Timberland Investment and International Timber Markets...Timberland Investment and International Timber Markets ... (FIA) XX Resource Management Services (RMS) XX X X Global Forest

Timberland Investment and International Timber Markets

Bob FlynnDirector, International Timber

RISI North American ConferenceOctober 2016

2© Copyright 2016 RISI, Inc. | Proprietary Information

Agenda

• Overview of timberland investment in 2016• Update on two key log/lumber markets China – much better than expected India – a bit disappointing, but starting to improve

• Update on international woodchip markets –another new record year!

More than 75% of all institutional investment in forest has been in North America

© Copyright 2016 RISI, Inc. | Proprietary Information 3

* "Other" in Europe includes the portion of Bergvik Skog and Tornator Oyj owned by pension funds. ** "Other" in North America includes REITs plus Deltic Timber.

0 2 4 6 8 10 12

Africa

Asia

Europe*

Latin America

North America**

Oceania

Million Hectares

Global Forest Ownership by Financial Investors

REIT TIMO

Most of the larger TIMOs have tried to acquire some forest assets in Latin America


Note: TIMOs ranked according to the value of assets under management in 2016. Brookfield and Molpus tied for 10th place, so table above includes 11 companies.

Top 10 TIMOs and Region of Investment, 2016

TIMO N. America L. America Oceania Africa Asia EuropeHancock Timber Resource Group X X X

Campbell Global X X

Forest Investment Associates (FIA) X X

Resource Management Services (RMS) X X X X

Global Forest Partners X X X

BTG Pactual X X X X

GMO Renewable Resources X X X

The Forestland Group X X

New Forests X X

Brookfield Timberlands Management X X

Molpus Timberlands X

Today 43% of the “Top 30” TIMOs are headquartered outside of the USA


USA57%

Europe30%

Brazil7%

Australia3%Canada

3%

Top 30 TIMOs by Headquarters Location


What’s new this year? A lot happening in Europe• Four new TIMOs in the Top 30 (ranked in terms of assets under management) – all based in Europe In addition, several other European TIMOs are hovering just outside the Top 30

Some are African focused but European based, like Quantum Global (Angola plantations) or Green Resources

Others are Northern Europe focused, like Dasos or UB Nordic

UPM continues to sell down forest assets in Finland Rumors of potential bids by financial firms for SCA forest company

Fourth RISI/DANA Forest Investment ConferenceLondon, May 3‐5, 2017


RISI and DANA have combined forces to bring together the most compelling conference for the financial community and those engaged in tracking companies and assets or who own and manage timberlands. The two‐day conference will take an in‐depth look at timberland investments around the globe and how these opportunities will unfold in the near future.

After the USA and Canada, there is more forest owned in Australia by institutional investors than in any other country


*Includes only the pension fund ownership shares in Tornator Oyj and Bergvik Skog. **Does not include Brookfields ownership of 205,000 ha of land under Fibria's trees.

0300600900

1,2001,5001,800

Mill

ion

Hec

tare

s

Ownership of Forest by Financial Institutions by Country

Brazil, Uruguay and Chile account for 77% of financial investors’ forest ownership in Latin America


Brazil49%

Colombia3%

Chile8%

Costa Rica1%

Argentina4%

Ecuador1%

Guatemala2%

Belize8%

Nicaragua1%

Panama1% Uruguay

20%

Paraguay1% Mexico

1%

Forest Ownership by Financial Investors in Latin America, 2016

Institutional investors play a much more important role in some countries than in others

Note: USA is share of all private forest, including both planted and natural forest

8.0%4.2%

28.3%

43.0%

54.7%

12.7%8.4%

0%

10%

20%

30%

40%

50%

60%

Brazil Chile Uruguay NewZealand

Australia USA SouthAfrica

Share of Planted Forest Owned by Financial Institutions

China’s timber deficit continues to grow, despite a slowing of economic growth


0

40

80

120

160

200

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 1-8,15

1-8,16

Mill

ion

Cub

ic M

eter

s, R

WE

China's Growing Timber Deficit, 1997 - 2016

Woodchips

Pulp

Wood Panels

Lumber

Logs

New Zealand has been the only country to see a decline in softwood log shipments to China thus far in 2016, but will likely catch up soon


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Russia New Zealand USA Canada Australia Other

Thou

sand

Cub

ic M

eters

Chinese Imports of Softwood Logs, January‐August

2014 2015 2016

US softwood log exports to China were up 10.5% in January‐July, but not much from PNW


