22 Page Sample World Forestry Update

1,313
-1

Published on

This is a free 22 page sample of the "World Forestry Update" a publication produced by Greenwood Management ApS.
For more information you can contact -

j.randall@greenwood-management.com

Published in: Education, Business, Technology
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
1,313
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
45
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

22 Page Sample World Forestry Update

  1. 1. World Forestry Update: South America World Forestry Update Prepared by Greenwood Management ApS. Issue 1 10.905.327/0001-66 Ltda. Greenwood Agropecuaria info@greenwood-management.com 1
  2. 2. CONTENTS TABLE OF CONTENTS ...............................................................................................................................................1/2/3 1.0 SOUTH AMERICA OVERVIEW ........................................................................................................................ 4/5/6 2.0 BRAZIL COUNTRY OVERVIEW ....................................................................................................................... 7 I OVERVIEW ........................................................................................................................................................ 7 II FOREST PRODUCT INDUSTRY.......................................................................................................................... 8 III BRAZIL POPULATION DATA............................................................................................................................... 9 IV BRAZIL GEOGRAGHY DATA .............................................................................................................................10 V BRAZIL GOVERNMENT AND COUNTRY DATA ..................................................................................................11 VI BRAZIL ECONOMIC DATA ..................................................................................................................................12 VII BRAZIL ECONOMIC OVERVIEW ........................................................................................................................12 VIII BRAZIL ECONOMIC INDICATORS TABLE...........................................................................................................13 IX BRAZIL ECONOMIC INDICATORS TABLE .13/14 X BRAZIL PRIMARY CROPS ................................................................................................................................15 XI INTRODUCTION/ OVERVIEW ..........................................................................................................................15 XII ANALYSIS AND INTERPRETATION OF DATA ................................................................................................16 XIII BRAZIL EUCALYPTUS PRIMARY SPECIES....................................................................................................16. XIV INTRODUCTION ..............................................................................................................................................16 XV PRIMARY MARKETS ...................................................................................................................................... 16/17/18 XVI SECONDARY MARKET ......................................................................................................................................19 XVII OTHER PLANTATION SPECIES ..........................................................................................................................20 XVIII INTRODUCTION ...............................................................................................................................................21 XIX PRIMARY INDUSTRIES .22/23 3.0 CHILE..................................................................................................................................................................24 I COUNTRY OVERVIEW ........................................................................................................................................24 II GEOGRAPHY DATA...........................................................................................................................................26 III GOVERNMENTAL AND COUNTRY....................................................................................................................27 IV POPULATION DATA ..........................................................................................................................................28 V FOREST PRODUCTS INDUSTRY .....................................................................................................................29 VI ECONOMIC DATA TABLE.................................................................................................................................29 VII ECONOMIC INDICATORS. .29/30/31 VIII PRIMARY AGRO FORESTRY SPECIES ..........................................................................................................32 IX INTRODUCTION ...............................................................................................................................................33 X OVERVIEW .......................................................................................................................................................34 XI PRIMARY MARKETS ........................................................................................................................................35 XII PRIMARY EXPORT MARKETS .........................................................................................................................36 XIII ANALYSIS AND INTERPRETATION OF COLLECTED DATA .......................................................................... 2
