The growth in demand for lumber in North America is expected to be somewhat lower. RISI forecasts growth in demand for lumber in the range of 0.5% per year for North America and the FAO forecasts 1.2%. The difference between the forecasts of RISI and the FAO stems partly from differences in methodology. The FAO forecast is driven mainly by changes in population, while the RISI forecast accounts for changes in consumption patterns (e.g., the average size of homes) as well as population and overall economic growth. RISI forecasts a trend towards more multi-family dwellings, which are smaller per unit. Such a trend would result in less growth in lumber demand. For some years now B.C. lumber producers’ dependence on North American markets has been falling. In the 1970s, 85% of B.C. lumber was shipped to North America; by the 1990s the share had dropped to 77%. Given the lower forecasts for growth in North American lumber demand compared to the world as a whole, B.C.’s trend to be less dependent on North American lumber markets will likely continue.
Housing starts in the United States are expected to continue their downward trend of the past few decades and to level off in the early part of the next century. In the 1970s, conventional housing starts averaged 1.77 million units per year and dropped to 1.45 million units per year in the 1980s. In the 1990s and the 2000s, housing starts are expected to average about 1.23 million units per year. Net growth in lumber demand will still occur despite declining housing starts, due mainly to growth in other categories of lumber use such as non-residential construction, repair and remodelling.
Even more uncertain is economic activity in eastern Europe over the next few decades. The FAO is forecasting 3.3% per year growth in lumber demand in eastern Europe, including all of the former USSR. In light of current political instability in some of these countries, the FAO forecast appears optimistic.
The growth in demand for the different types of panels included in this aggregate will vary significantly. Growth in plywood demand is expected to be minimal due to product competition and market constraints. The growth in wood-based panel consumption will be concentrated in a variety of reconstituted panel products such as particleboard, medium density fibreboard (MDF)130 and OSB.
Historically, the production of wood-based panels in B.C. has been dominated by plywood and demand for B.C. plywood has largely depended on levels of Canadian construction. However, as discussed earlier, OSB is replacing plywood for many applications in Canada. OSB is also successfully penetrating U.S. markets, due to the absence of tariffs and the fact that OSB is more homogeneous than plywood, and hence less susceptible to non-tariff barriers such as product standards. As a result, B.C.’s OSB manufacturing capacity is increasing rapidly.
While Canadian construction demand is expected to increase modestly over the next 15 years, RISI forecasts that Canadian demand for plywood in 2008 will be less than two-thirds what it was in 1993, due to replacement by OSB.
The outlook is considerably better for OSB. With modest levels of overall construction growth in North America and with penetration into traditional plywood markets in both Canada and the United States, RISI forecasts consumption of OSB from 1994 to 2008 to increase by 9% per year.
Figure 7.32 shows some recent projections for world paper and paperboard demand. The FAO 20-year growth forecast is 3.2% per year through 2010. Simons forecasts growth of 2.6% per year through 2020. Growth of paper and paperboard demand in North America and Europe will be below the world average, with greater growth coming from Asia (other than Japan) and Latin America.
Growth in wood pulp consumption will not match paper and paperboard consumption, due to the substitution of secondary fibre (waste paper) pulp for virgin wood fibre pulps. The greatest impact of this requirement is expected to occur during the 1990s as fibre recycling in North America catches up with Europe and Japan. After the year 2000, the rate of substitution is expected to slow as opportunities for additional recycling are exhausted.
Even though newsprint’s share of the advertising market is declining, the market is growing fast enough to provide net growth in newsprint demand. Figure 7.33 shows some recent forecasts for world newsprint consumption over the next 15 years. About 2% growth in consumption is forecast for the world, with growth in North America being somewhat lower. Demand in Asia and Latin America is expected to grow faster than the world average.
This figure illustrates some interesting points. First, the forecast rate of growth in world demand for sawlogs is considerably lower than that predicted by Simons for lumber (see Figure 7.30). This is a result of anticipated improvements in lumber recovery rates, partly driven by the increasing scarcity of sawlogs. It reflects a conservative approach, assuming that by 2020 the worldwide average for lumber recovery will still be somewhat below the rates achieved by today’s higher recovery sawmills.
Pulpwood demand growth is forecast to be low in the 1990s as the use of wastepaper expands rapidly. After 2000, demand for pulp logs will increase as the limits to recycling are reached and the pulp industry faces increased competition for milling residues from the producers of non-structural panel boards (e.g., MDF, OSB). Hardwood demand will grow at twice the rate of softwood demand as hardwood plantations mature and are used for solid wood products as well as for pulp.
Japan contains significant conifer plantations, established following World War II. Many of these plantations are now mature, but because of high stumpage prices, operability problems and expensive labour they are currently too expensive to harvest. Simons projects that with rising prices this resource will be fully allocated by 2020.
Brazil’s forest industry is fuelled, not by natural rainforests, but by plantations with very high growth rates. Any expansion in plantations could add to supply in a mere 15 or 20 years. Chile has very successful pine plantations and Simons forecasts expansion of plantations into hardwoods to supply an emerging hardwood pulp sector.
The market responds to scarcity with price increases. The excess demand predicted after the turn of the century will certainly impact prices. In fact, price effects of anticipated scarcity are already in evidence. Lumber prices in North America, though well below the peaks of early 1993 and 1994, appear to be maintaining an average level significantly higher than in the 1980s.
