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FEFPEB CONGRESS GLOBAL SAWNWOOD FLOWS AND THE IMPACT OF BIOENERGY October 18, 2013 Cormac OCarroll, Heikki Vidgren.

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Presentation on theme: "FEFPEB CONGRESS GLOBAL SAWNWOOD FLOWS AND THE IMPACT OF BIOENERGY October 18, 2013 Cormac OCarroll, Heikki Vidgren."— Presentation transcript:

1 FEFPEB CONGRESS GLOBAL SAWNWOOD FLOWS AND THE IMPACT OF BIOENERGY October 18, 2013 Cormac OCarroll, Heikki Vidgren

2 COPYRIGHT@PÖYRY Clients Unique Lifecycle Partner Local Relation- ships World- class expertise PÖYRY – CONSULTING AND ENGINEERING EXPERTS Pöyry is an international consulting and engineering company, dedicated to serving clients across the worlds energy and forest industry sectors 6,500 experts Over 15,000 projects annually Solid track record in pulp and paper EUR 775 million net sales in 2012 18 October 2013 FEFPEB- SYPAL 20132

3 COPYRIGHT@PÖYRY Introduction of Pöyry Global Sawnwood Flows Impact of Bioenergy Conclusions AGENDA 3 18 October 2013 FEFPEB SYPAL 2013

4 GLOBAL SAWNWOOD FLOWS

5 COPYRIGHT@PÖYRY 2000 2005 Consumption Million m 3 2010 2012 North America Latin America 80 81 Western Europe 69 68 Japan China Russia Eastern Europe The global softwood sawnwood market is around 290 Million m 3 110 106 84 78 15 20 2122 14 21 32 35 26 21 16 12 14 16 13 16 17 19 GLOBAL SOFTWOOD SAWNWOOD DEMAND 5 18 October 2013 FEFPEB SYPAL 2013

6 COPYRIGHT@PÖYRY SOFTWOOD SAWNWOOD DEMAND CYCLES OIL CRISIS -21% =28Mm 3 ENERGY CRISIS/ GULF WAR -24% =34Mm 3 GLOBAL RECESSION -11% =18Mm 3 DOT COM BUBBLE -3% =6Mm 3 FINANCIAL CIRISIS -38% =78Mm 3 North America & Western Europe In addition to the increasing demand in growth markets, the cyclicality of the large mature markets have a significant impact on the demand of sawnwood. Where are we in the cycle? 6 Source FAO (slightly different mmbf/m 3 conversion vs p 4) 19 October 2013 FEFPEB SYPAL 2013

7 COPYRIGHT@PÖYRY7 Equator Supply deficit Stable supply Increasing supply GLOBAL FOREST RESOURCES – REGIONAL BALANCES Growing economy and demand of traditional forest products in Asia and Bioenergy sector in Europe will create significant regional wood deficits. 19 October 2013 FEFPEB SYPAL 2013

8 COPYRIGHT@PÖYRY SOFTWOOD SAWNWOOD TRADE FLOWS Million m 3 Trade flows of over 0.2 million m 3 Historically major trade flows have been between North America, Europe and Japan. Importance of China as destination and Russia as source has increased during the last years. 0.4 37.3 1.2 1.7 0.3 5.8 7.3 0.4 0.5 3.9 0.9 0.5 0.7 0.5 1.3 0.3 1.2 1.9 0.4 14.8 0.2 22.3 0.9 0.3 26.7 0.8 7.4 0.3 3.4 1.4 0.4 1.7 1.9 0.3 5.8 2.0 1.5 11.1 8.2 2.0 3.3 10.2 3.0 1995 2012 0.3 8 19 October 2013 FEFPEB SYPAL 2013

9 COPYRIGHT@PÖYRY9 N-America + Europe + RussiaTotal GLOBAL SAWNWOOD BALANCE 2012-2020 Demand 2012 Production 2012 Demand 2020f Capacity (highest production in 2005-2012) Based on the current economic outlook, the growing demand of sawnwood lead by the fast growth in China will be reaching the limits of existing capacity by 2020. China The forecasts are based on the 2013 spring IMF economic outlook 19 October 2013 FEFPEB SYPAL 2013

10 COPYRIGHT@PÖYRY10 Western EuropeNorth America China Eastern Europe Russia REGIONAL SAWNWOOD BALANCES 2012-2020 Outside China, the demand is expected to grow most significantly in North America, where the impact of economic crisis was more severe and demand in construction market is more cyclical than in Europe. The forecasts are based on the 2013 spring IMF economic outlook Demand 2012 Production 2012 Demand 2020f Capacity (highest production in 2005-2012) 19 October 2013 FEFPEB SYPAL 2013

11 COPYRIGHT@PÖYRY11 Western EuropeEastern Europe Russia EUROPEAN SAWNWOOD BALANCE 2012-2020 Demand in Eastern Europe will grow to the level or above current capacity in 2020. Increasing capacity utilisation in Western Europe, more capacity in Eastern Europe or growth of import from Russia is required to meet the demand in W-Europe. Europe Eastern Europe + RussiaEurope + Russia The forecasts are based on the 2013 spring IMF economic outlook Demand 2012 Production 2012 Demand 2020f Capacity (highest production in 2005-2012) 19 October 2013 FEFPEB SYPAL 2013

