An analysis prepared by Jaakko Poyry for the World Bank (1992) "Tropical Deforestation in Asia and the Market for Wood" provided a detailed analysis of timber markets and the relationship of timber prices and sustainable management incentives. Supply regions included Indonesia, Malaysia and the Philippines, with major market focus on Japan, Korea, the USA, the UK, Germany and Italy. As part of this analysis, Jaakko Poyry and CINTRAFOR, University of Washington jointly provided a global equilibrium analysis based on the use of the CINTRAFOR Global Trade Model (CGTM). That analysis was contained in Annex IX to the Main Report, and was titled "International Trade in Tropical Hardwoods: The Impact of Supply Reductions, Substitution, Trade Liberalization, and Carbon Emission Policy" (Perez-Garcia and Lippke, 1992).
Alternate scenarios were developed for this study, including a "baseline" projection. For the three supplier countries, it was estimated that total harvest of tropical timber exceeded 80 million cubic meters annually, which was 2 percent of the commercial growing stock. Further, it was reported that this harvest level, utilizing the stock of natural forest stands, was some 70 percent above the current annual growth, thus reducing total inventory. This study also highlighted the trends in forest land conversions, with a decline of an estimated 1.6 million ha. annually for the three countries. Declining forest inventory, together with forest conversion was estimated to result in a decline in log supply by 15-20 percent within ten years.
Overall, a decline in harvest of some 40 percent was envisioned as required to reach sustainability. Price increases of 35-40 percent per decade were foreseen for logs and increased prices of manufactured products of 20-50 percent per decade were forecast.
Projected Base Case tropical harvests through the year 2000 (including West Africa and Brazil) are shown in Table 54 and shown in Figure 33 for the three Asia-Pacific producers (including both East Malaysia and West Malaysia). The related baseline projections for "most likely" log prices for Malaysia and Indonesia as well as the estimated "global average" price through the year 2000 are shown in Figure 34. The 'moderate' increases projected for Asian prices is due to predicted substitution of other materials, primarily softwoods and temperate hardwoods, primarily in construction grades of wood-panels and reconstituted wood products. To a lesser extent, environmental pressures on tropical timbers, primarily in the European markets, also is projected to lead to substitution.
Base case projections for hardwood (non-conifer) logs in Asia are summarized in Figure 35, illustrating imports by Japan, South Korea, China and Taiwan-Hong Kong, hardwood log consumption in these four importer markets, and log exports by East Malaysia in comparison to the world total. Japan's imports are projected to continue to decline to 2000, while Taiwan-Hong Kong imports increase for 1990-2000, with a slight downturn at the end of the decade. South Korea and China would import slightly falling amounts. Hardwood log consumption would fall in Japan, largely consistent with the drop in imports, while consumption in China would increase on the basis of increased harvest.
Log exports, derived from East Malaysia, are projected to decline from approximately 20 million cubic meters in 1990-91 to under 15 million cubic meters in 2000.
Table 54. Base Case (Scenario 1) Tropical Wood Harvest Projections, Year 2000
|
|
million m³ |
|
Malaysia, East |
22.0 |
|
Malaysia, West |
8.3 |
|
Indonesia |
36.6 |
|
Philippines |
2.2 |
|
Papua New Guinea |
2.6 |
|
Indochina |
6.1 |
|
India |
41.1 |
|
Africa, West |
15.0 |
|
Brazil |
23.1 |
Figure 33. Log Production In South-East Asia, Base Case, 1983-2000
Figure 34. Most Likely Development of Log Prices to the Year 2000
Source: World Bank. 1992b.
Figure 35. Base Case Projections: Hardwood Log Imports, Consumption and Exports 1983-2000
Imports of Hardwood Logs In Asia, Base Case, 1983-2000
Hardwood Log Consumption in Asia, Base Case, 1983-2000
Log Exports from South-East Asia, Base Case, 1983-2000
Source: World Bank. 1992b
Projected trends for Hardwood Plywood and Hardwood Sawnwood production are shown in Figure 36. Hardwood plywood production would continue to be centered in Indonesia, increasing by about 1.5 million cubic meters between 1990 and 2000. Production in Japan would decline, to under 5 million cubic meters by the end of the decade. Production in South Korea would continue to fall to less than 500 thousand cubic meters, while Taiwan-Hong Kong production would increase moderately to just over 1 million cubic meters. Non-conifer sawnwood trends would see a moderately rising production in Indonesia to approximately 9 million cubic meters, while West Malaysia production drops sharply, from about 6 million cubic meters to less than 4 million cubic meters. East Malaysia production sawnwood production is projected under the base case to increase from less than 2 million to over four million cubic meters.