The outlook is not one of sudden price increases in response to supply shortages, but of gradually increasing prices. These will cause technical substitutions and in turn mitigate the growing scarcity of roundwood. Sawlog prices should be very strong throughout the forecast period. The technical innovation that blurs the distinction between sawlogs and pulp logs will continue, as will substitution between softwoods and hardwoods.
British Columbia is one of the traditional supply areas facing timber supply limitations. The days of expansion of the B.C. forest industry by building new sawmills and pulp mills, to be supplied by ever-increasing harvests, are past. Much of the growth of the industry in recent decades was achieved by expansion into previously untapped areas of forest in the Interior. This expansion has generally reached its limits. Similarly, the historical surplus of wood chips which contributed to the expansion of the pulp and paper sector has now essentially been absorbed by additional pulping capacity.
If the B.C. forest industry is to expand in the coming decades, it will have to do so by extracting more value out of a fixed or shrinking forest land base. This can occur at every step of the production process, from restocking denuded forest land to adding value to the product received by the customer.
The government’s recently announced Forest Renewal Plan will raise funds to increase the level of forest tending in the province. This plan, together with privately funded operations, has the potential to increase the volume of wood produced on a tract of forest land. Some investments (e.g., planting or brushing) may take decades to achieve results. Others, such as commercial thinning, could bring more immediate results by helping to offset timber access constraints elsewhere and alleviate short-term timber supply deficits.
At the harvesting stage, efforts will continue to increase the volume of wood recovered from a stand of trees through tighter utilization standards and reduced waste. The trend to use logs of decreasing size will continue. Also, advancements in harvesting technology that reduce breakage and other waste will increase the supply of wood available to manufacturing facilities.
There is potential to improve recovery in manufacturing facilities, particularly in the solid wood sector. Recent developments in technology, such as computerized scanners and recovery optimizers, are still not fully exploited. Other advancements such as curve-sawing, which can cut lumber with the curve of a log and machines that scan the interior of a log to detect defects before it is cut, may increase the usable supply of timber.
Waste materials formerly sent to the chipper are now being converted to valuable solid wood products using finger-jointing and edge-gluing techniques. Other waste which was formerly burned, such as sawdust and shavings, can now be made into non-structural panel products such as medium density fibreboard.
The utilization of decreasing sizes of sawlogs and remanufacturing of sawmill waste into value-added products have positive implications for the solid wood sector, but could negatively affect the pulp and paper side. As explained in a previous section, pulp mills in B.C. depend on residual fibre from solid wood manufacturing and will be seriously affected by any process which keeps fibre on the solid wood side of the industry. Closer utilization during harvest and fibre from commercial thinnings, as mentioned previously, are possible alternative sources. Other supplies might be obtained from increasing hardwood utilization and from harvesting areas previously considered uneconomical for the production of sawlogs.
In addition to improving utilization and recovery in the manufacturing of traditional forest products, there is significant potential to expand economic activity generated from a given level of timber harvest by expanding the value-added sector.[131] The industry has been moving steadily in this direction for some years already, and has recently received additional impetus from the government’s policy commitment to invest in the forest resource and expand value-added in the forest industry as part of the Forest Renewal Plan.
Increasing value-added can occur through remanufacturing existing products or by redirecting fibre to other, higher value-added manufacturing processes. Remanufacturing has been of particular interest for two reasons. One reason is that increased remanufacturing could be achieved by building on the existing industry structure and need not divert large volumes of timber away from existing facilities. Secondly, some of the lumber that B.C. presently produces is being remanufactured outside the province, and it is possible that this activity could take place before export rather than after.
The potential for increasing solid-wood remanufacturing has been the subject of debate and interest, which was great enough to warrant the commission of a separate study by the Simons Consulting Group.[132] The study points out that much of the existing value-added industry serves the domestic market with products normally produced close to the consuming region. These products include items such as trusses and cabinets, which are generally too bulky to be shipped great distances. Consequently, their production is linked to growth in the domestic economy. There is, however, potential for significant growth in the rest of the value-added sector, particularly in products which are easily shipped — such as door and window frame components, siding, panels and engineered building products.
Lumber remanufacturing, a prime candidate for such growth in the value-added sector, is the focus of the Simons study. The study estimates that roughly 2 billion board feet of B.C. lumber (nearly 20% of exports) are further processed outside B.C., with most of that remanufacturing occurring in the United States and Japan. Because some of the remanufactured products are too bulky for shipping or require short turnaround time on custom orders and the like, not all of this activity could be carried out in B.C. The study estimates, however, that about half of the 2 billion board feet currently remanufactured elsewhere could be remanufactured in British Columbia. Repatriating the processing of this lumber could increase B.C.’s lumber remanufacturing industry, which currently employs approximately 4000 people, by approximately two-thirds.
The above figures represent only part of the potential for increasing the value-added forest products sector. The study does not consider a restructuring of existing harvesting and primary breakdown patterns which could recover more raw material for further processing. Nor does it address the potential for further value-added opportunities in the pulp and paper sector.
Opportunities for growth can only be realized by concentrating on product value rather than on volume, as has been emphasized in the past. The forest industry must continue to adapt to changes in traditional markets while seeking out new markets for existing and new products.
