Outlook for Australia’s forestry and forest products industry Mark Kelly URS Forestry

Outline of issues International context Resource trends and log markets Sawn timber Pulp and paper Export woodchips Composite boards Emerging products Conclusions

International overview China’s demand and production driving international wood product markets Declining native tropical forests Increasing supplies from plantations Supplies from Russian forests South American pulp and paper expansion

China’s demand and log prices Softwood log imports Hardwood log imports

The rise of plantations Proportion of roundwood sourced from tropical plantations and tropical native forest

Large expansion in market pulp capacity in South America will help meet China’s demand Expansion of market pulp capacity in South America China’s imports of pulp

Australian plantation resources New softwood plantation establishment in Australia New hardwood plantation establishment in Australia Softwood changed from one of increasing supplies to constrained opportunity for expansion Plantation hardwood pulpwood will expand rapidly over the next decade - another 8 million m3 pa

Australian native forest resources   Current harvest volumes Future harvest volumes NSW 665,000 m3 of native forest sawlogs harvested in 2005/06 Most committed under Wood Supply Agreements Private native forests supplying around 500,000 m3 pa Expect some decline in harvest over next 10-20 years. Plantation resources may compensate but unlikely to be sufficient Sustainability of private native forests unknown Tas 650,000 m3 pa RFA sustainable sawlog harvest Private forests currently supplying around 300,000 m3 pa of sawlogs Relatively stable public native forest supply with future decline to be met by increasing plantation resources Private native forest harvest may decline Qld Around 250,000 m3 pa of sawlogs from public native forests Around 250,000 m3 pa of sawlogs from private native forests Most native forest harvesting on crown land will cease by 2025, to be replaced by plantation resources Western hardwoods region (around half) to cease around 2012 Harvest from private native forests expected to decline Vic Around 580,000 m3 pa of native forest sawlog Private native forest volume unknown Volumes recently reduced due to impact of Alpine fires Impact of latest fires still being considered WA Sustainable native forest sawlog yield of 185,000 m3 pa Private forests very small Ongoing sustainable yield from public forests of 185,000 m3 pa

Sawn timber consumption Apparent consumption of sawn timber in Australia Per capita consumption of sawn timber in Australia

Hardwood sawn timber continue to move to high value appearance uses Apparent consumption of LVL in Australia Rapid growth in LVL consumption in Australia LVL creating competition in hardwood structural markets Also potential competition from LSL

Pulp and paper Apparent consumption of printing and writing paper in Australia Apparent consumption of pulp in Australia

Woodchip exports Real Australian hardwood woodchip export prices Forecast supplies of hardwood chips in Australia

Composite boards Apparent consumption of particleboard in Australia Per capita consumption of boards in Australia Apparent consumption of MDF in Australia

Emerging environmental markets Development of carbon trading provides opportunities for plantations Bioenergy and biofuel also provide opportunities Water issues can have both positive and negative implications

Key issues for the future Need to attract investment in sawlog plantations Focus on higher value production Develop markets for environmental services Private native forests Scope for sustainable management Pulp mills are very important to hardwood pulpwood sector Hardwood sawn timber to face continued competition Building understanding of sustainability Certification