The projections summarized here, as the Base Case scenario, fail to show the ultimate implications of this outlook, which is projected to be a near-depletion of commercial timber in Malaysia by the year 2010. As noted above, sustainability is estimated to require an approximate 40 percent reduction from the total harvest levels for Indonesian, Malaysia, and the Philippines (a reduction of some 32 million cubic meters) to approximately 48 million cubic meters without substantial improvements in forest management. Alternative management intensities are estimated to potentially yield sustainable harvests of up to 58-78 million cubic meters but are considered unrealistic at present due to investment and policy constraints.
A second scenario examined in the World Bank study included a 'sustainable management' option whereby current harvest levels would be reduced in order to conserve growing stock to buffer a projected decline in commercial timber after the year 2000. This would also offset the projected decline of harvest below sustainable levels after the turn of the century which would otherwise be necessary to allow growing stocks to recover to a level consistent with the reduced long term sustainable harvest, primarily in East Malaysia. Simulations of this option are summarized in Figure 37 illustrating sustainable log production, log trade and price projections through the year 2000. These charts contrast the sustainable harvest scenario with the base case described above. In each case the darkened symbols represent the base case outlook while the unshaped symbols illustrate the sustainable harvest scenario.
Projected harvest for East and West Malaysia and for Indonesia are shown in the top frame of Figure 37. In each instance, the sustainable harvest scenario would see a reduction in harvest levels compared to the base case outlook. Reductions in Indonesia harvest would result in an output of approximately 25 million cubic meters for 2000, considerably below the approximate 38 million cubic meter output under the base case. The projected gain under the base case is lost, together with an absolute decline after 1990.
West Malaysia output would fall under this scenario to about 4.7 million cubic meters, in comparison to the base case harvest of approximately 9 million cubic meters. East Malaysia would see a decline under the sustainable harvest scenario to about 12.5 million cubic meters, a decline from the base case output of about 23 million cubic meters. However, East Malaysia would harvest more after the year 2000 in this case than under the base case due to the sustainability constraint, thereby avoiding the more drastic decline in commercial inventory.
Figure 36. Hardwood Plywood and Sawnwood Production in SE Asia, Base Case 1983-2000
Hardwood Plywood Production, Base Case, 1983-2000
Production of Sawn Hardwood In SE Asia, Base Case, 1983-2000
Source: World Bank. 1992b.
Figure 37. Log Production, Log Trade and Log Price Projections - Sustainable Harvest Scenario
Sustainable Log Production, Scenario 2
Hardwood Log Trade, Sustainable Production, Scenario 2
Hardwood Log Price Projections, Sustainable Production, Scenario 2
Source: World Bank. 1992b.
Under the sustainable harvest scenario, log import trade for major Asia Pacific log consumers would show a decline relative to the base case, primarily Japan and South Korea. The main impact on trade would be the decline in log exports from East Malaysia, mirroring the projected decline in harvests towards a sustainable level after the year 2000. Projected exports for E. Malaysia would drop from about 21 million cubic meters (1990) to under 10 million cubic meters by 2000.
As shown in the lower frame of Figure 37, hardwood log prices for Asia Pacific Importers would increase in response to the volume declines. Upward pressures approximating US$ 100/cum by the year 200 are projected for Taiwan-Hong Kong and South Korea, with a higher price differential being maintained between these two importers of less than US$ 50/cum. Price would increase relatively more for Japan as premium quality logs decline in availability. Projected price by 200 would be approximately US$ 125/cum above the base case, reaching prices approaching US$ 500/cum.
The potential for possible increased substitution of softwood in plywood panels was also simulated, as summarized in Figure 38. Substitution would dampen pressure on hardwood demand and prices, resulting in declines in hardwood plywood consumption in major Asia Pacific markets in Japan, South Korea and Taiwan-Hong Kong.
Figure 38. Softwood Substitution Impact on Plywood Consumption and Prices
Softwood Substitution Impact of Plywood Consumption, Scenario 3
Softwood Substitution Impact on Plywood Prices, Scenario 3
Source: World Bank. 1992b.
