Seeing the forest for the trees - commercialising Australia's forests

Perspectives

Seeing the forest for the trees – commercialising Australian forests

Agribusiness Bulletin

Exploring Australia's role in the global wood products industry, as well as the current trends and opportunities.

The Agribusiness Bulletin

The Agribusiness Bulletin focuses on national and local industry, as well as cross-industry insights and trends. This includes some of the drivers we expect to shape the future of the industry and potential challenges that may arise.

Background

The Australian forestry industry includes both softwood and hardwood plantations in addition to native forests used to generate wood products. Whilst the scale varies, every state within the country has some form of forest industry as seen in ABARES Australian Forestry Industry 2015 map.

Given varying climatic conditions, each state has a distinct forest type and species, which is particularly apparent for hardwoods. These differences in the forest create numerous and varied markets. These market differences can be seen in the ABARES profile of the agricultural, forestry and fisheries industries in each region

Uses of Australian forests

Hardwoods and softwoods are often used for many of the same purposes, however, given softwoods are cheaper and easier to work with than hardwoods, they make up the bulk of all wood used in the world.

Hardwoods generally have a slower growth rate, a higher density and are usually more expensive than softwoods. Australian hardwoods such as ash, red gum, jarrah and blackwood are often used to build decks, flooring, and high-quality furniture. In order to produce these decorative products from plantation hardwood, maintenance, including pruning is required, which can be costly.

Softwoods such as pine are often used for non-decorative or lower value products, including medium-density fibreboard (MDF), paper, furniture and building components such as structural framing, roof trusses, doors and window frames. 

Australia’s role – importing and exporting

The total value of imports of wood products to Australia is $4.1 billion and the value of exports of wood products is $2.0 billion. (ABARES Australia’s forests at a glance 2014 with data to 2012–13).

As seen below, Australia plays a relatively small role internationally in the trade of wood products, primarily exporting woodchips and other paper related products. There are a number of factors affecting current exports, including:

  • Reduced volumes into Japan as they move away from Australian hardwood woodchips (particularly native), preferring suppliers with PEFC and/or FSC sourced fibre. This is combined with increased supply from plantations in Vietnam and Chile
  • Increased exports into China, however this is predominantly on a spot market and delivered basis (i.e. CIF, CFR), which is priced lower than historical Japanese sales
  • Due to the exchange rate (which is now weakening) and the cost of land and growing, Australia is a high cost provider, but we are seen as a high quality supplier to north Asian markets. However, Vietnam has replaced Australia as the world’s largest hardwood woodchip exporter which is primarily price driven
  • Despite the recent AUD devaluation, Australia remains a high priced supplier.

Whilst the international market for woodchips has become more competitive, reducing the price received by Australian producers, particularly those marketing native forest hardwood residues, despite environmental concerns, we may see an increase in demand for native forest products in the medium term in Australia as there is likely to be a shortage of plantation hardwood available given the conversion of properties and reduced planting from 2010-2014 following MIS collapses. 

Summary of Australia’s forests

Total value of imports of wood products

$4.1 billion

Total value of exports of wood products

$2.0 billion

Major wood product imports (value)

 

Paper and paperboard

$2.043 million

Manufactured paper products

$446 million

Sawnwood

$423 million

Wood-based panels

$311 million

Major wood product exports (value)

 

Paper and paperboard

$712 million

Manufactured paper products

$611 million

Sawnwood

$90 million

Wood-based panels

$51 million

Source: ABARES Australia’s forests at a glance 2014 with data to 2012–13

Recent investment

There has been significant private sector investment in the forestry industry over the last five years with some state Governments realising or granting long term licences for both hardwood and softwood plantations (Queensland, South Australia and Tasmania). This private sector involvement has increased the commercialisation of Australian forests.

Following the collapse of several major Managed Investment Schemes (MIS), there has also been significant upheaval in the sector, particularly for crops grown specifically for pulp logs. Given the number of MIS related entities and the amount of crops planted from the early 1990’s though to 2009, arguably Tasmania has been the hardest hit with Western Australia close behind.

Saw milling

As seen below, the last decade has seen a major restructuring of the sawmilling industry, particularly hardwood sawmills. A contraction of the sector as native forest logging has seen smaller wood processors experience the most dramatic declines. In contrast, consolidation of softwood sawmills has led to larger processors whose volumes have increased over last 25 years.

Volume of sawlogs harvested and number of sawmill, Australia, 1999-2000 to 2012-13

Source: ABARES Australia’s forests at a glance 2014 with data to 2012–13

Future opportunities

Opportunities in the sector for Australia going forward include further development of engineered wood products which utilise lower grade logs and residues.

In the report Outlook scenarios for Australia’s forestry sector: key drivers and opportunities ABARES projects strong growth in many parts of Australia’s forestry sector 'on the basis of substantial forest resources that will supply large increases in future log availability, and significant future demand for wood products in domestic housing and consumer markets.'

A weakening AUD, as forecast by Deloitte Access Economic, may create an increased demand for Australian wood products which will have a significant effect on the industry by supporting investment (and upgrade) in wood processing infrastructure that will underpin the future growth of the industry as increased volumes of plantation hardwood becomes available over the coming decade.

Authors

Michael O’Shea
Peita Calvert

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