1301.0 - Year Book Australia, 2003
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 24/01/2003
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The use of forest products
Domestic consumption of structural wood
The demand for structural wood is derived from the demand for building and construction, and to a lesser extent by the demand for furniture (Love, Yainshet & Grist 1999). Historically, rises or falls in new dwelling commencements show a close relationship with rises and falls in apparent consumption of sawnwood (graph 20.21).
Reflecting a number of influences such as low interest rates and increased grants for new home buyers, new dwelling commencements in Australia rose in 2001-02. However, with interest rates expected to rise, residential construction is forecast to be lower in 2002-03 and 2003-04, but begin to rise again thereafter.
As a consequence, sawnwood consumption is projected to fall from 4.5 million cubic metres in 2001-02 to 4.1 million cubic metres in 2003-04, but rise to around 4.7 million cubic metres in the medium term.
The main macroeconomic and other assumptions underlying these projections are described in the next section.
Assumptions for structural wood consumption projections
Projections of structural wood consumption are based on the underlying demand for new dwellings, and other uses such as alterations and additions to existing homes, non-residential construction and furniture (Love, Yainshet & Grist 1999). Structural wood consumption is modelled from the number of new single-unit and multiple-unit dwellings, and income. The demand for new dwellings is projected from expected rates of household formation, with adjustment for replacement of housing stock, and vacancy rates. Rates of household formation are projected from the expected number of persons per household, and projections of population growth (table 20.22).
In the past decade, reduced availability of hardwood sawlogs and increased availability of softwood sawlogs and pulpwood resulted in significant changes in the relative prices of these production inputs, and consequently in the production mix of structural wood products and their prices to consumers. Sawn hardwood prices rose strongly relative to sawn softwood- and pulpwood-based products such as wood-based panels (graph 20.23).
With these trends projected to continue throughout the current decade, sawn hardwood consumption is projected to decline from 1.2 million cubic metres in 2000-01 to 1.0 million cubic metres in 2006-07, while sawn softwood consumption is projected to rise from 2.9 million to 3.7 million cubic metres.
Consumption of wood-based panels and reconstituted wood products is also projected to rise in the medium term, from 1.5 million cubic metres in 2000-01 to 1.7 million cubic metres in 2006-07 (graph 20.24).
The projected lower rate of increase in consumption of wood-based panels and reconstituted wood products relative to that of sawn softwood reflects expectations that higher sawn softwood production will increase the availability of low-priced soft sawnwood, and that, while reconstituted structural wood products will remain competitively priced, their use will continue to be constrained to niche markets by building preferences.
Structural wood production
Australia produced 5.3 million cubic metres of structural wood in 2000-01, consisting of 1.2 million cubic metres of sawn hardwood, 2.3 million cubic metres of sawn softwood and 1.8 million cubic metres of wood-based panels (graph 20.25).
The average recovery rate (the ratio of sawnwood produced to the volume of sawlogs milled) is estimated to be around 40% from plantation sourced softwood logs and 33% from native forest sourced hardwood logs.
Production of wood-based panels includes reconstituted structural wood products that are direct substitutes for sawn timber, such as laminated veneer lumber and composite beams.
If all of the sawlog component of the industrial roundwood supply projected for the period 2005-06 to 2009-10 were to be processed into sawn timber, then reduced hardwood sawlog availability from native forests could result in annual sawn hardwood production falling by around 15-20% to average 1.0 million cubic metres, and sawn softwood production rising by around 60-70% to average 4.1 million cubic metres a year.
The increased supply of pulpwood directly and as mill residue could also reduce the cost of producing wood-based panels and reconstituted structural products, the combined production of which could potentially average 2.2 million cubic metres a year in the period 2005-06 to 2009-10 (see graph 20.25).
Structural wood imports and exports
There has been a long-term decline in the share of imports in structural wood consumption, as domestically produced sawn softwood has become more competitive with imports.
At the same time, the share of wood-based panels imports in total wood-based panels consumption has been rising, reflecting the availability of low cost imported wood-based panels and reconstituted structural wood products.
