Transcript International Wood Energy Market Developments Ed Pepke Forest Products Marketing Specialist UNECE/FAO Timber Section, Geneva Modern Wood Energy Systems and Markets 16-17 September 2008, Timisoara,

International Wood Energy Market Developments
Ed Pepke
Forest Products Marketing Specialist
UNECE/FAO Timber Section, Geneva
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Subjects
I.
Overview of forest products
market developments
II. Market drivers
III. Policy drivers
IV. Wood energy markets
V. Conclusions
VI. Recommendations
VII. Questions and discussion
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Main sources of information
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• UNECE/FAO Forest
Products Annual Market
Review, 2007-2008
• UNECE/FAO Forest
resources assessment
• UNECE/FAO Timber
database
• FAO Statistics
• State of Europe’s Forests
2007 by Ministerial
Conference for the
Protection of Forests in
Europe, November 2007
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Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
I. Overview of forest products market
developments
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
“United States forest products market crash
impacts UNECE region”
• In 2007, US housing construction continued its sharp
decline, severely impacting world markets.
• Green building systems are a market driver, but also a
constraint.
• UNECE region consumption of wood and paper products fell
in 2007 for the first time in 6 years (downturn in North
American overcoming a rise in European and CIS).
• Oil prices soared, stimulating wood-based biofuels and
policies to mobilize more wood from both forests and other
sources.
• Certified forest area rose to over 300 million hectares
worldwide.
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
UN Economic Commission for Europe region
Europe 42
North America 2
Commonwealth of Independent States, 12
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
“US forest products market crash
impacts UNECE region”
• Some European market sectors exceeded their North
American counterparts: production of sawn softwood and
consumption of panels and paper and paperboard.
• China’s trade with countries in the UNECE region continues
to increase.
• In Europe, wood products prices generally rose in 2007, then
fell in 2008 as markets weakened
• In North America prices for some wood products, such as
sawnwood dropped to their lowest levels since 1991.
• Russian export taxes on roundwood are disrupting supply
and changing trade patterns.
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
II. Market drivers
•
•
•
•
US housing market
Energy prices
Russian export taxes
China’s trade
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Million starts (SAAR)
United States housing starts
•
•
•
2
1.8
1.6
US residential housing: 2.2 million
1.4
2008:
under 1 million, -40%
1.2
1
Recovery
beginning 2010 (NAHB)
0.8
0.6
0.4
0.2
0
08
20
07
20
06
20
05
20
Single family
homes in 2006
Multi-family
Source: US Census Bureau, 2008.
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Oil prices
140
Rising fossil fuel costs driving wood energy
100
Spike
at $145/barrel in July 2008
80 production in Europe, Canada, Russia
Pellet
Competition
with wood industry
60
Concern
for sustainability  certification
40
Biofuels vs. food  wood
$/barrel
•
•
•
•
•
•
120
20
0
08
20
07
20
06
20
05
20
04
20
Source: US Department of Energy, 2008.
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Russian exports & taxes
100
• Roundwood
export tax
Million m3
•
•
90
– 2008 €15/m3
80
3
– 2009
70 €50/m
60
Log exports
to Europe down
50
With 40
new Forest Code
– Autonomy
to regions
30
20
– Attracting
foreign investment
10
– Value-added
processing
0
44% in early 2008
• Illegal harvesting and exports
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
Roundwood
Market pulp
Sawnwood
Paper and paperboard
Source: UNECE/FAO TIMBER database, 2008
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
China’s forest products output impacts
Million $
180 000
• Impacting
every market sector
160 000
• Roundwood
imports profit UNECE region
exporters
140 000
120 000
• European
roundwood exports affect sawmills
100 000 exports benefit consumers
• China’s
80 000
• European,
American manufactures impacted
60 000 does not include furniture
• Graph
40 000
20 000
0
07
20
05
20
03
20
01
20
99
19
97
19
Source: International Wood Markets Group, 2008
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Chinese furniture exports
25
$22 billion
2007, total furniture exports
$11 billion,
wooden furniture exports
20
$69 billion, total furniture production
15
66% of production for domestic market
10
2,322 manufacturing
plants
5
Most plants
have some foreign investment
Billion $
•
•
•
•
•
•
0
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
Total furniture
Wooden furniture
Source: IBISWorld, 2008 and Tan,X. et al., 2007
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Chinese forest products production
80
60
50
3
Million m or m.t.
70
40
30
20
10
0
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
Roundwood m3
Woodpulp m.t.
