forest-based bioeconomy outlook - indufor ltd. · lapland 55 north ostrobothnia 3 1 kainuu 3 2...
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Agents' Day 2017 of Finnish Sawmills AssociationJyrki Salmi – Managing Director, Senior Partner, Indufor Oy
Forest-based Bioeconomy Outlook
Copyright © 2017 Indufor Oy
Content
Indufor in a nutshellFinnish wood resources and harvestingWood consumption in FinlandFuture investmentsConclusions and implications for the sawmilling industry
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Indufor in a nutshell
Indufor in a nutshell
Independent international consulting company based in Finland, New Zealand, Australia and the US with over 35 years of experience in the field of forestry, forest industry and natural resourcesProvide world class advisory services to a wide range of private and public sector clientsMore than 300 clients in over 800 projects in 5 continents.
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Scope of servicesWorld class services to wide range of Clients: forest industry companies and associations, forest and land owners, and primary producers’ associations, investors and investment banks, development banks and others.
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Due diligence of forestry investments
Valuation of forestry assets and financial modelling
Sustainability solutionsInvestment advisory and strategy
Wood supply studies
Strategic industry advisory
Benchmarking & process improvementsClimate change consulting
Development consulting
Project and program evaluation
Indufor – Forest Industry & Bio Solutions
Biomass sourcing and wood supply plansSite suitability for forest plantation and biomass species and varietiesPotential and realistic supply availability in biomass supply basketsDeveloping supply models and assessing associated cost structures
Business strategiesPre-feasibility/feasibility studiesBusiness plansMarket supply, demand and trade assessments – market entry solutionsEnd use segment and client identification studies
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Due Diligence and M&APurchaser and vendor due diligenceValuations Mergers and acquisitions
Process ImprovementsTechnology assessmentsOperational improvement analysis
Industry benchmarkingIndustry segment productivity assessments Single plant benchmarking studies
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Finnish wood resources & harvesting
Average annual increment of growing stock and drainAnnual industrial roundwood removals have been fluctuating between 40 and 60 million m3 during the past 20 years. Over this period the annual growth has been significantly higher than harvesting volumes.
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40
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80
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120
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
million m³
Industrial roundwood removals Annual growth Drain (harvest + natural mortality)
Sustainable annual harvesting vs. consumption of industrial woodCurrent harvesting volumes do not fully realize the potential of Finnish forests and theoretically there are significant volumes being underutilized. In addition, ca. 9 million m3
of wood are imported annually, mainly from Russia.
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VMI9 VMI10
VMI11
-20
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80million m³
Sustainable harvesting level
Domestic wood
ImportImports from Russia
Sustainable annual harvesting level vs. consumption of sawlogsCurrent harvesting volumes especially of pine sawlogs is below harvesting potential. Recently Finland has been relying on domestic resources and imports have been marginal.
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VMI9VMI10
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20million m³
Sustainable harvesting level
Domestic
ImportFrom Russia
VMI11
Pine sawlogs
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16
20million m³
Sustainable harvesting level
Domestic
ImportFrom Russia
Spruce sawlogs
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16
20million m³
Sustainable harvesting level
DomesticImport
From Russia
Birch sawlogs
VMI11
VMI11
Sustainable annual harvesting level vs. consumption of pulpwoodSimilar to sawlogs, particularly coniferous pulpwood is harvested below theoretical potential. However, some 6.5 million m3 of pulpwood, particularly birch, is imported mainly from Russia.
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VMI*9 VMI*10
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‐5
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25million m³
Sustainable harvesting level
Domestic
Import
From Russia
Pine pulpwood
VMI9VMI10VMI11
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25million m³
Sustainable harvesting level
Domestic
ImportFrom Russia
Spruce pulpwood
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25million m³
Sustainable harvesting level
Domestic
Import
From Russia
Birch pulpwood
Wood import by species and typeBirch pulpwood accounts for half of the imported volumes, followed by wood chips, designated for pulp production. Due to high export tariffs for sawlogs in Russia, only minor volumes of sawlogs are currently imported to Finland.
