As a global wood market expert, Russ Taylor is often asked: “Are we running out of wood?”
The answer is “no, but…”
The world is not running out of timber, per se, he said Tuesday at the Global Wood Summit that he and ERA Forest Products are hosting Oct. 29-30 in Vancouver.
“Absolutely we’re running out of cheap wood,” he added. “Really, there’s not many places left in the world for new logs or low-cost logs.”
Log and lumber markets are also in a complex and tumultuous cycle, as well, driven by supply disruptions, changing trade policies, macroeconomics, and a decline in China’s economy, which has had a major impact on log and lumber demand there.
Climate change produced a bonanza of cheap wood in B.C. and Europe through beetle infestations, which resulted in an increased supply of cheap logs and lumber for export, Taylor said.
Beetle kill in Europe produced a surplus of 675 million cubic meters of cheap timber, he said – similar to the volumes produced in B.C. due to the Mountain pine beetle infestation. But that bonanza is now coming to end end, the same way it did in B.C.
“So even though they have lots of sawmills in Europe, the log supply is not going to be there,” Taylor said.
He noted that Finland and Sweden are planning to reduce their harvest levels by 25 per cent.
Russia – a major timber producer – implemented a ban on log exports few years ago, which has also shrunk the global log supply.
All of that is beginning to pinch the supply of logs to major markets like China.
Global markets and demand-supply equations are also in turmoil, with markets like China taking a drop in imports of logs and lumber in recent years, due to a steep plunge in its housing market, and Japan is beginning to become more self-sufficient, as forests replanted after the Second World War come to maturity.
“Global supply disruptions are coming,” Taylor warned. “It’s mainly on the log side.”
Global softwood log demand is growing by about one per cent per year he said. But supplies of cheap timber are declining. More parks and conservation areas, as well as old growth protection policies, in Canada and U.S. are also eating into supply.
“There’s a lot going on in the log supply world when you start peeling back the onion,” Taylor said.
One of the few regions in the world that may see an increase in softwood log exports is New Zealand, Taylor said, but growth and harvest cycles point to harvest levels beginning to drop in about 10 years from now.
The upside of a shrinking global log supply is that it means importing countries will not have the raw supply for their own sawmills, which is good for lumber exporters, like British Columbia.
“In 2030, New Zealand supply is starting to drop, so we’re going to see less logs there as well,” Taylor said. “So again, that means opportunities for lumber guys.”
Taylor said he sees improvements on the horizon for the forestry sector, but it’s about five years away.
“Looking out three, four, five years, I see log and lumber prices being very volatile, and that means going up,” Taylor said.
“We’ve got a chance, but it’s 2030. It’s not tomorrow. You’ve got to survive five more years.”