US South51%

PNW11%

Alaska34%

Other4%

Increase in US Softwood Log Shipments to China, January‐July 2016

Almost all SYP log exports to China are from South Atlantic ports (but still only account for 12% of US shipments to China)


0

30

60

90

120

150

Charleston Wilmington Norfolk Savannah Gulf Ports

Thou

sand

Cub

ic M

eters

SYP Log Exports to China, Jan‐July

2014 2015 2016

Chinese imports of softwood lumber are up nearly 20% in 2016, with the big story being Russia and other European suppliers


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Canada Russia USA Chile New Zealand TotalEuropean

Others

Thou

sand

Cub

ic M

eters

Chinese Imports of Softwood Lumber, January‐August

2014 2015 2016

Despite much doom and gloom in the market, total imports of softwood logs & lumber (RWE) are higher in 2016 than record year of 2014


0

5

10

15

20

25

30

35

40

45

50

2014 2015 2016

Million Cu

bic M

eters

China: Total Softwood Log and Lumber Imports, January‐August

Canada Russia USA Australia New Zealand Other

In 2016, Chinese imports of Russian softwood (logs and lumber RWE) will be at an all‐time record level


0

5

10

15

20

25

30

Million Cu

bic M

eters

China: Imports of Russian Softwood Logs and Lumber (RWE)

Lumber (RWE)

Logs

RWE = Roundwood Equivalent

Part of the surge in Russian softwood lumber exports to China has been a redirection of wood from other traditional markets


0%

10%

20%

30%

40%

50%

60%

2010 2011 2012 2013 2014 2015 2016

Russian Softwood Lumber Exports by Region

North Asia CIS

Middle East Europe

China’s imports of eucalyptus sawlogs have tripled since 2012; good news for plantation owners seeking new alternative markets


0

100

200

300

400

500

600

2012 2013 2014 2015 2016E

Thou

sand

Cub

ic M

eters

China: Imports of Eucalyptus Sawlogs

Australia Uruguay

Chile Brazil

USA


India should be a great market for softwood imports….• Rapid economic growth

RISI projects 7.5% GDP growth in 2016‐2020 vs. 6.0% in China

• Working age population still rising Has been falling in China since 2012

• Urbanization rate 33% (vs. 57% in China)• Domestic softwood timber harvest very low (less than one‐

quarter the level in China), and no softwood plantations in India• Gigantic need for new housing in India

Compared with China, housing programs just getting started in India

• Plans in India for massive new investment in infrastructure

Softwood has increased to more than 40% of log imports, but volumes are lower than predicted


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Thou

sand

Cub

ic M

eters

India Log Imports

Hardwood

Softwood

Softwood lumber imports are only about 35% of the volume of softwood log imports


050100150200250300350400450500

2009 2010 2011 2012 2013 2014 2015 2016E

Thou

sand

Cub

ic M

eters

Softwood Lumber Exports to India

Other

Russia

New Zealand

USA

Germany

Canada

Asian woodchip imports will set another all‐time record for volume in 2016…for the seventh year in a row!!


0.0

5.0

10.0

15.0

20.0

25.0

Million BD

MT

Asian Woodchip Imports

Japan Hardwood China Hardwood

Other Hardwood Softwood

Asian hardwood chip imports will be used to produce more than 11 million tonnes of hardwood pulp in 2016


0

600

1,200

1,800

2,400

3,000

3,600

4,200

4,800

5,400

Vietnam Australia Chile Thailand South Africa Brazil Indonesia

Thou

sand

BDM

T

Hardwood Chip Suppliers to Asia, January‐August

2013 2014 2015 2016

Australian volumes of both hardwood and softwood chips have seen the biggest increases by far in 2016


‐

60

120

180

240

300

360

420

480

540

Australia United States New Zealand Canada Fiji Russia

Thou

sand

BDM

T

Softwood Chip Suppliers to Asia, January‐August

2013 2014 2015 2016

9th International Woodfiber Resources and Trade Conference Da Nang, Vietnam, February 13‐15, 2017

26

The only conference focused on international trade in woodchips and biomass, and the first one to be held in Vietnam.

Previous conferences have proved to be valuable business networking events for those involved in the trade, attracting buyers, sellers and traders from more than 30 countries.

For details, contact Bob Flynn [email protected]‐360‐471‐6578

© Copyright 2015 RISI, Inc. | Proprietary Information

Documents

Timberland Investment and International Timber Markets...Timberland Investment and International Timber Markets ... (FIA) XX Resource Management Services (RMS) XX X X Global Forest