FEFPEB CONGRESS GLOBAL SAWNWOOD FLOWS AND THE IMPACT OF BIOENERGY October 18, 2013 Cormac OCarroll,...
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FEFPEB CONGRESS GLOBAL SAWNWOOD FLOWS AND THE IMPACT OF BIOENERGY October 18, 2013 Cormac O’Carroll, Heikki Vidgren
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Transcript of FEFPEB CONGRESS GLOBAL SAWNWOOD FLOWS AND THE IMPACT OF BIOENERGY October 18, 2013 Cormac OCarroll,...
FEFPEB CONGRESS
GLOBAL SAWNWOOD FLOWS AND THE IMPACT OF BIOENERGYOctober 18, 2013Cormac O’Carroll, Heikki Vidgren
COPYRIGHT@PÖYRY
Clients
Unique Lifecycl
e Partner
Local Relation-ships
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expertise
PÖYRY – CONSULTING AND ENGINEERING EXPERTS
Pöyry is an international consulting and engineering company, dedicated to serving clients across the world’s energy and forest industry sectors
6,500 experts Over 15,000 projects annually Solid track record in pulp and paper · EUR 775 million net sales in 2012
18 October 2013
FEFPEB- SYPAL 2013 2
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Introduction of Pöyry
Global Sawnwood Flows
Impact of Bioenergy
Conclusions
AGENDA
3
18 October 2013
FEFPEB SYPAL 2013
GLOBAL SAWNWOOD FLOWS
COPYRIGHT@PÖYRY
2000
2005
Consumption Million m3
2010
2012
North America
Latin America
80 81
Western Europe
69 68
JapanChina
Russia
Eastern Europe
The global softwood sawnwood market is around 290 Million m3
110
10684
78
15 20 21 22
1421
32 35 26 21 16 16
12 14 16 16
13 16 17 19
GLOBAL SOFTWOOD SAWNWOOD DEMAND
5
18 October 2013
FEFPEB SYPAL 2013
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0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
225,000
North America
NA+WEUR
Mm3
SOFTWOOD SAWNWOOD DEMAND CYCLES
OIL CRISIS-21%
=28Mm3
ENERGY CRISIS/ GULF
WAR-24%
=34Mm3
GLOBAL RECESSION
-11%=18Mm3
DOT COM BUBBLE
-3%=6Mm3
FINANCIAL CIRISIS
-38%=78Mm3
North America & Western Europe
In addition to the increasing demand in growth markets, the cyclicality of the large mature markets have a significant impact on the demand of sawnwood. Where are we in the cycle?
6
Source FAO (slightly different mmbf/m3 conversion vs p 4)
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Equator
Supply deficit Stable supply Increasing supply
GLOBAL FOREST RESOURCES – REGIONAL BALANCES Growing economy and demand of traditional forest products in Asia and Bioenergy sector in Europe will create significant regional wood deficits.
19 October 2013
FEFPEB SYPAL 2013
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SOFTWOOD SAWNWOOD TRADE FLOWS
Million m3
Trade flows of over 0.2 million m3
Historically major trade flows have been between North America, Europe and Japan. Importance of China as destination and Russia as source has increased during the last years.
0.4
37.3
1.21.7
0.3
5.8
7.3
0.40.53.9
0.9
0.5
0.7
0.5
1.3
0.3
1.2
1.9
0.4
14.8
0.2
22.30.9
0.326.7
0.8
7.4
0.3
0.3
3.41.4
0.4
1.7
1.9
0.3
5.8 2.0
1.511.1
8.22.0
3.3
10.2
3.0
1995 2012
0.3
8
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N-America + Europe + Russia Total
GLOBAL SAWNWOOD BALANCE 2012-2020
Demand 2012Production 2012
Demand 2020f
Capacity (highest production in 2005-2012)
Based on the current economic outlook, the growing demand of sawnwood lead by the fast growth in China will be reaching the limits of existing capacity by 2020.
China
The forecasts are based on the 2013 spring IMF economic outlook
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Western EuropeNorth America
China
Eastern Europe
Russia
REGIONAL SAWNWOOD BALANCES 2012-2020 Outside China, the demand is expected to grow most significantly in North America, where the impact of economic crisis was more severe and demand in construction market is more cyclical than in Europe.
The forecasts are based on the 2013 spring IMF economic outlook
Demand 2012Production 2012
Demand 2020f
Capacity (highest production in 2005-2012)
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FEFPEB SYPAL 2013
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Western Europe Eastern Europe
Russia
EUROPEAN SAWNWOOD BALANCE 2012-2020 Demand in Eastern Europe will grow to the level or above current capacity in 2020. Increasing capacity utilisation in Western Europe, more capacity in Eastern Europe or growth of import from Russia is required to meet the demand in W-Europe.
Europe
Eastern Europe + Russia Europe + Russia
The forecasts are based on the 2013 spring IMF economic outlook
Demand 2012Production 2012
Demand 2020f
Capacity (highest production in 2005-2012)
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GLOBAL SOFTWOOD SAWNWOOD PRICING
As the trade flows between the major markets in Europe and North America are small, also the price developments of these regions are different. The prices in Europe recovered in 2010, when the output and inventories balanced to lower demand. In America, small acceleration of growth increased prices since 2011.
