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Timberland Investment and International Timber Markets
Bob FlynnDirector, International Timber
RISI North American ConferenceOctober 2016
2© Copyright 2016 RISI, Inc. | Proprietary Information
Agenda
• Overview of timberland investment in 2016• Update on two key log/lumber markets China – much better than expected India – a bit disappointing, but starting to improve
• Update on international woodchip markets –another new record year!
More than 75% of all institutional investment in forest has been in North America
© Copyright 2016 RISI, Inc. | Proprietary Information 3
* "Other" in Europe includes the portion of Bergvik Skog and Tornator Oyj owned by pension funds. ** "Other" in North America includes REITs plus Deltic Timber.
0 2 4 6 8 10 12
Africa
Asia
Europe*
Latin America
North America**
Oceania
Million Hectares
Global Forest Ownership by Financial Investors
REIT TIMO
Most of the larger TIMOs have tried to acquire some forest assets in Latin America
© Copyright 2016 RISI, Inc. | Proprietary Information 4
Note: TIMOs ranked according to the value of assets under management in 2016. Brookfield and Molpus tied for 10th place, so table above includes 11 companies.
Top 10 TIMOs and Region of Investment, 2016
TIMO N. America L. America Oceania Africa Asia EuropeHancock Timber Resource Group X X X
Campbell Global X X
Forest Investment Associates (FIA) X X
Resource Management Services (RMS) X X X X
Global Forest Partners X X X
BTG Pactual X X X X
GMO Renewable Resources X X X
The Forestland Group X X
New Forests X X
Brookfield Timberlands Management X X
Molpus Timberlands X
Today 43% of the “Top 30” TIMOs are headquartered outside of the USA
© Copyright 2016 RISI, Inc. | Proprietary Information 5
USA57%
Europe30%
Brazil7%
Australia3%Canada
3%
Top 30 TIMOs by Headquarters Location
6© Copyright 2016 RISI, Inc. | Proprietary Information
What’s new this year? A lot happening in Europe• Four new TIMOs in the Top 30 (ranked in terms of assets under management) – all based in Europe In addition, several other European TIMOs are hovering just outside the Top 30
Some are African focused but European based, like Quantum Global (Angola plantations) or Green Resources
Others are Northern Europe focused, like Dasos or UB Nordic
UPM continues to sell down forest assets in Finland Rumors of potential bids by financial firms for SCA forest company
Fourth RISI/DANA Forest Investment ConferenceLondon, May 3‐5, 2017
© Copyright 2016 RISI, Inc. | Proprietary Information 7
RISI and DANA have combined forces to bring together the most compelling conference for the financial community and those engaged in tracking companies and assets or who own and manage timberlands. The two‐day conference will take an in‐depth look at timberland investments around the globe and how these opportunities will unfold in the near future.
After the USA and Canada, there is more forest owned in Australia by institutional investors than in any other country
© Copyright 2016 RISI, Inc. | Proprietary Information 8
*Includes only the pension fund ownership shares in Tornator Oyj and Bergvik Skog. **Does not include Brookfields ownership of 205,000 ha of land under Fibria's trees.
0300600900
1,2001,5001,800
Mill
ion
Hec
tare
s
Ownership of Forest by Financial Institutions by Country
Brazil, Uruguay and Chile account for 77% of financial investors’ forest ownership in Latin America
© Copyright 2016 RISI, Inc. | Proprietary Information 9
Brazil49%
Colombia3%
Chile8%
Costa Rica1%
Argentina4%
Ecuador1%
Guatemala2%
Belize8%
Nicaragua1%
Panama1% Uruguay
20%
Paraguay1% Mexico
1%
Forest Ownership by Financial Investors in Latin America, 2016
Institutional investors play a much more important role in some countries than in others
Note: USA is share of all private forest, including both planted and natural forest
8.0%4.2%
28.3%
43.0%
54.7%
12.7%8.4%
0%
10%
20%
30%
40%
50%
60%
Brazil Chile Uruguay NewZealand
Australia USA SouthAfrica
Share of Planted Forest Owned by Financial Institutions
China’s timber deficit continues to grow, despite a slowing of economic growth
© Copyright 2016 RISI, Inc. | Proprietary Information 11
0
40
80
120
160
200
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 1-8,15
1-8,16
Mill
ion
Cub
ic M
eter
s, R
WE
China's Growing Timber Deficit, 1997 - 2016
Woodchips
Pulp
Wood Panels
Lumber
Logs
New Zealand has been the only country to see a decline in softwood log shipments to China thus far in 2016, but will likely catch up soon
© Copyright 2016 RISI, Inc. | Proprietary Information 12
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Russia New Zealand USA Canada Australia Other
Thou
sand
Cub
ic M
eters
Chinese Imports of Softwood Logs, January‐August
2014 2015 2016
US softwood log exports to China were up 10.5% in January‐July, but not much from PNW