Future trends in Australian trade in soft sawnwood (both imports and exports) will depend largely on the international competitiveness of softwood processing in Australia. Although the share of sawn softwood imports in Australian sawn softwood consumption is expected to continue to decline, it is expected that imported special applications timbers such as Douglas fir and western red cedar will continue to hold around 10-15% of the market.
In the reconstituted structural wood market, imports represent a high share of total consumption and are likely to continue to do so, as the size of the mills required for economic production of many of these products exceeds the likely requirements of Australia's relatively small domestic market.
While some of the projected additional sawn softwood production (see next section) is likely to be absorbed by the domestic market (probably at lower prices), a large proportion would be available for export. However, the ability to export sawn softwood will depend on Australia's international competitiveness in Pacific Rim markets.
To compete, Australian sawmillers will need to be able to produce and transport sawn softwood to export markets at a lower cost than competing nations. This may prove increasingly difficult as sawn softwood from plantations in other nations such as Argentina and New Zealand also comes on stream in the latter half of the current decade.
Plantations and structural wood markets
Forest plantations have provided progressively more of Australia's structural wood resources in recent years. Some recent revisions to projected wood supplies from both forest plantations and native forest, however, suggest that this process is occurring more quickly than previously expected. It is now possible that forest plantations could be providing 75% of domestic industrial wood supplies by 2010, compared with expectations of only around 62% several years ago.
The forecast net increase in wood flow is also much larger than previously expected - at around 5.5 million cubic metres - after expected decreases in flows from native forest are taken into account. The potential increase in plantation wood supplies will have many implications for Australia's wood and paper industries.
If all of the sawlog component of the industrial roundwood supply projected for the period 2005-06 to 2009-10 were to be processed into sawn timber, then sawn hardwood production in Australia would fall by 15-20% and sawn softwood production would rise by 60-70% relative to current levels. This would represent a significant addition to domestic sawn softwood availability.
The issues relating to the potential to export the increased stock of sawn softwood that is not required for domestic consumption were discussed in the previous section. Large increases in domestic production of sawn softwood would also likely alter the relative prices for, and therefore the domestic use of, sawn softwood, sawn hardwood, wood-based panels and reconstituted wood products.
Industrial roundwood removals
Reflecting steady increases in wood flows from forest plantations in the past decade, Australia's production of industrial roundwood reached 24.2 million cubic metres in 2000-01. Hardwood plantations have emerged as a 'third source' of industrial roundwood, alongside native forests (which provide mainly hardwood) and the softwood plantations established mainly during the two decades from around the mid 1960s to the mid 1980s.
Recently revised figures for industrial wood flows indicate expected lower wood flows from native forests over the next decade, but a further steady increase in wood flows from softwood plantations and large increases in wood flows from relatively recently established hardwood plantations (graph 20.26).
For native forests, the recently announced intentions by the governments of Victoria and Western Australia to reduce the volume of wood being harvested are expected to reduce Australia's annual removals of industrial roundwood from native forests to an average of 8.2 million cubic metres in the period 2005-06 to 2009-10, compared with estimated removals of 10.2 million cubic metres in 2000-01.
In comparison, potential log availability from softwood plantations is projected to average 15.0 million cubic metres a year in the latter half of this decade, significantly higher than previously projected (Ferguson et al. 2002).
The supply of plantation hardwood pulplogs is also expected to rise significantly as existing hardwood plantations approach the end of their first 10-year rotation. Wood flows from hardwood plantations are projected to rise from 1.0 million cubic metres in 2000-01 to an average of 9.2 million cubic metres a year in the latter half of the current decade (Ferguson et al. 2002).
Consequently, total industrial roundwood removals could potentially increase from 24.2 million cubic metres in 2000-01 to average 32.4 million cubic metres a year in the latter half of the current decade.
ABS (Australian Bureau of Statistics) 2000, Population Projections, Australia, 1999 to 2101, cat. no. 3222.0, ABS, Canberra.
Ferguson IS, Fox J, Baker T, Stackpole D & Wild I 2002, National and Regional Plantation Wood Availability 2001-2044, Consultant's Report for National Forest Inventory, Bureau of Rural Sciences, Canberra (in press).
Love G, Yainshet A & Grist P 1999, Forest Products: Long Term Consumption Projections for Australia, ABARE Research Report 99.5, Canberra.
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