Wood-Based Forest Trade in the Asia-Pacific Region€¦ · China actively promoting pulp & paper...
Transcript of Wood-Based Forest Trade in the Asia-Pacific Region€¦ · China actively promoting pulp & paper...
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Wood-Based Forest Trade in the Asia-Pacific Region
Implications of China’s Growing Demand
Wood-Based Forest Trade in the Asia-Pacific Region
Implications of China’s Growing Demand
Christopher BarrCenter for International Forestry Research (CIFOR)
Seminar on Indonesian Forest Industry RestructuringJakarta, December 1, 2005
Partially funded by EC Asia Pro Eco Program
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In the early-1990s, Japan was the dominant market in Asia-Pacific...In the early-1990s, Japan was the dominant market in Asia-Pacific...
During 1990-97, Japan imported an average of 50 million m3/yr (RWE) of logs, sawnwood, and plywoodIndonesia and Malaysia were dominant suppliersJapan consumed 35% of Indonesia’s plywood exports
South Korea imported approx. 12 million m3/yr (RWE) until the 1997 monetary crisis, including > 1 million m3/yr (panels) of tropical plywood
China imported 12-15 million m3/yr (RWE) during 1990-97, with roughly 50-60 % as roundwood
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… but Japan’s wood imports have declined since 1997… but Japan’s wood imports have declined since 1997
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
1990
1991
1992
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9920
0020
0120022003
Industrial Roundwood Sawnwood Plywood
RW
E (‘
00
0 m
3)
Source: FAO
Since 1997-98 crisis, Japan has imported approx. 40 million m3 (RWE) per year
In 2003:
• Log imports declined to 12.7 m m3
• Sawnwood imports fell to 8.8 m m3 (lumber)
• Plywood imports fell to 4.2 m m3 (panels)
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South Korea’s wood imports have risen again close to pre-1997 levelsSouth Korea’s wood imports have risen again close to pre-1997 levels
0
2,000,0004,000,000
6,000,0008,000,000
10,000,00012,000,000
14,000,000
19901991199219931994199519961997199819992000200120022003
Industrial Roundwood Sawnwood Plywood
RW
E (‘
00
0 m
3)
Source: FAO
S Korea’s timber imports fell to 6 m m3 (RWE) in 1998, but have grown as Korea’s economy has rebounded from crisis
In 2003:
• Log imports were 7.6 m m3
• Plywood imports reached 1.4 m m3
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China’s timber imports have tripled since 1997…China’s timber imports have tripled since 1997…
Source: FAO
China now world’s leader in wood imports, consuming 36 m (FAO) and 40 m (Chinese customs) m3 in 2003
• From 7th to 1st in last 7 years
• World’s leading importer of tropical wood
• 3 X increase in timber
• 80% of timber is logs and sawnwood – and an increasing share of total
RW
E (‘
00
0 m
3)
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
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Industrial Roundwood Sawnwood Plywood
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… and could double again by 2015… and could double again by 2015With pulp, paper and paperboard included:
• China imported 120 million m3 (RWE) in 2004
• Imports will reach 280 m m3 (RWE) in 2010, if current trends continue
• Strong international demand (50% of import volume is exported)
• Rapidly growing domestic consumptionSource: Sun et al, forthcoming (Forest Trends-CCAP-CIFOR)
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China’s log imports now exceed 27 million m3 per yearChina’s log imports now exceed 27 million m3 per year
Source: Sun et al, 2004
Roundwood imports have grown by 4-fold since 1997, with much of this fed by Russia
China is a major destination market for illegal logs
2004 suppliers led by:
• Russia (64.6%) • Malaysia (10.4%) • PNG (5.0%) • Myanmar (4.0%)
• New Zealand (3.2%)
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China’s sawnwood imports exceed 7 million m3 per yearChina’s sawnwood imports exceed 7 million m3 per year
Source: Sun et al, 2004
Sawnwood imports have grown from < 1.5 m in 1997 to > 7 m m3 in 2003, according to Chinese customs data
2004 suppliers led by:
• Indonesia (16.0%)
• Thailand (13.9%)
• Russia (13.3%)
• USA (13.0%)
• Canada (7.3%)
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China’s plywood imports are declining… China’s plywood imports are declining…
Source: Sun et al, 2004
Plywood imports have dropped from 1.7 m m3 in 1998 to approx 600,000 m3 in 2002, according to Chinese customs data
2004 suppliers led by:
• Indonesia (62.2%)
• Malaysia (19.2%)
• S. Korea (4.8%)
• Japan (3.4%)
• Hong Kong (2.5%)
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… while China’s domestic plywood production is growing… while China’s domestic plywood production is growing