  3. 3. CONTENTS 4.0 URUGUAY ........................................................................................................................................................38 I COUNTRY OVERVIEW.....................................................................................................................................38 II FOREST PRODUCT INDUSTRY .....................................................................................................................38 III GEOGRAPHY DATA........................................................................................................................................39 IV POPULATION DATA ........................................................................................................................................41 V GOVERNMENT AND COUNTRY DATA ...........................................................................................................42 VI ECONOMIC DATA.............................................................................................................................................43 VII ECONOMIC INDICATORS .44/45/46 5.0 PARAGUAY......................................................................................................................................................47 I COUNTRY OVERVIEW ....................................................................................................................................48 II ECONOMIC DATA ...........................................................................................................................................48 III ECONOMIC OVERVIEW..................................................................................................................................48 IV POPULATION DATA .......................................................................................................................................49 V GOVERNMENT AND COUNTRY DATA ...........................................................................................................50 VI ECONOMIC INDICATORS. .51/52/53/54 VII DEVELOPMENT OF F0REST PLANTATIONS ...............................................................................................55 VIII SPECIES .........................................................................................................................................................56 INDUSTRY NEWS ....................................................................................................................................................... 56 3
  4. 4. 1.0 South America An Overview South America has an area of 17,840,000 square km representative of almost 3.5% of the surface of the earth. In th 2005 its population was estimated to be 371,090,000. South America ranks 4 in total area after Asia, Africa, and North America as well as fifth globally in population after Asia, Africa, Europe, and North America. South America’s agricultural industry is growing, new techniques have been developed to turn land once viewed as unusable and degraded into some of the worlds most productive areas. The primary country in South America for much of the agricultural operations is Brazil. Tropical South American forestry The tropical South American regions comprising of Brazil, Paraguay, Bolivia, Peru, Columbia, French Guiana, Suriname, Guyana, Venezuela, and Ecuador consists of the largest concentration of tropical rainforest globally. It is understood that there is approximately 970 million hectares of rainforest located in the area on a total land mass of 1387 million hectares, the forest types in the region vary dramatically from arid and semi-arid comprising around 36% of the total area, tropical moist deciduous forest representing 24%, tropical mountain forest representing 10% and tropical dry forest at 9.5%. There is now an international Amazon forestry fund initiated by Brazil to protect the area, and management programs have been allowed in some areas in order to stamp out illegal logging. South American agro-forestry Agro-forestry is the practice of growing trees as a crop and has been utilized by farmers for centuries. South America not only produces much of the worlds fruit and a large amount of global soft commodities but also produces a large amount of timber. In South America the agro-forestry plantations are dominated by fast growing Pines, and Eucalypts, however other species such as Poplar, Acacia, and willow are also planted New data from the World Agroforestry Centre suggests that nearly half of the worlds farmlands have at least 10% tree cover the study also found that in South America there is approximately 3.2 million squared kilometers 4
  5. 5. Tropical South American Forestry Country / Agro- Forest Forestry Area Land Natural Forestry Cover Above Ground Currently Plantations Biomass Volume m3 Under ha Forest ha ha Total ha /ha Management Bolivia 108 438 000 53 022 000 46 000 53 068 000 114 6 900 000 538 924 543 905 Brazil 845 651 000 000 4 982 000 000 131 4 000 000 Colombia 103 871 000 49 460 000 141 000 49 601 000 108 85 000 Ecuador 27 684 000 10 390 000 167 000 10 557 000 121 14 000 French Guiana 8 815 000 7 925 000 1 000 7 926 000 145 400 000 Guyana 21 498 000 16 867 000 12 000 16 879 000 145 4 200 000 Paraguay 39 730 000 23 345 000 27 000 23 372 000 34 3 000 000 Peru 128 000 000 64 575 000 640 000 65 215 000 158 1 573 000 Suriname 15 600 000 14 100 000 13 000 14 113 000 145 1 568 000 Venezuela 88 206 000 48 643 000 863 000 49 506 000 134 3 970 000 Total 1 387 493 827 252 834 142 Tropical 000 000 6 890 000 000 129 South America Total 1 754 741 875 163 885 618 South 000 000 10 455 000 000 125 America 13 063 900 3 682 722 3 869 455 Total 000 000 186 733 000 000 100 Global Table 1: Shows the areas currently afforested and managed in the tropical areas of South America 5
  6. 6. Although there are a number of countries located in South America this report focuses primarily on the top 3 countries for investment Brazil, Chile and Uruguay. 6
