Global Log and Lumber Dynamics with a Focus on Russia, China & Other Perspectives

Transcription

1 Global Log and Lumber Dynamics with a Focus on Russia, China & Other Perspectives ForestWood 2016 Conference Auckland, New Zealand March 16, 2016 By: Russell Taylor, President

2 WOOD MARKETS Group & New Zealand Background in New Zealand (radiata pine): Forester (in Tasmania ) Consulting Clients: Shell (1990) Forestry Corporation (1991) Fletcher Challenge (1994) Carter Holt Harvey (1997) and many more since Presenter at NZ Conferences : Starting in 1997 About 1 presentation every 2 years An outsiders perspective 2

3 Presentation Outline 1. About: Global Markets 2. About: Global Currency Devaluations 3. About: Global Softwood Log & Sawnwood 4. About: Russia 5. About: China 6. About: North America highlights 7. Summary 3

4 1. About: Global Markets Global economies = OK, but somewhat fragile Global trade = uncertain, volatile, low prices Global housing market = flat in most countries + slow recovery in US; NZ & Australia slower Low U.S.-dollar lumber prices are now expected in 2016 in U.S. & many major export markets as devalued currency exporters compete on price. U.S. market great for exporters with devalued currencies e.g., New Zealand, Russia, Canada Currently, too much supply chasing flat demand in 2015 and probably again in

5 5 2. About: Global Currency Dynamics Most major currencies plunged against the U.S. Dollar in 2014 and The net result is a major change in the competitiveness of different producing and exporting countries vs. U.S. producers = will attract more imports to the U.S. - very positive for exporters to the U.S. = for U.S. wood exporters = negative impact s = in most export markets = more competition & lower prices (in US- dollar prices) - no real advantage for most exporters except Russia and Brazil (and Canada in the U.S. market).

6 Global Currencies Huge Changes! 6 The whole world is more competitive against the U.S! Brazil = to 60% & Russia to 45% since Jan 2014

7 3. About: Global Log & Lumber Supply Global trends growing very slowly (flat in most regions) over the last 4-5 years in logs, with only some small gains in lumber Countries with major supply or demand dynamics: Russia China U.S. Canada India 7

8 There is general tightening of softwood timber harvesting in some major global regions: Deficits: China, India Canada: 15-35% timber harvest drops: 3 Provinces Constraints: in many other countries (logistics). Plantation Pine: appears to be one of the few supply options for incremental sawlogs = New Zealand, Brazil, Chile, Australia & US South. Tropical Hardwoods: log export bans in Indonesia, Gabon, Ghana, Myanmar (Apr 2014). Impact on uncertified logs/lumber from the EU Timber Regulations, Lacey Act, Australia, etc. 8 Timber Supply Issues

9 Global Sawn Softwood Production 9 UN-ECE = 75% of global total; Europe > North America

10 Up to 2013 = increasing costs, crumbling logistics, poor labour, high rail costs, bankruptcies, etc. - had marginalized Russia s logging industry. Russia s log export tax (2008) + volume quota & new duties (WTO) have restricted log exports. Sawlog export volumes: bottomed in Lumber exports = increasing since mid-1990s Priority Investment Projects many! Weaker ruble = game changer? Rumours of reductions to the log export tax! RUSSIA: Timber Supply Issues = Big Impact on China

11 Russia: Softwood Log Supply & Demand 11 From the ruble devaluation, more logs are being processed in Russia (where lower ruble-based costs yield lower log processing costs and there is no export tax on lumber).

12 Russia Exports Now Increasing After Log Export Tax, GFC & Ruble Decline Sawlog Exports Lower; Pulpwood Higher 12 Russian lumber exports = now the big winner!

13 Russia: Softwood Lumber Supply/Demand 13 Russian softwood production up by 2.2% in 2015 vs 2014 & increased 3+% in 2015.