Plywood m3
Particle board m3
Sawnwood m3
Paper products m.t.
Fibreboard m3
Source: International Wood Markets Group, 2008
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Chinese forest products imports
6000
Million $
5000
4000
3000
2000
1000
0
07
20
05
20
03
20
01
20
99
19
97
19
Roundwood
Sawnwood
Panels
Woodpulp
Waste paper
Paper products
Source: International Wood Markets Group, 2008
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Chinese forest products exports
4000
3500
Million $
3000
2500
2000
1500
1000
500
0
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
Sawnwood
Particle board
Paper products
Plywood
Fibreboard
Source: International Wood Markets Group, 2008
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Chinese forest products consumption
70
3
Million m or m.t.
60
50
40
30
20
10
0
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
Paper and paperboard
Sawnwood
Wood-based panels
Sources: FAOStat, 2008 and Tan, X., et al, 2007.
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
III. Policy drivers
•
•
•
•
•
•
•
Climate change
Carbon markets
Wood energy, biofuels vs food
Green building
Deforestation
Corporate responsibility
Illegal logging and trade
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Policies can level or distort the playing field
•
•
•
•
•
Laws, duties, tariffs, taxes, regulations
Raw material costs
Labour costs & benefits
Manufacturing costs
Goal: Raise standard of living  and
domestic consumption of and paper
wood products
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Climate change
• UN Intergovernmental Panel on Climate Change:
“evidence of a warming trend is unequivocal”
• Policies mitigating climate change
–
–
–
–
National and sub-national governments
International organizations
Trade associations
Non-governmental organizations
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Climate change
• 17.4% of global greenhouse gas emissions caused by
humans are from forestry, mainly deforestation
• Direct links between sustainable forest management
and climate change
• EU targets for 2020
– 20% renewable energy
– 20% improved energy efficiency
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Volume damaged by storms in Europe
(million m3)
200
180
160
140
120
100
80
60
40
20
0
Factor “X” for forests:
Climate change
Greenhouse effect on growth?
Species substitution?
Storms and their damage?
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 1999
Source: UNECE/FAO Forest Products Annual Market Review
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Cumulative (CHF millions)
Annual losses (CHF millions)
Storm damage in Swiss forests, 1972-2005
Source: Institute fédérale de Recherche Suisse, 2007
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Carbon markets
• Active forest management reduces carbon emissions
• Following Kyoto Protocol, carbon trading established
• Pulp and paper industry included in the EU Emissions
Trading Scheme
• Future in marketing carbon sequestration in forests and
products of wood and paper?
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Wood energy policies
• Targets for wood energy
– European and North American
– Must be balanced with current and future availability from
forests
– Must be balanced with wood processing industry needs
• 60% of annual growth in European forests harvested
– 80% in North America
– 34% in Russia
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Biofuels versus food
•
•
•
•
Food security
Food shortages
Production of liquid biofuels from food crops
Wood-based biofuels do not compete with
food
– Forests, including harvesting residues
– Wood processing residues
– Recycling of wood and paper products
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Green building systems
• New market
• New market driver
Photo: APA.
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Deforestation
• Issue plaguing the forest sector
• Consumers confused between tropical
deforestation and state of forests in Europe
• Strong policies in UNECE region for sustainable
forest management
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Change in annual forest area, 1990-2000
3
Asia &
Pacific
Million hectares
2
1
Europe
0
Mideast
-1
North
America
-2
-3
-4
Africa
S. America
-5
Natural
Plantation
Central
America
Total
Source: FAO Global Forest Resources Assessment 2000
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Change in annual forest area, 1990-2000
(million hectares)
Deforestation
Increase
Net change
Tropics
-14.2
+1.9
-12.3
Temperate
-0.4
+3.3
+2.9
World
-14.6
+5.2
-9.4
Note: The change in annual forest area was recalculated at -7.3 million ha per year
from 2000 to 2005 by the FAO Global Forest Resources Assessment in 2005.