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Birch pulpwood53 %
Wood chips28 %
Spruce pulpwood6 %
Pine pulpwood4 %
Other hardwood pulpwood
3 %
Pine sawlogs3 %
Spruce sawlogs2 % Birch sawlogs
1 %
Total, 2015 – 9 million m3
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4 13
Lapland
511
North Ostrobothnia
3 7
Kainuu
36
Central&SouthOstrobothnia
5 9
North Karelia
59
North Savo
6 9
South Savo
0Åland
3 7
South‐western
3 6
Pirkanmaa
5 7
Häme‐Uusimaa1 3
Southern coast
5 9
Central Finland
4 5
South‐eastern
Increment
Industrial roundwood removals
In the Southern regions, where most of the production facilities are located, almost all the available wood resources are being processed recently and there is high competition on the raw material market.In Northern Finland the utilization rate is lower, but the distances are longer and accessibility is poorer
Increment vs. industrial roundwood removals by region
Industrial roundwood removals vs. total wood consumption by region
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4 6
Lapland
5 5
North Ostrobothnia
3 1
Kainuu
3 2
Central&SouthOstrobothnia
5 5
North Karelia
5 5
North Savo
63
South Savo
0 0
Åland
3 7
South‐western
3 3
Pirkanmaa5 5
Häme‐Uusimaa
1 0
Southern coast
5 6
Central Finland
420
South‐eastern
Total wood consumption
Industrial roundwood removals
Wood consumption is the highest in the Southern part of FinlandIndustrial roundwood removals are not sufficient for satisfying the demand in several regions.
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Wood consumption in Finland
Wood flows in FinlandIndustrial processing dominates even use in energy production has increased.
Source: Luke, 2016.
Wood products
P&P industryIMPORT
Forest
Annual growth
106
Annual removals
79
Annual harvesting
65
Industrial roundwood
64
Increment of growing stock
26Forest chips
9Energy wood
9
27
37 Sawdust & wood chips
9
Recycled fiber650 000 t
Import sawdust &
chips3
Roundwood7
Roundwood & wood chips
exports1
Harvesting residues and drain
5
million m3
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Wood consumption of the Finnish forest industriesAlmost 60% of the wood consumption originates from P&P industries, whereas 35% is consumed by sawmills, mainly of medium and large size. The rest of the demand is created by birch plywood producers. In addition, 9 million m3 of wood is used for energy generation annually.
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Source: LUKE
Large and medium-sized
sawmills36 %
Small sawmills1 %
Plywood and veneer
industries4 %
Other1 %
Mechanical pulp industry
10 %
Semi-chemical pulp industry
2 %
Chemical pulp industry
46 %
Total, 2015 – 64 million m3
Sawnwood and P&P production in FinlandSawnwood production has not reached pre-crisis level of 2007. Currently, pine and spruce sawnwood account for equal share. Pulp production is still recovering from significant drop in 2009, accompanied by paper making capacity shrinkage. Sawmilling industry generates annually around 3 million m3 of wood chips, suitable for pulp production.
Sawnwood production
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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
million m3
Pine Spruce
Pulp production
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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
million t
Bleached coniferous pulp Other pulp
Raw material composition in P&P industries in FinlandMore than half of the domestic raw material is comprised of coniferous pulpwood, whereas hardwood pulpwood accounts for 20%. Also, one fourth originated from wood industries processing residues and waste wood. Almost 9 million m3 were imported, represented mainly by hardwood pulpwood and wood chips.
Domestic fibre
Pine pulpwood
37 %
Spruce pulpwood
21 %
Hardwood pulpwood
21 %
Processing residues & waste wood
21 %
Total, 2015 – 38 million m3
All fibre
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Pine pulpwood
31 %
Spruce pulpwood
18 %
Hardwood pulpwood
29 %
Processing residues & waste wood
17 %
Imported wood chips
5 %
Total, 2015 – 47 million m3
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Future investments
Future investments 7 million m3/a increase in coniferous pulpwood and sawlog use in 2015-2017 and possible further increase of 10 million m3 in 2018-2020 and 5 million m3 thereafter.