  7. 7. 2.0 BRAZIL –Country Overview Overview Brazil gained independence from the Portuguese in 1822 and maintained a monarchical system of government until slavery was abolished in 188. This was followed by a military republic system in 1889. The Brazilian coffee exporters held political control over the country until the populist leader Getulio Vargas rose to power in 1930. Brazil is the largest and most populous country in South America and has endured more than 50 years of populist and military government until 1985 when the then military rule peacefully relinquished power to civilian rulers. Brazil as a nation is in physical terms, the size of a continent. 2.2 The Forest Products Industry In the Mercosur countries, forest plantations have won international attention from investors due to high forest productivity (MAI). This, coupled with competitive production costs, provides strong advantages to produce unrivalled returns in comparison to some other countries. Brazil is the world’s fifth-largest industrial wood producer, the largest producer of tropical wood and produces 280 million cubic meters of wood per year. Brazil produces significant quantities of both hardwoods and softwoods with almost a third of Brazil’s planted wood production being used to produce sawn timber, and a large quantity of the remainder being used to produce pulp and paper. Brazil’s wood panels sector is also significant on a global scale. Brazil consumes a relatively high proportion of its wood production but is still one of the world’s ten largest forest products exporters and is one of the three largest producers and consumers of wood for fuel. A recent study by the IDB (Inter-American Development Bank) ranked Brazil as the most attractive of the Latin American countries for foreign investment. 3 Production (m ) Leading State (% of market segment) Natural Forests Charcoal (1) 38,734,000 Pará(35%), Maranhão(21%) All Northern Firewood 47,232,000 Bahia(26.6%), Ceará(9.3%) States Logs 20,663,000 Pará(52%) Planted Forests Charcoal (1) 39,468,000 Minas Gerais(74.5%) Firewood 33,903,000 Rio Grande do Sul(32.5%) All Southern Paper & Cellulose 49,531,000 Sao Paulo(26.6%) States Lumber 50,166,000 Sao Paulo(26.6%) Total 279,697,000 Table 1: Brazilian Annual Wood Production, Segmented Source: IBGE, Diretoria de Pesquisas, Coordenação de Agropecuária, Produção da Extração Vegetal e da 3 Silvicultura 2002 e 2003 (2003 figures shown) figures are Estimated equivalent m of wood. Figure 1: Above shows how the Brazilian wood products market is divided 7
  8. 8. 2.0 BRAZIL - Country Overview (continued) 2.2 The Forest Products Industry (continued) The Brazilian Amazon occupies almost 60% of the country as a whole. Approximately 85% of timber production from natural forests comes from the Amazon. In 2005 it was estimated that over 3,000 logging companies were in operation. Exports from the area are just under US$1 billion with around 30% of the total exports going to EU member states. The legal timber extracted from the area is produced from either managed forestry areas or authorized land clearance, although illegal timber extraction is of still a concern and the total consumed by the forestry and forest products industry could have as much as 80% volume unauthorized. There have been a number of re-forms in the industry and in 2008 the Brazilian President Luiz Inacio Lula da Silva signed a decree creating the Amazon Fund. The fund, an international forestry fund, has been designed to receive up to 21 billion dollars in contributions over the next thirteen years. The donations to the fund are administered by the National Economic and Social Development Banks (BNDES) and the fund will also be monitored by the BNDES. The funds primary motive will be to finance conservation and sustainable development programs in the Amazon area. The fund represents Brazil’s stance and its intention to conserve the natural resources of the Amazon, despite the criticism from some environment groups that not enough is being done to support the area. Additionally up to 20% of funds can go to preserving Brazilian ecosystems outside the area and is also directed to other tropical areas of environmental importance. Other legislative reform such as the law on Public Forest Management in 2006, has opened legal timber production on public forest land under a concessionary system. This is important as this is also the first time that this has been allowed. It is noted that as much as 45% of the Amazon could be held under this tenure and there is now an opportunity to regularise a substantial quantity for timber that would previously have been illegal. The creation of a federal forest service and forestry fund for development of managed initiatives will also allow more control. This leaves the Amazon less dependant on the political priorities that have been previously attached to environmental management, which has been the primary reason for unmanaged, unsustainable illegal logging in the area. Other structural designs introduced under this law require 3 yearly audits on concessions given on public forests. National efforts to address the problems of illegality in forestry are being co-ordinated by intra-governmental departments such as the Ministry for Justice, and Defence and Strategy. Directed via the National Forest Programme, these combined efforts will be vital in reforming the industry. Advances in technology via bar-coding, on-line data bases and better tracking systems will also bring new opportunities to address these problems. Despite these advances in illegality, there still remain the ongoing difficulties of land tenure reform. Under-resourcing in government administration departments for land title/tenure allocation is still a significant problem for Brazils forestry industry. The chain of responsibility regarding regulation from the upper levels of the Federal Government also presents a significant challenge to evolve workable solutions. Considerable over-lapping exists within the decision making chain and the regulatory areas of responsibility often become quite indistinct. Poor forestry management in some states also provides obstacles to proper forestry practices, particularly with respect to the chain of custody and systematic control procedures. The existing procedure within the legal profession is restricted by under-resourcing and a programme of targeted funding for expansion of the judicial sector would alleviate the situation considerably. Extra funding via re-forestation credits is offered to wood producers as an incentive to maintain supplies to Brazil’s end users of timber products. 8
