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Market for Plantation Grown Wood: Where we're at and where we're going

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As we continue to see the impacts of COVID-19 across the forestry sector, many aspects of our lives and jobs are put on pause as we take a considered approach on the best path forward. Despite this global pandemic, it is crucial that our industry continues during this time to help deliver the products our society demands and to ensure our economy can progress. The global demand for timber is still expected to quadruple by 2050, and while the demand for some products may have temporarily slowed down, the demand for other wood products has risen.

With the right trees and management, such plantings still provide long term financial rewards. These trees can deliver increased primary production productivity while simultaneously growing high value timber products. But if trees are ready to be harvested now for these timber products, many land owners have questions around the current market price for planation grown wood.

To offer some insight into market prices for plantation grown wood in Tasmania, we spoke with Andrew Morgan, PFT Director and Managing Director at SFM Forest Products, to get a better idea of where the market is and could be going.

While COVID-19 has impacted the industry in various ways in varying degrees, Morgan says the current demand for plantation timber products is strong.

“From a log export point of view the biggest impacts happened back in January/February when the virus was hitting hard in China. Since that downturn, demand has picked back up and is stable at the moment.”

With demand on the whole being solid right now, Morgan says it’s important to recognize that the demand is stronger for some products than others.

“The demand for construction products may slow but we’ve seen demand for fibre products used for making household items like toilet paper remain consistent, particularly on the back of some strange panic buying activity!”

“Each market and company will have a different view on where we’re sitting at the moment but generally it feels quite  stable. That’s not to say things won’t change so really it’s a bit of a ‘watch and act’ like a lot of other industries at the moment.”

With many variables contributing to the price of plantation grown wood, Morgan says it’s hard to put a definitive answer around what returns might look like right now.

“We can’t look at plantation grown wood as one global commodity because there are too many variables at play. Things like fuel prices, shipping costs, foreign exchange, market demand, long term vs. short term markets, different commodities and the destination of products are just some of things that will have an effect on price.”

Taking a cautiously stable stance on where we’re presently at Morgan says he’s optimistic that things will eventually pick back up to where we were prior to COVID-19.

“Before COVID-19, demand for wood products was continuing to increase. Prices were generally stable over a long period of time. The overall sentiment now is there would be continued demand for wood fibre as populations continue to grow- paper products, tissue products and engineered products will continue to be needed with this type of growth.”

While some plantation wood products have a higher demand than others, Morgan says it’s hard to pinpoint what the most lucrative markets currently are.

“It depends on where the products are grown and what the markets are doing. There are times where woodchips for pulp and paper have outperformed solid log pricing. Trees which take longer to grow like pruned pine will always have an inherent value but time is a big factor in seeing that return. It’s not a one size fits all answer and will be different for each land owner.”

To access the market, Morgan says PFT is a great resource to turn to for assistance.

“PFT can direct landowners to reputable companies and consultants  to ensure the best advice is being given to land owners.”

Forest Management certification is one of the biggest barriers to enter the market but Morgan says a few other issues need to be considered.

“Certification is very important but there are a few other variables like land size, the position of the trees on the farm, access to roads, proximity to ports, and council approval all need to be factored in.”

COVID-19 has brought a number of uncertainties for a lot of land owners but Morgan says the industry has adapted and has implemented all of the necessary steps to ensure health and safety is top priority during the potential harvesting of any trees.

“Consultants and companies have a number of processes and policies in place to limit the risk of spreading COVID-19. Maintaining social distancing, not sharing vehicles, working from home where possible are some of the protocols in place that mean we can continue to work safely.”

With the disruption to trade worldwide due to COVID-19, the Tasmanian Government is working to support Tasmanian exporters to maintain access to key international markets and prepare for new opportunities.