1. FEFPEB CONGRESS GLOBAL SAWNWOOD FLOWS AND THE IMPACT OF BIOENERGY
Pöyry transparent logo flattened with the background image
GLOBAL SAWNWOOD FLOWS AND THE IMPACT OF BIOENERGY
October 18, 2013
Cormac O’Carroll, Heikki Vidgren

2. PÖYRY – CONSULTING AND ENGINEERING EXPERTS
Pöyry is an international consulting and engineering company, dedicated to serving clients across the world’s energy and forest industry sectors
6,500 experts
Over 15,000 projects annually
Solid track record in pulp and paper
EUR 775 million net sales in 2012
Clients
Unique Lifecycle Partner
Local Relation-ships
World-class expertise
Why Pöyry?
Unique lifecycle partner – ability to deliver across the entire lifecycle
World-class expertise – deep experience, solid implementation capability
Local relationships – easy access via strong regional office network
FEFPEB- SYPAL 2013
18 October 2013

3. AGENDA Introduction of Pöyry Global Sawnwood Flows Impact of Bioenergy
Conclusions
FEFPEB SYPAL 2013
18 October 2013

4. GLOBAL SAWNWOOD FLOWS

5. GLOBAL SOFTWOOD SAWNWOOD DEMAND
The global softwood sawnwood market is around 290 Million m3
110
106 84 80 81 69 78 68 12 14 16 16 13 16 17 19
Russia
Eastern Europe 32 35 26 21 16 16
Western Europe 21 14
North America
Japan
China 20 21 22 15
2000
2005
Consumption Million m3
2010
2012
Latin America
FEFPEB SYPAL 2013
18 October 2013

6. SOFTWOOD SAWNWOOD DEMAND CYCLES
In addition to the increasing demand in growth markets, the cyclicality of the large mature markets have a significant impact on the demand of sawnwood. Where are we in the cycle?
North America & Western Europe
FINANCIAL CIRISIS
-38%
=78Mm3
DOT COM BUBBLE
-3%
=6Mm3
ENERGY CRISIS/ GULF WAR
-24%
=34Mm3
GLOBAL RECESSION
-11%
=18Mm3
OIL CRISIS
-21%
=28Mm3
Source FAO (slightly different mmbf/m3 conversion vs p 4)
FEFPEB SYPAL 2013
19 October 2013

7. GLOBAL FOREST RESOURCES – REGIONAL BALANCES
Growing economy and demand of traditional forest products in Asia and Bioenergy sector in Europe will create significant regional wood deficits.
Equator
Supply deficit
Stable supply
Increasing supply
FEFPEB SYPAL 2013
19 October 2013

8. SOFTWOOD SAWNWOOD TRADE FLOWS
Historically major trade flows have been between North America, Europe and Japan. Importance of China as destination and Russia as source has increased during the last years.
1995
2012
0.4
37.3
1.2
1.7
0.3
5.8
7.3
0.5
3.9
0.9
0.7
1.3
1.9
14.8
0.2
22.3
0.9
0.3
26.7
0.8
7.4
3.4
1.4
0.4
1.7
1.9
5.8
2.0
1.5
11.1
8.2
3.3
10.2
3.0
0.3
Million m3
Trade flows of over 0.2 million m3
FEFPEB SYPAL 2013
19 October 2013

9. N-America + Europe + Russia
GLOBAL SAWNWOOD BALANCE
Based on the current economic outlook, the growing demand of sawnwood lead by the fast growth in China will be reaching the limits of existing capacity by 2020.
N-America + Europe + Russia
China
Total
Demand 2012
Production 2012
Demand 2020f
Capacity (highest production in )
The forecasts are based on the 2013 spring IMF economic outlook
FEFPEB SYPAL 2013
19 October 2013

10. REGIONAL SAWNWOOD BALANCES 2012-2020
Outside China, the demand is expected to grow most significantly in North America, where the impact of economic crisis was more severe and demand in construction market is more cyclical than in Europe.
North America
Western Europe
Eastern Europe
China
Russia
Demand 2012
Production 2012
Demand 2020f
Capacity (highest production in )
The forecasts are based on the 2013 spring IMF economic outlook
FEFPEB SYPAL 2013
19 October 2013

11. Eastern Europe + Russia
EUROPEAN SAWNWOOD BALANCE
Demand in Eastern Europe will grow to the level or above current capacity in Increasing capacity utilisation in Western Europe, more capacity in Eastern Europe or growth of import from Russia is required to meet the demand in W-Europe.
Western Europe
Eastern Europe
Europe
Russia
Eastern Europe + Russia
Europe + Russia
Demand 2012
Production 2012
Demand 2020f
Capacity (highest production in )
The forecasts are based on the 2013 spring IMF economic outlook
FEFPEB SYPAL 2013
19 October 2013

