The first part of this report identified the main trends in wood and wood products markets which are likely to develop over the next decade or so. These trends are summarised below along with the major challenges facing the markets in the future.
Patterns of regional demand will not change by very much. The analysis has shown that developed countries currently account for 60-80% of forest product demand depending on the type of forest product. This situation is not likely to change very much over the next decade. Rapid economic growth in Asia will increase the importance of this region as a consumer, but much of the demand and demand growth in Asia will continue to be dominated by Japan. Despite relatively slower projected consumption growth in North America and Western Europe, the sheer size of these economies is likely to mean that they will also continue to consume a substantial share of the worlds forest product output.
Growth in consumption will continue to shift towards consumption of paper and reconstituted panels. For several decades now, growth in consumption of paper and reconstituted panels has consistently been 1-2 percentage points above growth in consumption of sawnwood and plywood in most countries and this trend is likely to continue. The only major exception to this is parts of Asia where demand for plywood is currently still very strong.
Importance of a few forest product suppliers at the global level. Despite the fact that forest resources are generally distributed more evenly than income across the world, more intensive use of forests and higher productivity rates in developed countries means that forest product supply is also quite concentrated in the hands of a few developed countries. Most of the world's wood production comes from temperate and boreal forests, which currently account for 80% of global supplies. Of the temperate and boreal countries, USA, Canada, Sweden and Finland account for 45% of global wood supplies. China and the Russian Federation are the next largest producers, with 7% and 4% shares of world production respectively. Of the tropical countries, Brazil is the largest producer with a 6% share of world output. Indonesia, India and Malaysia are the only other significant producers with shares of 2-3% each. This global dominance of a handful of countries is expected to continue in the future although, at the regional level, a few smaller producers may gain prominence (e.g. countries with large plantation resources such as South Africa, Chile and New Zealand).
Adequacy of wood supplies at the global level. The results of this analysis confirm the consensus among recent studies, that wood supplies at a global level will be adequate to meet demands for both industrial wood and wood fuel in the immediate future. However, the types of wood which will be available in the future will be very different from what has been produced in the past. The natural forest will generally produce less wood in smaller log sizes than previously except in the few countries where virgin natural forest will remain available for wood supply. Most growth in wood supply in the future is expected to come from forest plantations and trees outside forests, which have the potential to play a much greater role in supply than they have in the past.
Forest products trade. A general trend towards trade in higher value-added products has been experienced in the past and is expected to continue in the future. This trend will be supported by the general thrust toward more liberal trade policies, through the World Trade Organisation (WTO) and regional associations such as the Asia-Pacific Economic Co-operation forum (APEC) and Association of Southeast Asian Nations (ASEAN). Several countries already have trade restrictions on unprocessed forest products such as logs and rough sawnwood and these policies are expected to continue in the future.
In terms of the future markets for wood and wood products, the main challenges facing the forestry sector will be to secure adequate wood supplies while meeting the social and environmental demands increasingly being placed on forests. There are undoubtedly enough forest resources to meet future demand needs, but the crucial question which will be faced in the future will be: from what mixture of natural forest, plantation and non-forest resource should future demands be met? Given that supply sources are likely to diversify, another issue will be: how will the processing sector develop to accommodate these changes and what role will trade policies play in this transition? The main likely future challenges in each of these areas are summarised below.
Pressure on supplies from the natural forest. It is expected that moves to take greater areas of natural forest out of wood production and declining harvesting volumes in the remaining areas, will put some pressure on wood supplies from natural forests. At a global scale, such moves may not have a major impact, but they may have more of an impact at the regional level. For example, greater scarcity of large logs in Asia will put pressure on plywood production and encourage substitution by other types of panels in markets currently dominated by plywood.
An increased role for forest plantations and trees outside of forests. It is anticipated that forest plantations and trees outside of forests will play an increasing role in wood supplies in the future. These resources will produce smaller log sizes and, more generally, a very different type of wood than has been produced in the past. The main uncertainties with respect to these supply sources will be the growth rates which will be achieved (particularly in forest plantations) and the extent to which these supply sources will substitute for products coming from the natural forest. To a large extent, the degree of substitution achieved will depend upon the pricing policies (for industrial roundwood from the natural forest) which countries pursue.
Changes in the structure of industrial processing capacity. The changes noted above will be reinforced by the expected changes in forest product demand. The strongest levels of demand growth are anticipated in the reconstituted panels and pulp and paper sectors. In comparison, only relatively slow growth in the demand for sawnwood and plywood is expected in the future. This shift is important because the former can be produced from a range of fibre sources and do not require high quality, large logs for their production. The challenge facing the sector, will be to restructure the forest processing industry towards the larger, more technologically complex processing plants required to produce these wood products. This challenge will be particularly acute in those developing countries which have developed large sawmilling and plymilling sectors (e.g. several countries in Southeast Asia).
The potential role for technology improvements. Another way in which the forest sector may choose to respond to the increasing wood product demand and changes in supply sources could be to strive for greater wood processing efficiency. Indeed, for the sawmilling and plymilling sectors, this may become of paramount importance. There is, as will be shown below, still tremendous scope to increase the efficiency of processing plants around the world and such moves could go a large way towards accommodating the expected changes in wood supply outlined above. As with the development of new sources of supply however, much will depend on pricing policies.
Globalisation and trading policies. The forestry sector will continue to rely on international trade for a major share of revenues and, given the desire to trade in higher value-added products, exporter countries will continue to seek access to high value markets in Europe and North America. Foreign investment will also continue to be important for the development of the sector in developing countries. Against this background, concerns about environmental issues are likely to continue to play a role in forest products trade and investment and measures such as certification may become more important in the future for some exporter countries.
The remainder of this part of the report discusses in more detail some of these challenges, then attempts to draw-out the main conclusions of this analysis and implications for World Bank involvement in the forestry sector.