  9. 9. BRAZIL - Economic Data 2.2 Overview Since 1985, Brazil has continued to pursue agricultural and industrial growth and the development of its interior. Its position has been cemented through exploiting its natural resources and large labour pool and is today the leading economic power and regional leader in South America. Brazil is also one of the four primary emerging markets projected by analysts to become one of the wealthiest economies by 2050, collectively termed the “BRIC” economies. These countries consist of Brazil, Russia, India, and China. On th April the 30 2008 Standard & Poor’s became the first rating agency to classify Brazil as “investment grade” this move sparked a 6.3% rise in the BOVESPA index. Literacy is relatively high, supplying an abundant able workforce, with 88.4% of males and 88.8% of th females over the age of 15 able to read and write. Brazil is also the 6 most populous country in the world and has 198,739,269 residents. There are a number of other market participants that may support future sustainable investments into Brazil, as an example, the Brazilian Development Bank (BNDES) has stakes in over 30 publicly listed Brazilian companies and holds a portfolio of approximately $16 billion US dollars. The wealth management market is important and there are currently 143,000 high net worth individuals, creating a market of approximately $1.4 trillion US with approximately 16% of Latin American high net worth individuals allocating some part of their portfolio’s into sustainable “green investments” such as alternative energy. The investment environment in Brazil in relation to the sustainable investments sector is relatively strong in comparison to its emerging BRIC economy counterparts,.Brazil is particularly strong in its voluntary “non-financial” reporting by companies. Approximately 60% of companies in the BOVESPA publish reports detailing sustainability, many of which are based on the international good practice guidelines issued by the Global Reporting Initiative (GRI). The annual survey for the International Carbon Disclosure Project (CDP) is also progressing. Based on the IMF’s 2008 estimates of worldwide GDP, Brazil th is today the worlds 9 largest economy. Economic growth in Brazil increased from 3.8% in 2006 and exceeded the 2007 expectations at 5.4%. In 2008 this trend continued for the first several months with the GDP growing at 6.1% however as the shockwaves of the global financial crisis rippled across the globe the growth of the GDP also slowed as such the growth prospects for 2009 are low from the projected 5.1% in 2008 to 0.5% in 2009. In response to the financial crisis the Brazilian government has expanded its social security net and has developed its strategic investment initiatives by creating jobs in the infrastructure sector whilst also progressing its social housing strategy. Through 30 years, the development of the rural poverty reduction projects have developed with 53% of low income rural populations now receiving resources directed through their communities. These resources allow the community to choose how to invest them and implement projects directly. The result is that these community projects are 50% less expensive to implement. In addition, the land loans (Credito Fundiario) project offers financing and donations to communities to identify and purchase land for farming. This has led to the average income of families settled by the program increasing by 181% between 1998-2003, and 145% between 2003-2005. Agricultural production as a result has also increased by around 350% between 1998-2000 and by 100% between 2000-2003. As a result of these and other initiatives before the crisis, Brazilians have been benefiting for the first time in a generation from stable economic growth coupled with low inflation rates and large improvements in social well-being. The development of the Brazilian market in these recent years is primarily down to sustained strong commodity prices, allowing the economy to grow at an average of 4.8% between 2004 to 2008 above the average growth rate of previous decades of just below 2.5%. 9
  10. 10. ECONOMIC INDICATORS GDP (purchasing power parity) GDP (real growth rate) 2006 (est) 2006 (est) $1.794 trillion 4% 2007 (est) 2007 (est) $1.896 trillion 5.70% 2008 (est) 2008 (est) $1.993 trillion 5.10% GDP (per capita PPP) GDP (sectoral composition) 2006 (est) AGRICULTURE $9,400 6.70% 2007 (est) INDUSTRY $9,800 28% 2008 (est) SERVICES $10,200 65.30% LABOUR FORCE (sectoral composition) LABOUR FORCE AGRICULTURE TOTAL (2008 est) 20% 93.65 million INDUSTRY UNEMPLOYMENT RATE (2007 est) 14% 9.30% SERVICES UNEMPLOYMENT RATE (2008 est) 66% (2003 est.) 7.90% POPULATION BELOW POVERTY LINE (2005) FAMILY INCOME DISTRIBUTION (Gini index) 31% 56.7 (2005) 60.7 (1998) INFLATION RATE (consumer index) 2007 est INVESTMENT (gross fixed) 3.60% 19% of GDP 2008 est BUDGET REVENUES (2008 est) 5.70% NA BUDGET EXPENDITURES (2008 est) CENTRAL BANK DISCOUNT RATE NA 20.48% (31 December 2008) 17.85% (31 December 2007) PUBLIC DEBT 10
  11. 11. COMERCIAL BANK (prime lending 2004 est (of GDP) rate) 52% 2008 est (of GDP) 31st Dec 2007 36.90% 43.72% 31st Dec 2008 STOCK OF QUASI MONEY N/A 31st Dec 2007 $792.8 billion STOCK OF MONEY 31st Dec 2008 31st Dec 2007 N/A $131.1 billion 31st Dec 2008 STOCK OF DOMESTIC CREDIT $NA (31 December 2008) 31st Dec 2007 MARKET VALUE OF PUBLICLY $1.377 trillion TRADED SHARES 31st Dec 2008 31st Dec 2008 N/A $589.4 billion 31st Dec 2007 PRODUCTS $1.37 trillion AGRICULTURE 31st Dec 2006 coffee, soybeans, wheat, rice, corn, sugarcane, cocoa, citrus; beef $711.1 billion INDUSTRY textiles, shoes, chemicals, cement, lumber, iron ore, tin, steel, ELECTRICITY aircraft, motor vehicles and parts, other machinery and equipment ELECTRICITY (production) INDUSTRIAL PRODUCTION GROWTH RATE 437.3 billion kWh (2007 est.) 4.30% ELECTRICITY (consumption) 402.2 billion kWh (2007 est.) CURRENT ACCOUNT BALANCE ELECTRICITY (exports) 2007 est 2.034 billion kWh (2007 est.) $1.551 billion ELECTRICITY (imports) 2008 est 40.47 billion kWh; note - supplied by Paraguay (2007 est.) $-28.19 billion OIL EXPORTS OIL (production) 2007 est 2.277 million bbl/day (2007 est.) $160.6 billion OIL (consumption) 2008 est 2.372 million bbl/day (2007 est.) $197.9 billion OIL (exports) EXPORT PARTNERS (2008) 481,100 bbl/day (2005) Germany 4.5% OIL (imports) Netherlands 4.9% 648,800 bbl/day (2005) Argentina 8.6% 11
