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Squaring the Circle

Squaring the Circle. The Role of Technology in Meeting the World’s Need for Wood.

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Squaring the Circle

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  1. Squaring the Circle The Role of Technology in Meeting the World’s Need for Wood Clark S. Binkley, Ph.D. Chief Investment Officer Hancock Timber Resource Group 99 High Street, 26th Floor Boston, MA 02110 617-747-1583 tel 617-747-1516 fax cbinkley@hnrg.com 13 October 2000

  2. Agenda I.The last century: “timber famine” and rising real prices II.The emerging gap between timber demand and supply from "natural forests” III.Forest-sector technologies -- in growing trees and in using wood -- fill the gap IV.Conclusions

  3. I. The Last Century: Rising Real Timber Prices Southern Pine Sawtimber Stumpage Prices (1910 - 1999) 1982$/mbf

  4. I. The Last Century: Rising Real Timber Prices “If we accept the larger estimate of annual growth and apply it to the present rate of consumption, the result shows a probable duration of our supplies of lumber of not more than 33 years…[It] is certain that the United States has already crossed the verge of a timber famine.” Gifford Pinchot (1907) First Chief of the U.S. Forest Service

  5. II. Global Timber Supply and Demand A. Global Industrial Roundwood Demand billion m³

  6. II. Global Timber Supply and Demand B. Global Industrial Roundwood Supply billion m³

  7. II. Global Timber Supply and Demand Supply (from “Natural Forests”) C. The Emerging Gap between Demand and Supply from “Natural Forests” 3 2.5 billion m³ 2 1.5 1 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Demand (based on population growth) Source: RISI and HTRG Research

  8. III. Technical Innovation Will Fill the Gap A. Increasing Reliance on Plantation Forests million m³ percent of total operable harvests Global Fast-Growing Plantation Harvests and Percent Share of Total Operable Forest Harvest Source: RISI

  9. III. Technical Innovation Will Fill the Gap Agriculture (U.S. corn yields) 2.0%/year Plantation Forestry 3.0%/year B. Increasing Productivity of Plantations 10 9 8 7 Growth Rate (tonne/ha/yr) 6 5 4 3 2 1 0 1950 1960 1970 1980 1990 2010 2020 Natural Stands Today’s Plantings Future Plantations First Plantations Source: FAO and Westvaco

  10. III. Technical Innovation Will Fill the Gap Demand (population-based) “Natural forest" harvests Plantation harvests (overall technology) Plantation harvests (planting technology) Plantation harvests (base case) C. Plantations Employing Advanced Forestry Biotechnologies will Fill the Gap 3.5 3 2.5 billion m³ 2 1.5 1 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Source: HTRG Research

  11. III. Technical Innovation Will Fill the Gap • Timber demand is derived from the demand for final products • housing • repair & remodeling • non-residential construction • shipping containers • Technical innovation reduces the amount of timber needed • reduction in wood-use per unit of final demand(e.g. lumber per square foot of housing) • improved efficiency in manufacturing processes(e.g.increased lumber production per unit of log input; substitution of smaller trees and less-used species for large-diameter traditional species)

  12. III. Technical Innovation Will Fill the Gap I-Joists D. Reduced Wood-Use Per Unit of Demand Structural Plywood Or OSB • Conventional Floor System • 1700 lineal feet lumber/house • 8.25 million cubic meters wood fiber/yr In U.S. (at 1.3mm housing units/yr) • I-Beam System • 50% savings in wood fiber(19.2” on center, LVL flange, same subfloor thickness, OSB web) • Save 4 million cubic meters wood fiber/yr Source: Schular, Spelter and APA - Engineered Wood Association 12

  13. III. Technical Innovation Will Fill the Gap E. Improved Efficiency in Manufacturing Processes   Source: Forintex, TJ MacMillan, USDA FS

  14. III. Technical Innovation Will Fill the Gap F. Lumber Recovery Improves at 1.3% / yr Fbm/m³ Source: PriceWaterhouseCoopers

  15. III. Technical Innovation Will Fill the Gap Demand forecast without efficient wood use or improvements in manufacturing Demand forecast with more efficient wood products manufacturing Demand forecast with technological improvements G. Improved Wood-Use Technologies Will Reduce the Need for Timber 3 2.5 billion m³ 2 1.5 1 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Source: RISI

  16. III. Technical Innovation Will Fill the Gap Potential plantation supply with technological improvement Demand with technological improvement “Natural Forest” harvests without increased supply from plantations “Natural Forest” harvests with increased supply from plantations H. Technologic Innovation Could Largely Replace Harvests from “Natural Forests” 3 2.5 2 billion m³ 1.5 1 0.5 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Source: RISI

  17. Conclusions • Reliance on traditional forest-sector technologies leaves a gap between the world’s wood needs and its capacity to supply them • Technical innovation in the use of wood reduces the amount of timber used per unit of GDP • Technical innovation in growing trees permits a much smaller land base to supply more wood • Forest sector R&D pays rich dividends in protecting the world’s forests

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