© Copyright 2016 RISI, Inc. | Proprietary Information 13
US South51%
PNW11%
Alaska34%
Other4%
Increase in US Softwood Log Shipments to China, January‐July 2016
Almost all SYP log exports to China are from South Atlantic ports (but still only account for 12% of US shipments to China)
© Copyright 2016 RISI, Inc. | Proprietary Information 14
0
30
60
90
120
150
Charleston Wilmington Norfolk Savannah Gulf Ports
Thou
sand
Cub
ic M
eters
SYP Log Exports to China, Jan‐July
2014 2015 2016
Chinese imports of softwood lumber are up nearly 20% in 2016, with the big story being Russia and other European suppliers
© Copyright 2016 RISI, Inc. | Proprietary Information 15
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Canada Russia USA Chile New Zealand TotalEuropean
Others
Thou
sand
Cub
ic M
eters
Chinese Imports of Softwood Lumber, January‐August
2014 2015 2016
Despite much doom and gloom in the market, total imports of softwood logs & lumber (RWE) are higher in 2016 than record year of 2014
© Copyright 2016 RISI, Inc. | Proprietary Information 16
0
5
10
15
20
25
30
35
40
45
50
2014 2015 2016
Million Cu
bic M
eters
China: Total Softwood Log and Lumber Imports, January‐August
Canada Russia USA Australia New Zealand Other
In 2016, Chinese imports of Russian softwood (logs and lumber RWE) will be at an all‐time record level
© Copyright 2016 RISI, Inc. | Proprietary Information 17
0
5
10
15
20
25
30
Million Cu
bic M
eters
China: Imports of Russian Softwood Logs and Lumber (RWE)
Lumber (RWE)
Logs
RWE = Roundwood Equivalent
Part of the surge in Russian softwood lumber exports to China has been a redirection of wood from other traditional markets
© Copyright 2016 RISI, Inc. | Proprietary Information 18
0%
10%
20%
30%
40%
50%
60%
2010 2011 2012 2013 2014 2015 2016
Russian Softwood Lumber Exports by Region
North Asia CIS
Middle East Europe
China’s imports of eucalyptus sawlogs have tripled since 2012; good news for plantation owners seeking new alternative markets
© Copyright 2016 RISI, Inc. | Proprietary Information 19
0
100
200
300
400
500
600
2012 2013 2014 2015 2016E
Thou
sand
Cub
ic M
eters
China: Imports of Eucalyptus Sawlogs
Australia Uruguay
Chile Brazil
USA
20© Copyright 2016 RISI, Inc. | Proprietary Information
India should be a great market for softwood imports….• Rapid economic growth
RISI projects 7.5% GDP growth in 2016‐2020 vs. 6.0% in China
• Working age population still rising Has been falling in China since 2012
• Urbanization rate 33% (vs. 57% in China)• Domestic softwood timber harvest very low (less than one‐
quarter the level in China), and no softwood plantations in India• Gigantic need for new housing in India
Compared with China, housing programs just getting started in India
• Plans in India for massive new investment in infrastructure
Softwood has increased to more than 40% of log imports, but volumes are lower than predicted
© Copyright 2016 RISI, Inc. | Proprietary Information 21
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Thou
sand
Cub
ic M
eters
India Log Imports
Hardwood
Softwood
Softwood lumber imports are only about 35% of the volume of softwood log imports
© Copyright 2016 RISI, Inc. | Proprietary Information 22
050100150200250300350400450500
2009 2010 2011 2012 2013 2014 2015 2016E
Thou
sand
Cub
ic M
eters
Softwood Lumber Exports to India
Other
Russia
New Zealand
USA
Germany
Canada
Asian woodchip imports will set another all‐time record for volume in 2016…for the seventh year in a row!!
© Copyright 2016 RISI, Inc. | Proprietary Information 23
0.0
5.0
10.0
15.0
20.0
25.0
Million BD
MT
Asian Woodchip Imports
Japan Hardwood China Hardwood
Other Hardwood Softwood
Asian hardwood chip imports will be used to produce more than 11 million tonnes of hardwood pulp in 2016
© Copyright 2016 RISI, Inc. | Proprietary Information 24
0
600
1,200
1,800
2,400
3,000
3,600
4,200
4,800
5,400
Vietnam Australia Chile Thailand South Africa Brazil Indonesia
Thou
sand
BDM
T
Hardwood Chip Suppliers to Asia, January‐August
2013 2014 2015 2016
Australian volumes of both hardwood and softwood chips have seen the biggest increases by far in 2016
© Copyright 2016 RISI, Inc. | Proprietary Information 25
‐
60
120
180
240
300
360
420
480
540
Australia United States New Zealand Canada Fiji Russia
Thou
sand
BDM
T
Softwood Chip Suppliers to Asia, January‐August
2013 2014 2015 2016
9th International Woodfiber Resources and Trade Conference Da Nang, Vietnam, February 13‐15, 2017
26
The only conference focused on international trade in woodchips and biomass, and the first one to be held in Vietnam.
Previous conferences have proved to be valuable business networking events for those involved in the trade, attracting buyers, sellers and traders from more than 30 countries.
For details, contact Bob Flynn atrflynn@risi.com1‐360‐471‐6578
© Copyright 2015 RISI, Inc. | Proprietary Information
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