Pre-recession, forest products accounted for 1% of global GDP and the forestry industry (wood production, wood processing, and pulp and paper) employed 13.7 million people, according to the Food and Agriculture Organisation of the UN. Forests cover 31% of the world’s land area, with the most forest-rich countries being Russia, Brazil, Canada, the US and China. Together, these five countries account for more than one half of the world’s forests.
Forestry is a global business, with supply chains stretching around the world from the forests to the end-markets, taking in the producers, exporters, importers and consumers of the wood and paper products. Data from fDi Markets shows that the top three destination markets for inward investment in wood products are Russia, the US and China. The top three source markets for outward investment are the US, Austria and Finland. Threequarters of investment projects relate to manufacturing activity.
The global recession in 2008 and 2009 brought significant change to the forestry industry. It has endured reduced demand and falling prices, as well as serious currency exchange-rate fluctuations. With the US being the largest consumer of wood and paper products in the world, the drastic fall in US housing construction has been a particularly strong factor – housing starts have fallen by more than 75% since 2006.
The furniture, pulp and paper industries have been gradually shifting production from north to south. Latin American and Asia-Pacific countries have grown in importance, while North American and European production has been downsized. Communities where the forestry industry is a major employer, primarily in rural areas, have been impacted, with company consolidations, closures and the mothballing of facilities bringing much pain.
One positive note, however, is the contribution of wood for energy. Driven by government policies and legislation for renewable energy sources, biomass energy is booming. This includes the production of solid biomass fuels such as wood pellets and briquettes, as well as liquid biofuels produced from wood residues.
Global wood pellet production has increased from less than 2 million tonnes in 2000 to more than 10 million tonnes in 2009, and is expected to double again by 2012. Europe is the largest consumer of pellets (about 8 million tonnes per year) and Canada is the largest exporter of wood pellets, exporting more than 1 million tonnes per year, 90% of which goes to Belgium, Netherlands, Denmark, Sweden and the UK.
The biofuels market is at a much earlier stage in its development. First-generation biofuels are now available in several countries – mainly bioethanol and biodiesel produced from crops. There are a number of different approaches being taken to establish secondgeneration biofuel production on a commercial scale – producing ethanol, synthetic diesel and aviation fuels from forestry residues. Full commercialisation for these second- generation biofuels is predicted over the next five to 10 years.
New technologies are opening up fresh opportunities for wood
One of the locations trading on the wood-for-energy opportunity is the Canadian province of Ontario. Accounting for 2% of the world’s forest area, it has recently passed a green energy act that seeks to encourage renewable energies in the province and includes a supportive feed-in tariff system for various renewable fuels, including biomass. Ontario is also converting some of its existing coal power stations to use biomass. Stephen Roberts, a business development consultant at the Ontario Ministry of Northern Development, Mines and Forestry, points out the new business possibilities: “There is huge scope of opportunity here, including the production of solid biomass fuels for regional and international markets and the development of new liquid biofuels and bio-based chemicals, as well as generating green power from biomass.”
Appliance of science
New technologies are opening up fresh opportunities for wood, and one of the most science-fiction-like examples of this can be seen in the case of biorefineries, which process biomass into a range of different products, such as food, feed, materials, chemicals and energy (fuels, power and/or heat). Pulp and paper mills could be considered the first generation of biorefineries, but the new concepts are looking at extracting a much broader range of products from the biomass feedstock.
Solander Science Park in Piteå, Sweden, specialises in this new technology producing biofuels and other useful materials and chemicals. Johan Hedin, coordinator of Solander Science Park, says: “Our focus is on biorefining technology and we have the world’s first industrial- scale production facility for biodimethylether (BioDME) from forest-based feedstock – from wood to wheel.”
In light of these opportunities, forestry companies are changing their business models. For example, Finnish forestry company UPM has reorganised its business to address the integration of the bio and forest industries under its ‘Biofore’ strategy, with its energy business expected to grow significantly in the future. Also, under-used forestry infrastructure is attracting new uses. Another Finnish company, Stora Enso, has seen the successful re-engineering of one of its former newsprint facilities into a green data centre for Google in Hamina, Finland. The paper production machines have been replaced by computer servers.
The trend for locations that are rich in forestry is now to seek to encourage value-add investment at the forest, with activities as close to the trees as is possible. This will mean more FDI as overseas companies bring their new technologies, processes and investment to the biomass resources around the globe. The International Energy Agency has estimated that bioenergy could contribute between a quarter and a third of global primary energy supply by 2050.
The next few years will see the development of new biomass-toenergy production chains, new logistics and trading platforms, new funding and delivery models for the biomass energy facilities. This brings with it a new challenge in ensuring that such a process is undertaken in a sustainable way that ensures there is enough wood left for the other more traditional parts of the forestry industry.