  12. 12. China 11.5% NATURAL GAS US 14.6% NATURAL GAS (production) EXPORT COMMODITIES 9.8 billion cu m (2007est ) transport equipment, iron ore, soybeans, timber, footwear, coffee, autos NATURAL GAS (consumption) 19.8 billion cu m (2007 est.) IMPORTS NATURAL GAS (exports) 2007 est 0 cu m (2007 est.) $120.6 billion NATURAL GAS (imports) 2008 est 10 billion cu m (2007 est.) $173.1 billion IMPORT PARTNERS (2008) RESERVES FX AND GOLD Germany 7% 31st Dec 2007 Argentina 7.9% $180.3 billion China 11.6% 31st Dec 2008 US 14.9% $193.8 billion IMPORT COMMODITIES machinery, electrical and transport equipment, chemical products, oil, automotive parts, electronics EXTERNAL DEBT 31st Dec 2007 STOCK OF FOREIGN INVESTMENT (in house) $240.5 billion 31st Dec 2007 31st Dec 2008 $248.9 billion $262.9 billion 31st Dec 2008 $294 billion EXCHANGE RATES Reals (BRL) per US dollar STOCK OF FOREIGN INVESTMENT (abroad) 2006 31st Dec 2007 2.434 $107.1 billion 2007 31st Dec 2007 1.85 $127.5 billion 2008 1.864 12
  13. 13. BRAZIL - Economic Data (Continued) Brazil has the largest economy of all the Latin American nations and continues to expand its global presence. The diversity within its economy has been pivotal in its success. Ranging from a strong agricultural sector to flourishing mining and commodity markets, there has been a wide depth of industrial growth. Brazil has also recently discovered significant off shore oil reserves. Recognized from an international standpoint for prudent fiscal management, the Brazilian government has presided over current account surpluses in recent years. President Lula da Silva re stated his commitment to fiscal responsibility following the 2006 elections and promised further economic reforms involving infrastructural investment and tax reductions. As a percentage of its GDP, Brazils exports are relatively modest in comparison to many of the worlds largest economies. Approximately 13% of GDP for Brazil, compared to almost 40% for Japan and Germany. The institutional community, Standard and Poor and Fitch have assigned investment grade status to Brazils sovereign debt. Brazil commenced a tightening of monetary policy during 2008 due to inflationary pressures. In line with most major market indices, the Bovespa, Brazils stock exchange dropped 40% during the global financial crisis. In 2008, Brazil incurred a current account deficit as global commodity demand fell. Brazil has recently emerged from recession following recently reported growth figures. The first South American Country to come out of recession. BRAZIL – Primary crops Introduction Although a large proportion of timber is extracted from natural forests in the north, Eucalypt and Pine are still the predominant agro-forestry (forestry plantation crops) species in the South of Brazil. Due to their fast growth they have been heavily used as a substitute for natural forest products in the majority of Brazil’s primary industries. Consequently, this section of the report focuses on these two primary plantation species. Overview: In 2008 the Brazilian Association of Forest Plantation Producers reported an estimated 6,126,000 hectares of planted Eucalypt and Pine forest. This represented an increase on the previous year of approximately 282,000 hectares. The total area designated for Eucalypt increased by 7.3%, whilst the area designated for pine dropped by 0.4%,. This has resulted in a total increase of 4.8% in the total planted area for both species combined in 2008 compared to 2007. The total area for Eucalypt grew to 4,258,704 hectares with 29% of this area in Minas Gerais, 22% Sao Paulo and 14% in Bahia. The total area currently for Pine is 1,867,680 hectares, of which 38% is situated in Paraná, 30% in Santa Catarina and 9% in Rio Grande do Sul. The average annual growth trend for Eucalypt plantations is currently +6.7% whilst the growth trend from 2004 to 2008 was +29.5%,. The average annual growth trend for Pine is -1.5% whilst the growth trend between 2004 to 2008 was -5.7%. 13
  14. 14. BRAZIL – Primary crops (Continued) 3.3 Analysis and Interpretation of collected data From the figures collected by ABRAF we can ascertain that 77% of all pine planted in Brazil is concentrated in the southern region, whilst the southeast region comprises 57% of all Eucalypt planted in Brazil. The state of Minas Gerais (currently containing 10 out of the 27 “pig iron” producers) represented the largest area for both Eucalypt and Pine combined. The total planted area (Eucalypt and Pine) held by ABRAF members increased by 9.8% in 2008 compared to 2007. Determined by ABRAF members, end users for Eucalypt and Pine have developed into the largest industry end users, with the pulp and paper industry utilizing 76% of Pine and 70% of Eucalypt.. The industrial end users for reconstituted panels and the iron and steel industry utilize 15% of Pine and 9% of Eucalypt, however in the case of ABRAF member growers, 21% of the Eucalypt planted area is designated for the iron and steel industry, whilst only 6% is utilized for reconstituted panels. BRAZIL - Eucalyptus (primary species) Introduction Australian eucalypts have been among the most widely used and successful plantation trees. There are over 700 different species of Eucalypts, the majority of Australian origin, with only 15 other species naturally occurring outside of Australia and only 9 that do not occur in Australia. Out of these species, a total number of 500 have the potential for industrial plantations, however in Brazil the primary species of Eucalyptus used is E. grandis grown on 5-10 year coppice rotations. Other predominant species are also favored: these are E. urophyll, E. saligna and more recently, strains of E.grandis and E.urophyll have evolved. Certain species will of course grow at faster rates than other species but Brazil still sustains world record growth rates for Eucalypt. This is primarily to do with a high levels of research into Eucalypt producing developments in breeding and silviculture that has increased growth rates reported by ABRAF members from 36.7 m3/ha/yr in 2005 to 40.5 m3/ha/yr in 2007. and Growth rates of over 60m3/ha/yr are commonly observed and in some exceptional cases, growth rates of over 100 m3/ha/yr have been reported. Primary Markets Firewood The firewood is used primarily as a source of energy for the generation of steam and comes from the native woods found in the “cerrado”. Assuming the cerrado land being cleared in Bahia has an average 3 density of 50 m of wood per hectare, 250,000 hectares of land must be cleared per year to maintain the current level of production, which is clearly an unsustainable figure now that the choice farmland has been cleared. 14