12 COPYRIGHT@PÖYRY12 GLOBAL SOFTWOOD SAWNWOOD PRICING As the trade flows between the major markets in Europe and North America are small, also the price developments of these regions are different. The prices in Europe recovered in 2010, when the output and inventories balanced to lower demand. In America, small acceleration of growth increased prices since 2011. Softwood sawnwood prices in North America and Western Europe (Index:, 1Q2003 =100, nominal ) 19 October 2013 FEFPEB SYPAL 2013

13 COPYRIGHT@PÖYRY EUROPEAN SAWNWOOD BUSINESS CYCLES In addition to low volume, the industry is challenged by low margins. The sawnwood prices have decreased in real terms since the beginning of 2000s, but log prices in many locations have increased Index (real) 1Q2000= 100 Sawnwood and log prices in Europe 13 19 October 2013 FEFPEB SYPAL 2013

14 THE IMPACT OF BIOENERGY

15 COPYRIGHT@PÖYRY BIOENERGY– HOW BAD CAN IT GET? Bioenergy incentives for heat and electricity generation are highly complex and differ greatly in Europe. Legend: Low interest loans Investment subsidiaries Other Price-based schemes None Legend: Feed-in tariff (FiT) Market premium tariff Tender Green certificates (GC) Net-metering None Incentives for renewable electricity from biomass Incentives for renewable heat from biomass Green certificates: Green electricity support mechanism linked to the market economy through tradable commodities representing the environmental value of renewable energy sources. Typically, 1 GC represents 1 MWh of generated green electricity. The support value of the GC is generally on top of the market electricity price Feed-in tariff: Cost-based compensation to renewable energy producer through long-term contracts to help finance renewable energy investments Net-metering: A compensation mechanism for the difference between the amount of electricity taken from the grid and the amount of electricity fed into the grid. 15FEFPEB SYPAL 2013 19 October 2013

16 COPYRIGHT@PÖYRY16 GLOBAL PELLET DEMAND OUTLOOK In our central scenario we expect the market will more than double by 2025 with demand for industrial pellets being the main driver. FEFPEB SYPAL 2013 19 October 2013

17 COPYRIGHT@PÖYRY17 PELLETS TRADE FLOWS 2009 - 2012 Wood pellet imports into the EU have grown at a steady pace with North America being the key supply source. Source: Eurostat, Pöyry Analysis FEFPEB SYPAL 2013 19 October 2013

18 COPYRIGHT@PÖYRY18 PELLETS IN HEATING MARKETS - CENTRAL SCENARIO, EUROPE Based on an analysis of country specific National Renewable Energy Action Plans, we expect the heating pellet market to continue growing out to 2020. Austria and Germany are expected to account for the majority of the projected growth. FEFPEB SYPAL 2013 19 October 2013

19 COPYRIGHT@PÖYRY19 PELLET MARKET DYNAMICS – ATLANTIC MARKET We expect to see a phase of rapid expansion in the Atlantic market, followed by a stable market out to 2027. NL GB DK BE 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 FEFPEB SYPAL 2013 19 October 2013

20 COPYRIGHT@PÖYRY20 PÖYRYs PELLET PRICE SCENARIOS After a period of stable price levels the end of the support scheme for UK projects will result in falling market prices. Pellet Price CIF ARA UK incentives come to an end FEFPEB SYPAL 2013 19 October 2013

21 COPYRIGHT@PÖYRY PAYING CAPABILITY RANGES The lowest paying capabilities are exhibited by pulp and panel mills so companies in these sectors are most at risk of being forced to exit the market. Wood Paying Capability Ranges by Industry in the UK 21 FEFPEB SYPAL 2013 19 October 2013

22 COPYRIGHT@PÖYRY SO WHAT HAPPENS IN PRACTICE As pulpwood and residue prices increase small sawlog and pallet boards from construction mills are likely to experience upward price pressure 22 Pulpwood Pulp & Paper Wood based Panels Bioenergy Small sawlog Pallet sawmills Large sawlog Construction sawmills Pallet boards ResiduesPallet boards Construction timber Residues FEFPEB SYPAL 2013 19 October 2013

23 COPYRIGHT@PÖYRY Based on the current economic outlook (IMF Spring 2013) the global sawnwood market is expected to grow by 60-80 Mm 3 by 2020 from just below 300 Mm 3 in 2011 Fastest growth in Asia and gradual recovery of the more mature markets in Europe and North America. Sawnwood pricing in North America and Europe follows different cycles – Europe lagging North America The bioenergy sector in Europe will continue to expand and impact raw material cost for pallet timber – varies considerably from country to country depending on the local supply demand balance and incentive systems – imports of pellets from outside the EU will play a significant role. CONCLUSIONS 23 19 October 2013 FEFPEB SYPAL 2013

24 COPYRIGHT@PÖYRY24 CONTACT: Dr Cormac OCarroll Mr Heikki Vidgren Name.surname@poyry.com tel: +44 20 7932 8200 www.poyry.com THANK YOU!


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