Fierce Competition Over Global Wood Fibre Supply Set to Take Off

Emerging markets and industry needs for fibre will outweigh traditional demands for paper.

Increasing populations and wealth will mean more fibre is needed, regardless of the reduction in traditional paper use.

June 2, 2011 - The demand for some types of paper, like newsprint and other printing and writing paper will decrease in the next decade but the many other uses for wood fibre will mean dramatic increases in global demand overall, according to a new report from PwC.

PwC's Canadian Forest, Paper and Packaging Leader Bruce McIntyre says: "Companies from a diverse array of industries — energy, utilities, chemicals and potentially many more as biomaterials evolve — will compete with FPP companies for control of forests, or at least access to their fibre, and the best economic use of the resources they provide."

As a result, demand will outpace supply and increasing competition for fibre will be a key factor of future supply chains.

"The world's forests will make a reduced contribution to meeting our increasing needs for wood fibre," says McIntyre. "Many of these forests are economically inaccessible or are sensitive to disturbance. Instead, these forests are going to be valued for their conservation benefits and that will result in restrictions on industrial wood output."

Wood fibre needs are increasingly being met from planted forests which currently cover approximately 272 million hectares or 7% of the world's total forest area. The World Business Council for Sustainable Development (WBCSD) estimates that the yield and harvest from planted forests, will need to increase threefold by 2050, with planted land-area increasing 60%.

In 2005, there were already nearly 141 million ha of plantation forests globally, an increase of over 12.8 million ha compared to 2000. Brazil stands out as the world leader in forest plantation agriculture, with nearly 6 million ha of plantations producing significant amounts of fibre for the global market. Brazil's largest trading partner is now China, and large shipments of pulp are one reason for the increased demand.

The report also finds that in North America and Europe, many of the existing mills simply won't be needed for newsprint or printing and writing paper. But increasing populations and wealth will mean more fibre is needed, regardless of the reduction in traditional paper use.

In the EU for instance, 340-420 million cubic metres of woody biomass per year is forecast to be needed solely for energy purposes by 2020, if current government policies continue. That level of demand could lead to a forest fibre deficit of 200-260 million metres³ by 2020.

Asia's emerging markets are also booming. In China and India, absolute demand for paper will still go up, although it won't increase as quickly as overall GDP growth. China in particular has a large fibre deficit, so pressure to secure access will grow in order to achieve its 2020 goal of 20 million ha for additional woodland planting to fuel bioenergy projects. In 2009, China imported over 100 million metres3 on a roundwood equivalent basis - roughly as much as Canada's entire timber harvest in that year.

Plantations have already faced a lot of criticism, though, for everything from replacing natural forests with plantations, to displacement of local peoples, to accusations that they have damaged local water tables.

"We believe that plantations still represent the single best opportunity to meet increased demand for forest products without damaging ecosystems, provided planting is done responsibly and balanced with appropriate conservation programs," says McIntyre.

New methods of accessing available fibre may emerge in response to the growing pressures. PwC sees international fibre exchanges and the emergence of a new biomass aggregation industry as two possibilities, but there may be others as well.

"The focus will shift from accessing fibre to using fibre more efficiently. There will be viable alternatives to woody biomass, although land availability may be a limiting factor," says McIntyre. "Technologies can help, but those businesses that control, or have secure access to competitive sources of fibre will be the best positioned for growth."

For more information, and to read the full report, please visit: Growing the Future.

SOURCE: PwC

Note: PricewaterhouseCoopers in the fall of 2010 changed its name to PwC.