The dominance of plantation forestry will soon extend to wood chips.
Half of Australia’s wood production is exported as unprocessed chips and logs (Table 2). This forestry-wide statistic masks important differences in the industry structures built around plantations and native forests. The native-forest sector exports a considerably higher proportion of its log-cut as unprocessed chips and logs compared to the plantation sector (Table 2). In Australia’s major public native-forest logging regions of Tasmania, East Gippsland and south-east NSW, woodchip exports now account for between 80 to 90 per cent of the log-cut (Ajani 2007: 278).
* Prices deflated using Australian CPI 2006/07 = 100.
Calculated using ABARE forestry statistics and Australian Plantation Products and Paper Industry Council (AP3) 2005.
In the immediate post-Regional Forest Agreements (RFA) era of abolished Commonwealth woodchip-export controls, native-forest woodchip exports increased by 44 per cent, from 4.8 million green tonnes in 1997 to 6.9 million green tonnes in 2001. With Japan’s stagnant market (Japan Paper Association; Japan Tariff Association), chip exporters (then mostly native-forest-based) secured this 2 million tonne new trade by settling on an 18 per cent fall in real chip prices over the four years (Figure 4).
Woodchips from Australia’s early managed-investment-scheme hardwood plantings are now coming on stream and substituting for native forest resources (Figure 4) in a continuing flat global market. Australia’s hardwood plantation chiplog supply is poised to increase by 9 million green tonnes over the next two to three years (Figure 5). With little growth in global demand for hardwood chips, we can expect ongoing displacement of native-forest chips and, given the size of the additional plantation resources, continuing downward pressure on chip prices.
China may alleviate the market situation. Its industrial wood imports have increased by an average 19 per cent per annum over the 10 years ending 2006 and now account for a quarter of the global industrial wood trade (FAOSTAT 2008). Clearing Australia’s hardwood-plantation chip resource through exports to China would require Australian exporters to lift their share of Chinese industrial wood imports from its current 2 per cent to 25 per cent within two to three years. This is a challenging task for trade negotiators, given China’s buying-power capacity to drive prices down. Whilst China’s wood imports surge, real import prices have declined by an average 6.8 per cent per annum over the decade ending 2006: in other words, halved (FAOSTAT unit import prices in US$ deflated by US CPI).
Source: Compiled using Parsons et al. 2007 (BRS plantation wood-supply projections); Ferguson et al. 2002; ABARE Forest and Wood Products Statistics; Australian Plantation Products and Paper Industry Council (A3P) 2005