12. GLOBAL SOFTWOOD SAWNWOOD PRICING
As the trade flows between the major markets in Europe and North America are small, also the price developments of these regions are different. The prices in Europe recovered in 2010, when the output and inventories balanced to lower demand. In America, small acceleration of growth increased prices since 2011.
Softwood sawnwood prices in North America and Western Europe
(Index: €, 1Q2003 =100, nominal)
FEFPEB SYPAL 2013
19 October 2013

13. EUROPEAN SAWNWOOD BUSINESS CYCLES
In addition to low volume, the industry is challenged by low margins. The sawnwood prices have decreased in real terms since the beginning of 2000’s, but log prices in many locations have increased
Sawnwood and log prices in Europe
Index (real) 1Q2000= 100
FEFPEB SYPAL 2013
19 October 2013

14. THE IMPACT OF BIOENERGY

15. BIOENERGY– HOW BAD CAN IT GET?
Bioenergy incentives for heat and electricity generation are highly complex and differ greatly in Europe.
Incentives for renewable heat from biomass
Incentives for renewable electricity from biomass
Legend:
Low interest loans
Investment subsidiaries
Other
Price-based schemes
None
Legend:
Feed-in tariff (FiT)
Market premium tariff
Tender
Green certificates (GC)
Net-metering
None
Green certificates: Green electricity support mechanism linked to the market economy through tradable commodities representing the environmental value of renewable energy sources. Typically, 1 GC represents 1 MWh of generated green electricity. The support value of the GC is generally on top of the market electricity price
Feed-in tariff: Cost-based compensation to renewable energy producer through long-term contracts to help finance renewable energy investments
Net-metering: A compensation mechanism for the difference between the amount of electricity taken from the grid and the amount of electricity fed into the grid.
FEFPEB SYPAL 2013
19 October 2013

16. GLOBAL PELLET DEMAND OUTLOOK
In our central scenario we expect the market will more than double by 2025 with demand for industrial pellets being the main driver.
FEFPEB SYPAL 2013
19 October 2013

17. Source: Eurostat, Pöyry Analysis
PELLETS TRADE FLOWS
Wood pellet imports into the EU have grown at a steady pace with North America being the key supply source.
Source: Eurostat, Pöyry Analysis
FEFPEB SYPAL 2013
19 October 2013

18. PELLETS IN HEATING MARKETS - CENTRAL SCENARIO, EUROPE
Based on an analysis of country specific National Renewable Energy Action Plans, we expect the heating pellet market to continue growing out to Austria and Germany are expected to account for the majority of the projected growth.
FEFPEB SYPAL 2013
19 October 2013

19. PELLET MARKET DYNAMICS – ATLANTIC MARKET
We expect to see a phase of rapid expansion in the Atlantic market, followed by a stable market out to 2027.
2021
2028
2019
2027
2020
2025
2016
2026
2012
2030
2029
2023
2024
2022
2018
2015
2014
2013
2017 NL GB DK BE
FEFPEB SYPAL 2013
19 October 2013

20. PÖYRY’s PELLET PRICE SCENARIOS
After a period of stable price levels the end of the support scheme for UK projects will result in falling market prices.
Pellet Price CIF ARA
UK incentives come to an end
FEFPEB SYPAL 2013
19 October 2013

21. PAYING CAPABILITY RANGES
The lowest paying capabilities are exhibited by pulp and panel mills so companies in these sectors are most at risk of being forced to exit the market.
Wood Paying Capability Ranges by Industry in the UK
FEFPEB SYPAL 2013
19 October 2013

22. SO WHAT HAPPENS IN PRACTICE
As pulpwood and residue prices increase small sawlog and pallet boards from construction mills are likely to experience upward price pressure
Pulpwood
Small sawlog
Large sawlog
Pallet sawmills
Construction sawmills
Pulp & Paper Wood based Panels
Bioenergy
Pallet boards
Residues
Pallet boards
Residues
Construction timber
FEFPEB SYPAL 2013
19 October 2013

23. CONCLUSIONS
Based on the current economic outlook (IMF Spring 2013) the global sawnwood market is expected to grow by Mm3 by 2020 from just below 300 Mm3 in 2011
Fastest growth in Asia and gradual recovery of the more mature markets in Europe and North America.
Sawnwood pricing in North America and Europe follows different cycles – Europe lagging North America
The bioenergy sector in Europe will continue to expand and impact raw material cost for pallet timber – varies considerably from country to country depending on the local supply demand balance and incentive systems – imports of pellets from outside the EU will play a significant role.
FEFPEB SYPAL 2013
19 October 2013

24. THANK YOU! CONTACT: Dr Cormac O’Carroll Mr Heikki Vidgren
tel:
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