March 2008

ABARE Outlook Conference2

ABARE Outlook ConferenceMarch 4 2008

Overseas Opportunities for Australian Forestry Sector

March 2008

ABARE Outlook Conference3

Topics

•Australian forest industry’s current overseas business

•Regional forest products demand/supply issues

•Australian industry growth

•Overseas opportunities

•Conclusions

March 2008

ABARE Outlook Conference4

Australian forest industry’s current overseas business

Manufactured wood exports by country 2006 - 2007

0

50

100

150

200

250

300

China Taiwan Hong Kong Japan Malaysia New Zealand Rep. ofKorea

'000

m3

kt (

pap

er p

rod

uct

Paper and paperboardWood based panelsSawnwood

March 2008

ABARE Outlook Conference5

Australian forest industry’s current overseas businessWood product export trend from 1995 - 2007

0

2000

4000

6000

8000

1995-96 1997-98 1999-00 2001-02 2003-04 2005-062006-07

Woodchips

Paper and paperboard

Wood based panelsSawnwood

'000

m3

kt (

pap

er p

rod

uct

March 2008

ABARE Outlook Conference6

Regional forest products demand/supply issues

• Regional markets - globally strongest growth

• Product innovation – big role for RCP and (hardwood) pulpwood grades.

• Regional fibre supplies are constrained

• Embodied energy values of wood (and biomass) are increasing

March 2008

ABARE Outlook Conference7

Regional markets’ strong growth

ChinaE. Europe & Russia

Latin America

Rest of

Asia

Western Europe

Africa

Oceania

Average 2.0%/a

Japan

North America

-1

0

1

2

3

4

5

0 20 40 60 80 100Share of consumption mid decade %

Pulp fibre demand growth 2005 - 2020 %/a

March 2008

ABARE Outlook Conference8

RCP and hardwood fibres have strongest growth

0

200

400

600

1980 1985 1990 1995 2000 2005 2010 2015 2020

Hardwood Non-wood

Forecast

Recovered paper

Million tons/a

Softwood dominated grades

World Consumption of Papermaking Fibre 1980-2020

March 2008

ABARE Outlook Conference9

Date Duty* Min. duty

2006 6.5% 4 EUR/m3

July 2007 20% 10 EUR/m3

April 2008 25% 15 EUR/m3

January 2009 80% 50 EUR/m3

•April 2008 step appears likely

•Creates East Asian market opportunities

*

Growing Russian log export duties

March 2008

ABARE Outlook Conference10

Regional log imports are evolving

Source ITTO 08-07

Country Imports (1000m³) Proportion (%)

China Total Imports 37,088.9 100

Russia 25,395.6 68.5

Papua New Guinea 2,341.0 6.3

Australia 489.6 1.3

•Russia is Asia’s major source for fibre

•China doesn’t have incremental domestic sources available

Chinese Log Imports – 2007

March 2008

ABARE Outlook Conference11

Australian forest industry’s major growth through 2010

• Immediate term growth - plantation hardwood chip volumes

• Post 2010 announced new/expanded pulpmill projects will become operational based on current timetables

– Gunns’ greenfield Tasmanian BHKP mill +/- 900 000 ADt/a

– Visy Tumut new kraftliner line +/- 350,000 Mt/a

– Protavia new BCTMP line +/- 750, 000 ADt/a

• Softwood log, lumber and panel exports

March 2008

ABARE Outlook Conference12

Export woodchip potential Million BDt

1

3

5

7

9

1992

1994

1996

1998

2000

2002

2004

2006

2007

e

2011

f

2016

f

Net surplus potential

Indonesia

China

South Korea

Taiwan

Japan

OUTLOOK

March 2008

ABARE Outlook Conference13

Woodchip export opportunities

• Indonesian MTH supply constraints

•Europeans tapping South African and Latin American sources

•Strong markets to meet tightening supply/demand

March 2008

ABARE Outlook Conference14

Softwood

•Potentially good markets for export accessible sources

• Increasing Russian taxes and uncertainty – traders looking for alternative supplies

March 2008

ABARE Outlook Conference15

Biomass

•Accessible biomass sources will increasingly be tapped in the search for renewable energy sources

•Australia is remote from mainly European markets - but could benefit from knock-on effect.

March 2008

ABARE Outlook Conference16

Conclusions

•Strong demand and limited supply in Asian markets

•Opportunities across a range of products

•Uncertainty on Russian taxes will be resolved – outcome will drive more or less opportunity for Australian exports