GLOBAL SUPPLY

According to the latest FAO data, Canada and the United States accounted for 16% percent of total forest area in 2005, an increase from an estimated 12% in 2000. However, these two countries account for a disproportionately high share of industrial log production: 37% in 2004, about the same level as in 2000.

Forest products companies continue to expand internationally, responding to opportunities arising from reductions in barriers to international trade and capital movements. Much of this expansion is taking place in less developed countries, where there are significant existing forest reserves of both natural and plantation forests. South America and China are current cases in point.

While this globalization trend is expected to continue, it does face challenges. Major capital investments are necessary to mobilize, maintain, and expand the existing forest resource, and to develop needed processing facilities. While these capital investments face significant risk hurdles (especially business, economic, and political), the forestry industry can support sustainable economic development, meeting both domestic and export demand for value-added forest products. In addition to providing wood for the forest products industry, in many countries throughout the world forests also serve as an important source of energy in the form of fuelwood for cooking and heating.

Resource availability is a key factor in determining timber production rates. Timber removal rates for industrial logs (as opposed to fuelwood) are growing most rapidly in Russia, increasing by 23% over the 2000-04 period (2000 was a low production year). Industrial timber harvest in Canada has increased dramatically over this same period also, up 12% driven in part by salvage operations in response to a mountain pine beetle epidemic in interior British Columbia and in part by strong growth in residential construction in their key US export market. Industrial timber harvest grew by some 7% in South America over the 2000-04 period. Harvest growth rates elsewhere in the world have been much more modest in recent years.

Plantation forests are assuming an increased role in industrial timber production. In 2000, timber harvest from both softwood and hardwood plantations accounted for about 35% of total industrial harvest (though only 5% of global forest cover). By 2005, the share of global timber production sourced from plantations was estimated as ‘approaching 50%’. Much of this harvest expansion has occurred in New Zealand, Australia, Chile, Brazil and South Africa, reflecting the maturing resources in these countries. However, by far the greatest plantation areas are located in Asia (China, India, and Japan), Europe (Russia, Scandanavia, and eastern Europe), and the USA.

Domestic Timber Supply

The United States is the dominant world forest products supplier, providing nearly half the world’s wood fiber with the vast majority being consumed domestically. In 2005 the US was the world’s largest producer of softwood lumber, followed by Canada, Germany, Russia, and Sweden. The US was also the largest producer of hardwood lumber, oriented strand board and wood pulp in the world in 2005.

Supporting this world-leading forest products industry are some of the world’s most productive tree-growing land. On a per-acre basis, net annual growth in the US is 47 cubic feet compared with 37 cubic feet in Canada, and just 19 cubic feet in Russia. US commercial timberland is concentrated in the Northwest, South, and Northeast regions of the nation.

Overall, commercial timberland area in the US is projected by the US Forest Service to decline slightly in total from about 504 million acres in 2002 to 497 million acres in 2030. Most of this decline is anticipated in the Northwest and the South, associated with conversion out of timberland into higher and better land uses. Nonindustrial private forestland owners are expected to be the main source of such conversions, rather than public or forest industry owners.

Even though timberland area is projected to decline, both softwood and hardwood timber harvests are projected to increase from 16.5 billion cubic feet in 2002 to 19.3 billion cubic feet in 2030. A major factor contributing to these projected increases in timber harvest is the concentration of increasingly intensive management effort on the most productive timberland, and away from less productive land. It is anticipated that most of this increase will be in the pulpwood component of the harvest, rather than the sawlog or veneer log component. Geographically speaking, the South will see the greatest harvest expansion. Much of the increased harvest will be concentrated in hardwood rather than softwood species.

Domestic Timber Demand

The primary trend drivers underpinning forest products consumption are economic growth, personal income, and population growth (especially household formation). In the long term, demand is therefore expected to increase with increases in these key drivers. In the near-term however, other factors may be more important and give rise to significant cyclic departures from the underlying trend. Such factors could include fluctuations in exchange rates, housing starts, usage rates and substitution, inventory levels, and productive capacity.

Compared with many other countries in the world, the US has a very strong wood tradition of wood use, directly reflecting the historical availability of wood. Total log consumption is projected to increase by about 22% from 19.6 billion cubic feet in 2002 to 23.9 billion cubic feet in 2030. Softwood timber is expected to comprise 16% of this increase. Little or no increase in exports manufactured from domestically produced logs is anticipated over the 2002-30 period, however imports are projected to increase substantially—by some 40% (off a small base) to nearly 7 billion cubic feet.

International Trade

The US will continue to be a net importer of timber products. Historically many of these products have been sourced from Canada and, for certain products such as dimension lumber and oriented strand board, little change in this historical pattern is likely. However other suppliers, especially South American suppliers, are likely to increase their shares of the domestic US market. This is particularly the case for pulp and paper products, where a substantial proportion of the world’s low-cost productive capacity is already concentrated in South America.

As might be expected given its status as a net importer of forest products, the US exports only a small proportion of its production (less than two percent). Locally these exports can be quite significant, as has been the case for logs exported from the US West Coast to Asia. In general though, domestic (US) demand and a desire among importers to diversify their sources of supply are likely to constrain future exports of US forest products.