Rudolf van Rensburg
The ongoing trade dispute between the US and China could potentially damage Australian hardwood woodchip exports to China, a forestry expert has warned. Rudolf van Rensburg, from Margules Groome Consulting, said Australia’s large volume of hardwood chip exports to China could be affected because China manufactured the woodchips for export to the US. Source: Philip Hopkins for Timberbiz
“We are starting to see some companies in pulp and paper starting to reduce staff levels,” he said, with some suspending capital expenditure in hardwood capacity. There were also more general concerns about the pulp market which could cascade into the chip market.
In the broader economy, the yield curve, and short and long-term interest rates were now flat, indicating possibly a coming recession.
“Trade sanctions between the US and China may exacerbate this situation. It remains to be seen whether this is resolved before the next US election cycle,” he said.
Mr van Rensburg was speaking at the Institute of Foresters of Australia’s valuation seminar in Hobart last month on the forces driving forest values in the Asia-Pacific. His presentation ranged from short-term factors to long-term issues affecting forests to 2050, including the emergence of Africa as a major source of wood demand.
Mr van Rensburg said Australia was still the second largest hardwood woodchip exporter in the Asia-Pacific after Vietnam, with Chile and Thailand other major players.
“We have grown our market share. From 2007, we are 30 per cent up from the peak in market compared with today in volume and price. Most of the growth is again a China story,” he said.
Potential upsides included potential processing expansion in 2021-22 in Vietnam, which could suck up woodchip volume for use domestically and create a larger share opportunity for Australian exports.
Also, China’s decision to ban the import of some waste papers meant more virgin pulp would be used, which would have a cascading effect through the market, helping lift demand for virgin pulp and thus hardwood woodchips, he said.
However, Mr van Rensburg warned that Australia’s hardwood woodchip supply outlook was poor. Some Managed Investment Scheme estates may not be replanted, as some were marginal.
“As consolidation plays out, this is a likely scenario,” he said. “As the world is getting more hungry for fibre, this potentially could happen to our hardwood supply unless we replant more of the areas.”
There was also no good news on natural forest supply, with much forest having been put into conservation management.
“The volume of logs available to domestic processors and native hardwood chips is in significant decline, but it does appear to have stabilised over the last few years. That is a reality. We could see further declines in natural forest production,” he said.
Looking at megatrends, Mr van Rensburg said between now and 20250, the world would add 2.2 billion people, from 7.7 billion to 9.8 billion. The increased population would have more wealth, better education and an increased demand for food and fibre, becoming choosier in buying products.
“You have all noticed the trend to buy green and be ethically produced, sustainable and have product in harmony with nature,” he said.
Managing climate change was another trend, as were transformative technologies that were shaping the forestry industry, such as artificial intelligence, early detection of weeds in plantations, driverless automation, and new technologies to measure trees.
Mr van Rensburg said the growth in the Asia-Pacific driven largely by China had not finished. There was the Belt and Road project, the growth of the middle class in Asia, and wealth creation in that part of world.
In 2007, the main wood market was Japan and Korea. China was then was importing 55 million cubic metres of roundwood equivalent. A decade later, China was now importing 132mm3 – a 240 per cent increase in the past 12 years, while import demand from Japan and Korea was flattening off. “What will this look like in 10-20 years’ time?” he said.
Mr van Rensburg said Australia would almost pale into significance. The world’s population was now dominated by China and India now, but by 2025, there would be more people in Africa than in China today.
“In the last eight years, 320 new embassies have been established in Africa. By 2050, Nigeria will be the third most populous country in world – overtaking the US,” he said. “There will be Increasing trade into Africa, largely led by China, India and the US. With the African market opening, China could ship manufacturing out of China to lower cost African countries. Where will the fibre for Africa come from, given we have a fibre deficit in Asia?”
Mr van Rensburg queried whether Australia’s investment strategies reflected this changing world and markets.
“If we think how long it takes to grow commercial plantations – 30 years – we not have much time left to cater for this market,” he said.
Australia’s softwood supply was now largely self-sufficient to meet consumption, but the softwood deficit was increasing, with imports set to rise.
“With a relatively small population, we have not been able to plan for our own needs in a world where the world is growing to grow demand for fibre,” he said.