  15. 15. BRAZIL - Eucalyptus (primary species) (Continued) In Western Bahia, companies such as Cargill and Bunge use the wood in their local soybean crushing facilities. Fertilizer manufacturing and meat processing facilities such as Bunge, Galvani and Fribarreiras are also large users. Currently, those companies are using R$60 per m3 in their forecasts for planning purposes. A majority of these companies have seen their supply of energy in jeopardy and have taken the initiative to plant their own areas of eucalyptus. Since 1992, for example, Bunge has planted eucalyptus for its own use. Both Bunge and Cargill attempted to stimulate production by offering financing programs and guaranteed sales, but have achieved little success to date. The lack of professional producers and systemized production methods inhibited satisfactory yields. Another large demand factor for firewood is the drying of soybeans. In any given year, the consumption of firewood depends on the humidity of the soybeans to be dried and the overall production. Drying facilities are not consolidated, nor do they typically produce their own energy needs. The growth of this market is directly related to the overall growth in production of soybeans. Charcoal Traditionally, steel companies have used charcoal as their main fuel and carbon source and today, 30% of the 29.9 million tons of steel produced utilizes charcoal to fuel the process. Charcoal can come from either native vegetation or reforested vegetation, and is achieved by a process called carbonization. The charcoal is produced onsite and typically charcoal from eucalyptus earns a premium to native wood due to its higher caloric value. The charts below indicate the total output and consumption of Brazilian charcoal by region. Fig 3: Shows currently Mato Grosso Sul (MS) produces 23% of the total charcoal whilst Minas Gerais (MG) produces 20% of Brazilian charcoal 15
  16. 16. BRAZIL - Eucalyptus (primary species) Fig 5: Shows Minas Gerais (MG) is by far the largest charcoal consumer using 66.14% of the total production Cellulose The majority of the Eucalyptus production in the State of Bahia is directed towards cellulose production. Cellulose production accounts for nearly 45% of the State's gross intern product. Both the northern and southern coasts of Bahia is where the vast majority of reforestation exists in the State. Some of the largest pulp mills in the world including Veracel, Aracruz and Bahia Sul are located in this region While cellulose is the largest use for eucalyptus production in Bahia, it is unlikely in the immediate future that cellulose processing will move into the western half of the state. It is feasible however that transport of feedstock from the other regions to the existing mills can occur. Both the northern and southern coasts are experiencing regulatory pressure and high land prices, impeding the inability to expand production in these traditional areas. Roundwood In 2007, the roundwood consumption by ABRAF member companies was 54,3 million cubic metres, representing a 10.6% increase in relation to the previous year. Eucalypt roundwood consumption has steadily risen over the last few years with an increase of almost 12 percent in 2007. The end users of roundwood are mostly large-scale companies, particularly those related to pulp and paper industry and reconstituted panel production, which use modern technologies for forest activities and industrial processing plants.The smaller and medium sized end users would typically use roundwood for sawnwood, plywood and furniture production. Most of the small-sized companies are family-run, with low level of mechanisation and low level technology. Bearing in mind that the Brazilian export trade market in roundwood from planted forests is relatively small. Brazil’s total production is roughly equivalent to its domestic consumption. In 2007, the total roundwood consumption from forest plantations was approximately 155.7 million cubic metres, represented by 32% pine and 68 % eucalypt. The pulp and paper industry is the main user, consuming 30.5% of the total production, iron ore and steel industry 24.0%, sawnwood 18.6%, and plywood and reconstituted panel 5.1% 16
  17. 17. BRAZIL – Eucalyptus (primary species) Secondary Markets The substitution of reconstituted wood products like plywood for solid wood products has been an ongoing change in the non-structural wood sector. Costs, both of the raw product and processing are significantly less compared to traditional wood products. As native forests have diminished and environmental regulations against the harvesting of natural forests have increased, Brazilian manufacturers have moved into plywood and particleboard production. Pressure Treated Lumber Fenced posts throughout the southern region are either made of concrete or are cut from native trees and are often used with the bark still intact. Utility poles are also made exclusively from concrete. By pressure treating posts or poles with cremated copper arsenate (CCA), plantation wood can be placed in the ground for up to 20 years and the cost of a pressure treated post is far less than concrete. Auto-clave facilities to pressure treat exist ing Southern Brazil and the product has been accepted domestically and is being successfully exported. Furniture Furniture exports from Brazil recently exceeded US$1 billion annually. Eucalyptus is used to produce various types of garden furniture including chairs, tables, benches, cabinets, stands, and dressers. While exports of furniture have been threatened by a stronger local currency, growth has been sustained. Exports for Brazilian furniture production are destined mostly to the United States, but also to France and Argentina. In addition to furniture, Brazilian eucalyptus is also exported for flooring, molding and joinery. Although Eucalyptus is the predominant species in Brazil, Loblolly pine also plays a role and is an important species in many countries, including Brazil where 1 million hectares of plantations have been established from latitudes 20° - 32°S in the states of Matto Grosso do Sul, Sao Paulo, Parana, Santa Catarina, and Rio Grande do Sul In southern Brazil, Mean Annual growth is around 25 m3/ha/yr with rotation ages from 20-25 years. Much of the rapid growth rates of loblolly in Brazil can perhaps be attributed to the relatively mild climate of southern Brazil 17