Softwood sawnwood prices in North America and Western Europe (Index: €, 1Q2003 =100, nominal)
19 October 2013
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EUROPEAN SAWNWOOD BUSINESS CYCLES
In addition to low volume, the industry is challenged by low margins. The sawnwood prices have decreased in real terms since the beginning of 2000’s, but log prices in many locations have increased
2000
Q1
2000
Q3
2001
Q1
2001
Q3
2002
Q1
2002
Q3
2003
Q1
2003
Q3
2004
Q1
2004
Q3
2005
Q1
2005
Q3
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q3
2011
Q1
2011
Q3
2012
Q1
2012
Q3
2013
Q140
60
80
100
120
140
160
Sawnwood
Sawlogs, Finland
Sawlogs, Germany
Index (real) 1Q2000= 100
Sawnwood and log prices in Europe
13
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FEFPEB SYPAL 2013
THE IMPACT OF BIOENERGY
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BIOENERGY– HOW BAD CAN IT GET?Bioenergy incentives for heat and electricity generation are highly complex and differ greatly in Europe.
Legend:Low interest loans
Investment subsidiariesOther
Price-based schemesNone
Legend:Feed-in tariff (FiT)
Market premium tariffTender
Green certificates (GC)Net-metering
None
Incentives for renewable electricity from biomass
Incentives for renewable heat from biomass
● Green certificates: Green electricity support mechanism linked to the market economy through tradable commodities representing the environmental value of renewable energy sources. Typically, 1 GC represents 1 MWh of generated green electricity. The support value of the GC is generally on top of the market electricity price
● Feed-in tariff: Cost-based compensation to renewable energy producer through long-term contracts to help finance renewable energy investments● Net-metering: A compensation mechanism for the difference between the amount of electricity taken from the grid and the amount of electricity fed into the grid.
15FEFPEB SYPAL 2013
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GLOBAL PELLET DEMAND OUTLOOK
In our central scenario we expect the market will more than double by 2025 with demand for industrial pellets being the main driver.
FEFPEB SYPAL 2013
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PELLETS TRADE FLOWS 2009 - 2012
Wood pellet imports into the EU have grown at a steady pace with North America being the key supply source.
Source: Eurostat, Pöyry Analysis
FEFPEB SYPAL 2013
19 October 2013
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PELLETS IN HEATING MARKETS - CENTRAL SCENARIO, EUROPE
Based on an analysis of country specific National Renewable Energy Action Plans, we expect the heating pellet market to continue growing out to 2020. Austria and Germany are expected to account for the majority of the projected growth.
FEFPEB SYPAL 2013
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PELLET MARKET DYNAMICS – ATLANTIC MARKET
We expect to see a phase of rapid expansion in the Atlantic market, followed by a stable market out to 2027.
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D /
ton
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Million tonnes
Demand
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GBR
DEN
BEL
Supply
Brazil
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BE
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Million tonnes
Demand
NET
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DEN
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Supply
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D /
GJ
(LH
V)
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D /
ton
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Million tonnes
2012
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Million tonnes
2013
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Million tonnes
2014
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(LH
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ton
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Million tonnes
2015
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GJ
(LH
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ton
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Million tonnes
2016
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(LH
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ton
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Million tonnes
2017
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GJ
(LH
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US
D /
ton
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Million tonnes
2018
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Million tonnes
2019
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(LH
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Million tonnes
2020
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GJ
(LH
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US
D /
tonn
e
Million tonnes
2021
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D /
GJ
(LH
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US
D /
ton
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Million tonnes
2022
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(LH
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D /
ton
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Million tonnes
2023
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Million tonnes
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Million tonnes
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ton
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(LH
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ton
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(LH
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(LH
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FEFPEB SYPAL 2013
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COPYRIGHT@PÖYRY
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D /
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LH
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US
D /
to
nn
e
Low
Central
High
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PÖYRY’s PELLET PRICE SCENARIOS
After a period of stable price levels the end of the support scheme for UK projects will result in falling market prices.
Pellet Price CIF ARA
UK incentives come to an end
FEFPEB SYPAL 2013
19 October 2013
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PAYING CAPABILITY RANGES
The lowest paying capabilities are exhibited by pulp and panel mills so companies in these sectors are most at risk of being forced to exit the market.
Wood Paying Capability Ranges by Industry in the UK
21FEFPEB SYPAL 2013
19 October 2013
COPYRIGHT@PÖYRY
SO WHAT HAPPENS IN PRACTICE
As pulpwood and residue prices increase small sawlog and pallet boards from construction mills are likely to experience upward price pressure
22
Pulpwood
Pulp & PaperWood based Panels
Bioenergy
Small sawlog
Pallet sawmills
Large sawlog
Construction sawmills
Pallet boards Residues Pallet boards Construction timber
Residues
FEFPEB SYPAL 2013
19 October 2013
COPYRIGHT@PÖYRY
• Based on the current economic outlook (IMF Spring 2013) the global sawnwood market is expected to grow by 60-80 Mm3 by 2020 from just below 300 Mm3 in 2011
• Fastest growth in Asia and gradual recovery of the more mature markets in Europe and North America.
• Sawnwood pricing in North America and Europe follows different cycles – Europe lagging North America
• The bioenergy sector in Europe will continue to expand and impact raw material cost for pallet timber – varies considerably from country to country depending on the local supply demand balance and incentive systems – imports of pellets from outside the EU will play a significant role.
CONCLUSIONS
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19 October 2013
FEFPEB SYPAL 2013
COPYRIGHT@PÖYRY 24
CONTACT:
Dr Cormac O’CarrollMr Heikki [email protected]: +44 20 7932 8200
www.poyry.com
THANK YOU!
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