Source: FAO Global Forest Resources Assessment 2000
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Causes of deforestation
• Forest conversion
– Agricultural, including
• Pastures for animals
• Bioenergy plantations: palm oil, sugar cane
– Urbanization
• Unsustainable forest management
–
–
–
–
Poor harvesting practices
Insufficient regeneration
Fire, insects, disease
Over harvest of fuelwood
• Poverty and over population
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Forest resources growing stock
70
60
50
40
s
30
20
10
0
Europe (41)
Growing stock
North America
CIS
Net annual increment
Fellings
Source: UNECE/FAO Forest Resources Assessment 2005
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Net annual growth vs. fellings
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Europe (41)
N. America
CIS
Net annual increment
Fellings
Source: UNECE/FAO Forest Resources Assessment 2005
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Forest resources in Europe*
• Only 60% of the annual growth is
harvested
• Forest volume increases ~700,000 m3
daily
• Forest area growing: ~700,000 ha
annually
* Europe = 42 countries for the UN Economic Commission for Europe
Source: UNECE/FAO Forest Resources Assessment
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Timber Committee: corporate social responsibility
• Trade associations issuing codes of conduct
• Companies developing CSR policies to demonstrate their
positive social impact
• CSR policies are a means to
– Shape consumer perceptions
– Gain competitive edge
– Improve international recognition and perception
• Mutual recognition of trade associations’ CSR policies could
facilitate trade.
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Illegal logging and trade
• G8
– “support existing processes to combat illegal logging”
– “one of the most difficult obstacles to further progress in realizing
sustainable forest management and thereof , in protecting forests
worldwide”
• Legislation in US and EU
• Trade associations establishing and updating codes of
conduct
– UK TTF proactively made members establish “due diligence risk
assessment systems”
– Timber Trade Action Plan coordinates associations
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
IV. Wood energy markets
(the oldest and newest market)
Nice discovery Og,
but what about
global warming?
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Wood energy markets
•
•
•
50
Driven by high fossil fuel costs
Driven by policies to promote renewable energies
– 20% by 2020 in EU
– 10% of transport fuels by 2020 in EU
Driven by policies for energy security
Renewable energy in European Union, 2005, 2011, 2020
Percentage
40
30
20
10
0
U n ite
gdo m
d Kin
en
Swed
Sp ain
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
ia
ds
2020 target
n
Slo ve
k ia
Slo va
n ia
Ro ma
gal
Po rt u
erlan
ia
bo urg
d
Po lan
N et h
Malta
m
Lu xe
an
Lit h u
d
2011 target
a
Lat vi
Italy
Irelan
ce
an y
ar y
H un g
G ree
G erm
e
Fran c
nd
Fin la
ark
b lic
R ep u
ia
Est on
De n m
us
C zech
C ypr
ria
Bulga
ia
um
Belgi
A ustr
2005 share
Wood energy markets
• Similar targets in North and South America, Asia,
Oceania and Africa
– US target of 15% biofuels for transport by 2022
– US target of 30% by 2030
• Most energy demand for space and water heating
• Wood pellet industry growing
– Warm winters of 2006/2007, 2007/2008  oversupply
– Transportation costs, especially Canada to Europe
• Future: cellulosic ethanol
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Pellet consumption et production
Pellet production (1000 tons)
7000
6000
5000
4000
N. American production
European production
Other production
Total production
N. American consumption
European consumption
Other consumption
Total consumption
3000
2000
1000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Canadian Wood Pellet Association, 2007
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Wood fuel production
120
80
60
40
Europe
Russia
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
1999
20
1998
Million m3
100
N. America
Sources: UNECE/FAO TIMBER database, UNECE Timber Committee forecasts, October 2007
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
French fuelwood production
40
Million m3
35
30
25
20
2006. New French study
on consumption and
production. Old statistics
not yet corrected.
15
10
5
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Sources: UNECE/FAO TIMBER database, and UNECE Timber Committee forecasts, October 2007
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Situation today
•
•
•
•
Record high petroleum prices
Energy sources security problems
Climate change policies
Wood industries’ raw material needs
increasing
• Wood energy production increasing
• Roundwood and residue prices increasing
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Utilization of biomass in the EU
80
Liquid biofuels
70
60
40
Wood 80%
Other wood & wood waste
30
20
Wood & wood waste in households & services
10
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
0
19
Mtoe
Biogas
Municiple waste
50
Source: EurObserv'ER, 2007
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Wood for the wood-based industries
• Increasing demand forecast
• Wood raw material prices climbing
• Competition for roundwood and residues
– Local and regional
– Short-term intense!
– Medium term?
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Demand for wood and fibre in western
Europe, without energy, 1960-2020
800
Recovered paper
Net pulp imports
Amount (in million cubic metres WRME)
700
Gap = residues
Industrial roundwood
Total wood and fibre requirement
600
500
Growth in demand without energy
400
300
200
100
0
1975
1980
1985
1990
1995
2005
2010
2015
2020
Modern
Wood
Energy
Systems
and2000
Markets
Year
16-17
September 2008,
Timisoara,
WRME = Wood raw material
equivalent
Source:
UNECE/FAORomania
European Forest Sector Outlook Study, 2005
1960
1965
1970
Results of a UNECE/FAO study on
“Wood resources availability and demands:
Implications of renewable energy policies”
• Wood is the major renewable energy source in Europe
• Woodfuel consumption much greater than previously
measured
• Lack precise statistics
• Increasing wood energy changes long-term forecasts
for the sector’s wood needs
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Dilemma or opportunity?
