
20
25
30
351997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Million Cu
bic Meters
Logs
LumberEverything Else
Tariff quota
Russia Exports to China
Source of Data: Customs Committee of Russia
0
5
10
15
20
25
30
351997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Million Cu
bic Meters
Logs
LumberEverything Else ?
RUSSIA‐CHINA FUND TO INVEST IN FORESTRY FIRM
• VLADIVOSTOK, Russia, Sept 7, 2012 (Reuters) ‐ A joint Russian‐Chinese fund will invest over $200 million in a Russian forestry company under a preliminary deal announced on Friday on the fringes of a summit held to promote economic cooperation in the Asia‐Pacific region.
• The Russia‐China Investment Fund would become a shareholder in Russia Forest Products, Russia's second‐largest forestry products firm, in a deal that would enable the business to produce higher‐value processed products.
• The deal was announced by the Russian Direct Investment Fund (RDIF), which was set up last year with $10 billion from the state to co‐invest in private‐equity style deals with foreign partners.
• Russian Forest Product holds annual allowable rights to fell more than 4.5 million cubic metres of timber and has long‐term leases on 6.4 million hectares of forest. It accounts for around 10 percent of Russia's timber exports to China, the RDIF said. (Reporting by Douglas Busvine; editing by Vladimir Soldatkin)
New Zealand
‐
5
10
15
20
25
30
35
Million Cu
bic Meters
Rest of Harvest
Log exportsto China
Lumber exports to: JapanChina
Rest of log exports
Log exports to India
Log exports to Japan
Source: Statistics New Zealand. Compiled by Information and Analysis, Ministry of Agriculture and Forestry
New Zealand: Export Supply Slack
‐
5
10
15
20
25
30
35
Million Cu
bic Meters
Rest of Harvest
Log exportsto China
Rest of log exports
~ 3 million m3
Maximum Biological Availability from plantat
Source: Statistics New Zealand. Compiled by Information and Analysis, Ministry of Agriculture and Forestry
Harvest Volume Douglas‐fir and Hemlock Westside Private Lands
1949 ‐2011
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
Har
vest
vol
ume
(bill
ion
boar
d fe
et, S
crib
ner r
ule)
Calendar year
Hemlock
Douglas‐fir
Source: WADNR Timber Harvest Reports
Harvest Volume Projection
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
Har
vest
vol
ume
(bill
ion
boar
d fe
et, S
crib
ner r
ule)
Calendar year
Recovery with growth in log exports up to first energy shock
Source: WADNR Timber Harvest Reports
Harvest Volume Projection
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
Har
vest
vol
ume
(bill
ion
boar
d fe
et, S
crib
ner r
ule)
Calendar year
Projected Growth
2016
Harvest Constraint
Source: WADNR Timber Harvest Reports
Lumber Demand: 2010
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
Har
vest
vol
ume
(bill
ion
boar
d fe
et, S
crib
ner r
ule)
Calendar year
2010 log consumption by sawmills and others except export
Source: WADNR Mill Survey 2010 Report
Lumber Demand Projection
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
Har
vest
vol
ume
(bill
ion
boar
d fe
et, S
crib
ner r
ule)
Calendar year
Projected growth in product demand for logs
Source: WADNR Mill Survey 2010 Report
Background Summary• China imports a substantial volume of its wood requirements (50% of its domestic consumption)– But softwood log imports are only a small percentage (around 11%) and
– Those sectors using sawlog products are in decline from134 to 117 MM m3 from 2010 to 2020
• Russian export tariff has changed to a quota with tariffs:– Suggests a decline from 16 to 12 MMm3 China log exports– Log sources have responded (NZ, US)– Lumber imports have grown (Chinese sawmills in Russia)
• US growth in log exports will be constrained by– Harvest availability– US housing demand
CINTFSFA Global Trade Model• Supply constraints include China’s own domestic timber harvesting
policies as well as policies in other countries to reduce the flow of illegally harvested wood products. – We will examine the impact of shifts in supply sources on China and
other forest sectors around the Pacific Rim and Europe.
• Infrastructure needs and capital investments in China’s forest sector are likewise needed. – Scenario analysis using the trade model will investigate the costs
associated with an expansion of milling and processing capacity.
• Thirdly, demand is changing rapidly around the world due to government policies aimed at stimulating economic activity. – We will examine potential changes in global demand for wood
products and their implications on the Chinese forest product sector using the CAF model.
Spatial equilibrium for two sectors outlining the feedback effect
Production, Consumption, Exports, Imports of Plywood
0
5 000 000
10 000 000
15 000 000
20 000 000
25 000 000
30 000 000
1960 1970 1980 1990 2000 2010 2020 2030 2040
Coastal China
Blue: Production (H), Green: Production (F), Lt Blue: Consumption (H), Purple: Consumption (F), Orange, E (F), Teal M (F)
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
1960 1970 1980 1990 2000 2010 2020 2030 2040
Sweden
Production, Consumption, Exports, Imports of Plywood
Blue: Production (H), Green: Production (F), Lt Blue: Consumption (H), Purple: Consumption (F), Orange, E (F), Teal M (F)
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
1 600 000
1960 1970 1980 1990 2000 2010 2020 2030 2040
Finland
Production, Consumption, Exports, Imports of Plywood
Blue: Production (H), Green: Production (F), Lt Blue: Consumption (H), Purple: Consumption (F), Orange, E (F), Teal M (F)
Plywood Prices
$‐
$200
$400
$600
$800
$1 000
$1 200
1960 1970 1980 1990 2000 2010 2020 2030 2040
Sweden
SWEUVXPLY 82 SWEp
Plywood Prices
$‐
$100
$200
$300
$400
$500
$600
1960 1970 1980 1990 2000 2010 2020 2030 2040
Coastal China
CHNUVMPLY 82 CCOp
Conclusion/Uncertainties that May Impact the Baseline
• Chinese Economy Outlook– Expectations have improved over the last quarter
• Chinese Demand Outlook Sensitivity – hard to get a good multiplier since forest products consumption is a small percentage of overall GDP and expenditures in overall construction activity and infrastructure
• Changes in Russian forest sector activity– Timing of investment programs, permitting processes
• New Zealand availability of logs– What is the biological constraint?
• Log/Lumber substitution – Availability of Canadian lumber exports to China?– Chinese sawmills in Russia/log lumber preference?
• US : Lumber profitability versus export market