  18. 18. BRAZIL - Other Plantation Species Introduction: Eucalypt and Pine are the predominant species planted in Brazil however several other species are noticeably worth looking at. These are - • Wattle (Acacia Mangium & Acacia Mearnsii). An important multipurpose agro-forestry species. • Rubber Tree (Hevea Braziliensis). Primarily in the Amazon regions. • Parica (Schizolobium amazonicum). Primarily utilized for veneer, toothpicks and plywood. • Teak (Tectona grandis) Primarily located in Mato Grosso, Amazonas, and Acre. One of the best known high value species. • Araucaria (Araucaria angustifolia) The main uses are sawnwood and vaneer, solid wood, mouldings, furniture and long fibre pulp. • Poplar (Poplar spp) This species is primarily used in manufacturing matches, furniture, doors, interior woodwork. • Guanandi (Calophyllum brasiliense) Acacia Acacia is notably one of the most important multi-purpose agro-forestry species in the world. There are a large number of uses for this species, notably including honey making, cattle fodder (retaining approximately 61% protein in leaf content), high value timber (can be produced within 10 to 12 years) pulp and paper, fuelwood and charcoal, and most notably tannins. Acacia holds one of the highest tannin contents in its bark and is heavily utilized by the leather industry. It should also be noted that the only industrial exporters of tannins are Brazil, South Africa, Chile and China. This species has both strong domestic as well as international acceptance and the areas planted are primarily concentrated in Rio Grande do Sul and Roraima. 18
  19. 19. BRAZIL - Other Plantation Species (Continued) Rubber Tree Native to Brazil and originally found in the Brazilian Amazon, this species is tapped to produce rubber. The species has also been grown in other states that have the right climate and abundant water supplies to support large scale agri-business ventures. The states that offer the best geographical locations are widely seen as Bahia, Minas Gerais, Sao Paulo, Mato Grosso, and Mato Grosso do Sul. There is an ongoing Brazilian strategy to avoid total dependence on imported rubber by producing domestic rubber in plantations. Additional to this, research has begun and clones have been developed to produce pest-resistant strains to combat the threat of native pests which have in the past been a concern of producing rubber in Brazil. Parica The plantation areas predominantly used for this species are situated in Para and Maranhao. Another native Brazilian species, the timber is suitable for veneer and plywood, moldings, ceilings, toothpicks and furniture. Araucaria Parana/Araucaria (Araucaria angustifolia) forest plantations are sited mainly in the southern states of Paraná and Santa Catarina. The timber is predominantly used for sawnwood and veneer, solid wood products, such as ceilings and mouldings, and furniture,. Despite its importance for certain regions, araucaria planted area in Brazil diminished over recent years, mainly as a result of it’s substitution by faster growing species and laws restricting araucaria logging (including natural and planted forest). The Administrative Ordinance now lists araucaria as a threatened native species and it is now is subject to legal restrictions on its harvesting, for any purposes, which can only be via a through a permit obtained from the competent environmental agency. Poplar (Populus spp) forest plantations are also concentrated in Parana and Santa Catarina. This is a minor planted species, generally used in manufacturing of matches, furniture parts, doors, interior woodwork, and others. Poplar Poplar forest plantations are concentrated in Parana and Santa Catarina. This is a minor planted species, generally used in manufacturing of matches, furniture parts, doors, interior woodwork, and others. Teak Plantations for teak are mostly located in Amazona, Acre and Mato Grosso, Teak is considered to be one of the moshighly valued timbers in the timber market, a clear reason for its expansion in plantation areas over recent years. Primary uses are for construction (doors, window frames, panels, ceilings etc.), flooring and decks, furniture, shipbuilding, decorative veneer, decoration, sculpture and woodcarving. Teak was originally planted between 25-30 years ago in Brazil. Most plantations are still at a young age. The teak plantations are managed by a handful of major forestry companies. Few of them have mature forests producing high-value timber products for export. The remaining companies are about to start managing their young plantations and will likely be producing small-diameter logs (fuelwood/residues) for domestic markets. 19