(million m3)
Year
Supply
Demand
“Gap”
2005
775
821
-47
2010
791
976
-185
2020
825
1274
-448
Source: UNECE/FAO “Wood resources availability and demands:
Implications of renewable energy policies”, 2007.
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
How to fill the “gap”
• Increase harvests from European forests
– More of annual growth
– More standing timber
• Remove more biomass from forests
– Tree tops
– Branches, needles, leaves
•
•
•
•
Harvest wood outside forests (urban, hedgerows)
Increase wood recycling and residue reuse
Import biomass, wood fuels
Improve energy use efficiency
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Possible consequences of a future gap
• Renewable energy targets not achieved
• Goals achieved, but not only with wood
– Other sources of biomass
– Other renewable energy sources
• Wood industry growth slowed
– Raw material unavailable
– Price of raw material too expensive
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Import more fibre? From Russia??
Billion m3
90
80
Europe-Annual growth
70
Europe-Annual harvest
60
Europe-Growing stock
50
40
Russia-Annual growth
30
Russia-Annual harvest
20
10
0
Russia-Growing stock
1990
2000
2005
Source: UNECE/FAO Forest Resources Assessment
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Import more fibre? From Russia??
Annual growth vs. annual harvests
0.9
Europe-Annual growth
Europe-Annual harvest
Russia-Annual growth
Russia-Annual harvest
0.8
Billion m3
0.7
0.6
0.5
59%
0.4
ATTENTION!
0.3
New Russian export taxes
0.2
April 2008: € 15/m3 conifers
34%
0.1
0
1990
2000
2005
Jan. 2009: € 50/m3 conifers
Jan. 2011: € 50/m3 birch
Source: UNECE/FAO Forest Resources Assessment
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Mobilize more wood
• Remember ~40% of annual growth remains
in Europe’s forests each year
• Confederation of European Forest Owners
estimates on private forest lands
– 150 million m3 more harvest possible (~half of
surplus 40%)
– 25% more production through better silviculture
• How many billion cubic metres of standing
timber are enough?
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
V. Conclusions
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
UNECE Timber Committee on “Energy”
• Entire forest sector being transformed by increased wood
energy in the UNECE region
– Forest owners and managers
– Wood industry and markets
– Bioenergy industry
• Growing wood energy is both a challenge and an opportunity
• Government policies must consider
– Needs of the forest sector, especially the wood industry
– Needs for bioenergy
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
UNECE Timber Committee on “Energy”
• Interaction of policies and markets is
complex
• Policies promoting bioenergy
– Strongly increase wood energy consumption
– Open important markets
– Create new trade
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Swedish imports of wood fuels
Source: UNECE/FAO
Forest Products Annual
Market Review
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
UNECE Timber Committee on “Energy”
• Pellet demand at record level
• Pellet prices peaked in 2007, except Sweden
• Increasing pellet trade
– Especially strong in Germany, Sweden, Austria
– 80% of N. American production exported to Europe
• Consumption of wood energy much greater than previously
known
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Future of the forest sector
• Integrated production of wood & paper products with energy
production
• Greater value of energy production by integrated plants than
by “primary wood & paper” products?!
• Profitability of the sector linked to wood energy
– Challenge for certain industries, e.g. panels
– Opportunity for forest owners, sawmills, energy suppliers
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
VI. Recommendations
• Know the provenance of your wood, for products and
energy
– Be sure it’s sustainable and legal
– Not only for your company today, and for your company
tomorrow
– But for the sake of the entire sector's reputation
• Work together to increase wood demand through
effective promotion
• Promote modern wood energy systems
• Use wood efficiently, with highest values first, and
eventually recycle for new products and energy
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
VII. Discussion
&
questions
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania
Ed Pepke
Forest Products Marketing Specialist
UNECE/FAO Timber Section
448 Palais des Nations
CH-1211 Geneva 10, Switzerland
Tel. +41 22 917 2872
Fax +41 22 917 0041
www.unece.org/timber
[email protected]
Modern Wood Energy Systems and Markets
16-17 September 2008, Timisoara, Romania