Source: Jaakko Pöyry, 2004
Domestic plywood production has grown from < 6 m m3 in 1996 to > 12 m m3 in 2003
• Expansion driven by furniture industry and construction sector
• Production concentrated on east coast, heavy reliance on imported logs
• China exports approx. 2 m m3 per year, mostly to Japan
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Approximately 50 % of China’s plywood production is done by small- and medium-scale enterprises
Use of small-spindle rotaries to peel small-diameter logs is common
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Panel production is often labor intensive – large numbers of people employed
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Most mills use machines made in China
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Even small-scale mills can produce high-value products for export
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MDF and HDF production is China’s fast-growing wood industryMDF and HDF production is China’s fast-growing wood industry
In 2005, China’s capacity = 15.6 m m3/yr5.8 million m3/yr new capacity installed during 2004-200566 % of global capacity expansion during last 2 years was in China!China’s industry now bigger than Europe
Source: Jaakko Pöyry, 2004; Wood Based Panels International, 2005
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003e 2004e 2005e
Year
MD
F Pr
oduc
tion
and
Impo
rt ('
000
m3)
CapacityImportProduction
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Most MDF mills use multi-layer presses made in China
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MDF is a key component in China’s US$ 26 billion furniture industry. Also used for interior decorative paneling.
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China is responding to booming demand from US and EuropeChina is responding to booming demand from US and Europe
0
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4,000
6,000
8,000
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19971998199920002001200220032004
Year
Valu
e (U
S$ m
illio
n)
Others
EU
S Korea
Taiwan
Japan
USA
• US now leads -36% in ’04 (over 50% of furniture)
• EU growing
• Japan – others, stable
China vulnerable to growing demands for environmental standards and verification of legal
supply
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Asia-Pacific pulp imports show similar trends as timber – China leading growthAsia-Pacific pulp imports show similar trends as timber – China leading growth
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Japan South Korea China India
(‘0
00
ton
nes
)
During 1997-2003:
• Japan’s wood pulp imports dropped from 3.4 m to 2.4 m tonnes
• South Korea imports grew from 1.9 m to 2.4 m tonnes
• China was driving force, with pulp imports growing from 2.9 m to 6.8 m tonnes
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China’s growing demand for paper…China’s growing demand for paper…China’s growing demand for paper…
Source: He and Barr, 2004
0
5000
10000
15000
20000
25000
30000
1990 2003 2010
NewsprintPrinting & WritingTissue/HouseholdContainerboard BoxboardOther14.6 m
46.7 m
68.5 m
(‘000
tonn
es)
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… means increased demand for pulp fiber…… means increased demand for pulp fibermeans increased demand for pulp fiber
Source: He and Barr, 2004
(‘000
tonn
es)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1995 2000 2003 2010
Nonwood Waste Paper (domestic) Waste Paper (import)Wood Pulp (domestic) Wood Pulp (imports)
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China has large numbers of pulp-paper mills < 50,000 tonnes/yr
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Until now, China’s paper industry has relied heavily on bamboo and other nonwood fibers …
… but the government is now closing many of these
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China is now promoting wood-based pulp production
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China actively promoting pulp & paper industry developmentChina actively promoting pulp & paper industry development
In Tenth 5-Year Plan (2001-2005), government prioritized capacity expansion:
paper and paperboard to reach 40 million tonnes/yrwood-based pulp to reach 2.2 million tonnes/yr
42 pulp-paper projects prioritized for integration of fiber supply, wood pulp, and high-grade paper production
Investment encouraged through:
Tariff reductions for priority projectsTax holidays for foreign investorsLoan interest subsidies from state banks
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Large subsidies for fast-growing plantation development ….Large subsidies for fast-growing plantation development ….