  20. 20. BRAZIL – Primary industries The Iron and Steel Industry The Brazilian Iron and Steel Industry is an important market driver for forestry products. Charcoal extracted from natural forests was paramount to the development of this Brazilian industry. A number of restrictions have been put in place over the years in order to stop charcoal extracted from native forests being used. These changes have led to the development of laws to ensure “re-forestation is relative to consumption” and as such has driven demand for plantation-grown charcoal that has been approved as sustainable by the regional governments. It is forecast that total Brazilian steel production capacity will increase from 33 to 57 million tons in the next ten years due to the heavy investment programmes undertaken in recent years and ongoing projects. Investments totaling apporoximately R$32billion in the 3 years from 2008 to 2011 are predicted by The National Development Bank. Pig-Iron production based on charcoal stayed unchanged over the last 3 years. The region of Minas Gerais, a central hub for production of pig iron has reduced output. Following difficulties in sourcing charcoal, many of the charcoal kilns have been out of use, with a reported 50% standing idle in 2007. Several companies with sourcing difficulties have turned to the neighbouring state of Bahia for supplies of charcoal produced from the Eucalyptus plantations. Nearly one third of pig- iron production in Brazil (32.5 million tons recorded in 2006) uses charcoal in the smelting process. The charcoal is produced equally between by the forestry plantations and from natural forests. A groundswell of opinion led by environmentalists is generating pressure against natural forest usage for iron smelting. As a result, there are significant numbers of private and public sector enterprises targeting the charcoal production market from forest plantations. Of particular note, the state of Minas Gerais, in a public-private enterprise, plans to find new outlets to boost financing for plantation investing, with an planned increase of 0.6 million hectares in 8 years., resulting in a total of 1.8 million hectares being anticipated to be in production at the end of the period. This is widely viewed as a part answer to the threat which faces the natural forest together with a workable solution to addressing the problems of charcoal scarcity. Under the supervision of The Secretary of State for agriculture a body known as the “Sectoral Chamber for Silviculture” has been formed to address the situation 20
  21. 21. BRAZIL – Primary industries (Continued) Coal/Coke Linked to steel and iron production, coking coal has undergone significant price rises between 200 and 2005 due to demand pull influences. The figure below show a small decline in imported coal prices in 2007. Coal prices are not available on stock markets but rather are determined in negotiations between specific countries/companies. Prices in spot markets have risen twofold with further rises anticipated in future. China has increased its domestic demand for coal and has now become a net importer of coal despite being a significant producer itself. As a result of increased oil prices many countries have turned towards coal as a substitute energy source. Investment in coking-coal fired power plants are rising. The combination of these factors together with coal based steel production have further pushed prices of coal. 6.3 National Steel production Large scale steel and Iron plants in Brazil will be based on coke as a thermal redactor once the future supply line of charcoal from forest plantations is unable to meet anticipated demand. As a result of growing environmental restrictions, combined with a chronic shortage of charcoal from managed forestry plantations some independent producers in the Carajas cluster are substituting some of the charcoal for Venezuelan imported Coking coal. Importation in 2007 was assisted by the strengthening of the Brazilian Real in relation to the US dollar. However, coal price rises are likely to change the small to medium sized 21
  22. 22. BRAZIL – Primary industries (Continued) pig iron and steel manufacturers, in the medium to long term and as a consequence opportunities will exist for these mills to benefit from carbon credits. The consumption of charcoal from planted forest is forecast to rise, providing a likely stimulus toward new financing incentives and driving advancement in new technologies. Years 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Pig Iron Production/Integrat ed Mills using 1,67 1,42 1,47 1,41 1,25 1,30 1,29 1,35 1,45 1,65 charcoal (millions tons) Pig Iron/Independent 4,36 4,76 4,96 5,40 6,15 6,51 6,76 8,10 10,09 9,77 mills using charcoal (millions tons) Charcoal consumed by Integrated Mills (millions cubic 5,20 4,50 4,40 4,20 3,75 3,90 3,68 3,38 3,98 4,63 meters) Charcoal consumed by Independent Mills (millions cubic 13,00 14,30 17,80 18,30 16,40 17,58 18,03 20,22 27,59 27,82 meters) Charcoal consumption and pig iron production in Brazil (1996 – 2005). Pulp and Paper: The Brazilian paper and pulp industry is a predominant market in Brazil with pulp and cellulose being produced from both Eucalyptus and Pine plantations. This market represents the largest market for forest products. Brazil has increased pulp production by approximately 8% in 2008 whilst the wood fiber costs remained nd unchanged in the local currency by the 2 quarter of 2009, however prices had increased by approximately 8%. In August, indications are that the Brazilian pulp industry is recovering from the weak global demand for paper and pulp. In April pulp exports equated to 766,000 tons, this was an increase of 43% from the previous month and 140% increase on the previous year’s shipments. Brazilian pulp companies benefited from some closures of pulpmills as a result of reduced production capacity in the Northern Hemisphere and an increase in demand for pulp in China. In the first quarter of 2009, shipments to China were 68 percent higher than the same quarter in 2008. This year, China increased its imports from Brazil for two main reasons, Firstly, a number of small domestic mills closed in China and secondly there was a reduction in imports from Indonesian pulpmills, which have experienced wood fibre 22
  23. 23. We hope that you have enjoyed this 22 page sample of the “World Forestry Update” This forestry “market brief” is a Greenwood Management ApS publication designed to help both forestry investors as well as professionals. You can access the full 56 page report by going to – www.greenwood-management.com Or alternatively you can email – j.randall@greenwood-management.com 23
  24. 24. Greenwood Management ApS Omøgade 8 2nd Floor 2100 Copenhagen Ø Denmark CVR No 31 62 93 73 Tel: 00 (45) 36 95 37 44 Greenwood Management ApS Barreiras Brazil CPF No 843.988.685-34 Ireland: Tel: 00 353 (0) 1452 0326 Fax 00 353 (0) 1452 0341 Italia: Tel. 039 38 07 23 Tel. 039 32 35 19 Israel: Tel/Fax: +972 9 7469520 Spain: Tel +34 97 171 5004 Slovenia: Tel. +386 40 352 912 Malaysia: Tel. +60 12 538 6040 24

×