14 China s domestic wood products demand is forecast to be relatively flat in 2016 & 2017 vs. 15% per year from Widening gap between growth in construction market (hemlock, SPF ) vs. furniture & valueadded market (radiata, red pine, Eur. spruce) China consumes about % of its domestic production, so the GDP growth and wood products demand have traditionally been closely tied until the slowdown in Imports of softwood logs and lumber = a key ingredient in China s supply chain as domestic timber harvests are falling, widening gap China

15 China: Softwood Log Imports 15 Russian log exports declining steadily to China (lower in 2015); NZ now the largest supplier to China

16 Russia: log exports expected to be flat to lower in the next 3-5 years, so where else can China get logs: New Zealand: getting closer to the upper limits of logistics(?) but can divert logs from India & Korea BC Coast: Log exports may be close to peaking as domestic market heats up (and pressure on government mounts to limit exports). US West Coast: The only big region that could increase log exports to China if US$ prices create enough incentives this would impact PNW mills! Australia, Eastern Europe, Baltics, US South incremental suppliers for now? 16 Softwood Log Suppliers to China

17 China: Softwood Lumber Imports 17 Canada (BC) exports = Drop; Russia/Europe/Radiata Pine = up

18 6. Highlights of WOOD MARKETS 2016 Report: Outlook to 2020 Highlights of Canadian & U.S. lumber trends & outlook Report produced since

19 Canada Exports to Flatten: Less Offshore 19 Strong demand and higher prices in the U.S. drive shipments

20 US Imports: No growth from Canada 20 The U.S. will need increasing imports from Europe, and also from the Southern Hemisphere pines (non-structural)

21 The 5 th negotiation between the U.S. and Canada since the early 1980s is underway. The U.S. accuses Canada of subsidies from government-owned timber, plus other factors. U.S. timberland owners want to increase the value of their forests and use the America lobby system and U.S. trade law to their advantage. The reality is quite different: Stumpage rates in U.S. > Canada (economics) U.S. sawmill earnings > Canadian mill earnings U.S. South highest sawmill earnings in world since 2009 due to cheap SYP logs! Canada s lumber output no threat! 21 U.S./Canada Softwood Agreement

22 Trans-Pacific Partnership: Canada View The Conservative government signed the TPP shortly before they were defeated by Liberal government 6 months ago, so there now there is some concern if the Liberals will actually sign it. In the negotiations with Japan, a side letter was agreed upon between the two countries addressing log exports. The Canadian government negotiators: claim that this letter protects existing restrictions on these exports = status quo. The Japanese side: insist that Canada has agreed to ease restrictions on log exports. Stalemate? 22

23 7. Key Outcomes: Global Wild Cards Russia: Log Export Tax/Quotas next steps? Russia: New competitiveness in export markets China: Economy & need for more imports? USA: Economy & housing demand key! Europe: Economy & wood products recovery? Japan, Korea, SE Asia: Pace of growth, imports? ME/NA, India: Offer growth but not stable politics? Canada: Timber supply outlook = poor New Zealand: Timber supply outlook = modest? = All impact global access to logs and lumber. = Global supply is becoming tight, so higher prices are expected in 2-3 years. 23

24 WOOD MARKETS: Russia & China Tour 24 Our 8 th Russia Tour: Siberia Forest & Industry Tour September 11-18, 2016 See it for yourself: A unique chance to see the log and lumber export potential from Siberia, including forests, logging, mills, value-added and logistics. Tentatively scheduled to end at the Russia-China border for a 2-day tour in Manzhouli, China (Sept 18-19) and then to our China Supply Chain & Logistics Conference in Qingdao, China (Sept 20) followed by a China Industry & Port Tour (Sept 21-23).

25 May 5, 2016 WOOD MARKETS: Global Conference: 6 th Annual Global Log & Lumber Conference Vancouver BC May Featuring: Log/lumber export trends in the Pacific Rim markets Global lumber trends U.S. Market Outlook Log/lumber Price Trends Special DAY 2: Focus on Russia & China Dynamics Networking VANCOUVER BC May 5 & : May 5,

26 Thank You! Russell Taylor International WOOD MARKETS Group Inc. Vancouver, B.C., Canada Suite E. Cordova Street Vancouver, BC V6A 0A5 Tel: (604) / Fax: (604) retaylor@woodmarkets.com