Government is budgeting RMB 70 billion to finance 13.3 million ha of FGHY plantations for 2001-2015 (> US$ 600 million/year)
Of which, target for commercial use = 10.8 million ha,
including 5.8 million ha for pulpwood
Ministry of Finance to allocate 20% (US$ 1.7 bn) as loan interest subsidiesState-owned banks to provide 70% (US$ 6.1 bn) as discounted loans Local governments to provide 3%Plantation companies to provide 7% from commercial sources
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1.2 - 5.0 million tonnes of new pulp capacity is now ‘planned’ for Hainan, Guangdong, and Guangxi.
Can South China provide fiber base to support this new capacity?
If so, with what delivered wood cost?
Guangxi Guangdong
Hainan
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Eucalypt is the main species being planted – approx. 200,000 ha per year
Generally managed on a 6-year rotation by plantation companies, although farmers often prefer to harvest after 3 years
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Productivity levels are highly variable. MAI’s range between 10-20 m3/ha/yr depending on site conditions and management practices.
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Plantations are in small blocks, with poor infrastructure.
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2003 wood price at mill gate = US$ 31-36 per tonne (in Zhanjiang)
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China may not meet its domestic log production targetsChina may not meet its domestic log production targets
Source: Zhou (SFA) 2001, Bull and Nilsson 2004
Official projection: total roundwood removal 328 million m3 by 2015.
• 195 million m3 from current forests
• 133 million m3 from new plantations (fast growing)
Official projection much higher than our most optimistic scenario: 280 million m3
– 200 or less much more likely
China's Domestic Industrial Roundwood Removal
050
100150200250300350
1995 2000 2005 2010 2015Time
000
000
m3
low base high
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What are the implications for forest industry restructuring in
Indonesia?
What are the implications for forest industry restructuring in
Indonesia?
Implications for Indonesia
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China is a huge and growing market…China is a huge and growing market…
China’s demand for solid wood products is growing rapidly, but Indonesia exporters will need to enter strategicallyChina’s focus is on logs and sawnwood that its own industry can process, either for domestic use or re-exportImports of plywood and processed solid wood products has declined in recent yearsLargest volumes of logs are coming from Russian Far EastChina’s growing demand for wood pulp and wood chips will likely continue, as well as most grades of paper
Over the medium-term, China’s demand for wood imports will largely depend on the success of its domestic plantation programChina’s domestic market is also showing growing demand for higher quality products
Implications for Indonesia -- 1
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… but China is not the only market!… but China is not the only market!
Although China’s growth is now a major force driving Asia-Pacific forest trade, Indonesian exporters need to keep focus on other markets tooJapan’s imports are declining, but it is still a major market and Indonesian exporters have good networksSouth Korea is growing, although on much smaller scaleIndia shows signs of rapid growth that may parallel ChinaNorth America and Europe remain key markets for high-grade products
Increasingly, Indonesia producers must be able to compete with Chinese exportersNeed for a diversified strategy
Implications for Indonesia -- 2
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Being competitive does not need to mean large investments in capital-intensive industries
Being competitive does not need to mean large investments in capital-intensive industries
China’s wood processing sector shows that small- and medium-scale producers can make export-quality productsMaintaining job levels will be a critical part of the industry restructuring process in IndonesiaPartnerships between companies and small-holder wood suppliers can also play an important part in managing sustainable industriesChina may offer useful models for such partnerships
Implications for Indonesia -- 3
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Competition for resources is driving new investments in Asia-Pacific forestry sectorCompetition for resources is driving new investments in Asia-Pacific forestry sector
Producers from China, Japan, and South Korea are now seeking to secure new supplies of raw materials and semi-processed productsJapanese pulp and paper companies are making significant investments in plantations, mostly in Australia and New ZealandChinese and Japanese companies are also seeking out new sources of wood chips and wood pulpSubstantial capital investments in Indonesia will require a secure investment environmentResolving land tenure disputes and social conflicts over forest resources will be key
Implications for Indonesia -- 4
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Effective coordination with consumer countries is a key step to improve forest governance
Effective coordination with consumer countries is a key step to improve forest governance
Efforts to resolve Indonesia’s problems with illegal logging and trade will require effective coordination with China, Japan and other consumer countriesA good start has been made with the Asia Forest Partnership and the Indonesia-China MoU on illegal tradeBut now steps should be taken to operationalize theseAccess to Japan, North America and Europe markets will increasingly require verifiable sourcing
Implications for Indonesia -- 5
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