Company Location / product Investment, EUR million Increase in wood use Timing
2015-2017
Metsä Group Äänekoski 1 300 000 t/a pulp and other bioproducts 1 200
4 000 000 m3/a coniferous pulpwood.Q3 2017Current use 2 300 000 m3/a birch and coniferous
pulpwood.UPM Kymi 170 000 t/a pulp increase 98 600 000 m3/a coniferous and birch pulpwood. Q4 2017UPM Kaukas modernization of pulp mill 50 200 000 m3/a coniferous and birch pulpwood. Q4 2016Kotkamills Conversion from paper to packaging materials 170 200 000 m3/a of coniferous and birch pulpwood Q3 2016Stora Enso Varkaus LVL 100 000 m3/a 43 250 000 m3/a coniferous sawlogs Q2 2016
Stora Enso Varkaus 310 000 t/a pulp (+390 000 t/a kraftliner) 110 1 100 000 m3/a more coniferous pulpwood. 800 000 m3/a reduction in birch pulpwood. Q4 2015
UPM Kymi 170 000 t/a pulp increase 160 600 000 m3/a coniferous and birch pulpwood. Q3 2015
Keitele Kemijärvi Lappi Timber 150 000 m3/a sawnwood / glulam 32 300 000 m3/a coniferous sawlogs. Q1 2015
2018-2020Boreal Bioref Kemijärvi 400 000 t/a pulp and other bioproducts 750 ca. 2 200 000 m3/a coniferous pulpwood and chips 2019-2020
Kaidi Kemi biofuel refinery 200 000 t/a biofuels 900 2 800 000 m3/a pulpwood, energy wood, wood residues 2019
Finnpulp Kuopio 1 100 000 t/a pulp and other bioproducts 1 400 ca. 6 000 000 m3/a coniferous pulpwood. 2019Other announced investment plans
Savonlinna biorefinery project Savonlinna 50 million liters of liquid biofuels n.a. n.a. Announced Q3 2016
Kaicell Fibres Kajaani or Paltamo 400 000-460 000 t/a pulp n.a. ca. 2 500 000 m3/a pulpwood. Announced Q2 2015Haapajärvi biorefinery Haapajärvi, softwood kraft pulp, 400 000 t/a 500 ca. 2 million m3/a coniferous pulpwood Announced Q2 2016
St1 Cellunolix® Pietarsaari n.a. n.a. Announced Q4 2016
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Future investmentsGreenfield plans focused in central and north. Chinese involvement in more than one project.
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Wood consumption will be increasing in the Northern and Central part of FinlandIn 2015-2017 wood consumption is to increase by 7 million m3, mainly represented by coniferous pulpwoodIf all announced projects are completed, that will result into annual wood consumption growth of over 20 million m3 by 2022This would result in a significant additonal supply of coniferous sawlogs and birch veneer logs in the domestic market.
Future investments – Most significant projectsÄänekoski is the only project under construction. Chinese CAMCE strongly involved in Kemijärvi project.
Äänekoski • First next-generation bioproduct mill in the
world• Up in operation in Q3, 2017• 1,2 billion € investment• 1,3 million tons of pulp• Bioproducts (tall oil, turpentine, lignin products,
bioelectricity and wood fuel)• 4.5 million m3 of coniferous pulpwood• 2 million m3 of birch pulpwood• Up to 2 500 jobs generated• Annual impact of more than EUR 0.5 billion on
Finland’s GDP
Boreal Bioref• Develops biorefinery in Kemijärvi• Up in operation in 2020. No investment
decison yet• EUR 780 million investment (letter of intent
with CAMC Engeneering signed in 2016)• 400 000 t of pulp (dissolving pulp, long fibre
market pulp)• Bioproducts (microcrystalline cellulose, MCC
C5- and C6 sugars, pine oil and turpentine, bioenergy, soil improvement substances)
• 2.3 million m3 of coniferous, mainly pine, pulpwood and chips from nearby sawmill
• Location close to Keitele group sawmill and glue laminated timber mill
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Future investments – Most significant projectsChinese Kaidi involved in Kemi project. Finnpulp plan closest to the Äänekoski project which is under construction already.
Kaidi Finnpulp• World's largest softwood pulp mill • Up in operation in 2019. No investment
decision yet.• 1.4 billion € investment. No major investors
announced yet. No investment decision• 1.2 million tons of coniferous pulp• 1 TWh of electricity and 65 000 t of tall oil
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• Second generation biorefinery • Up in operation in 2019; investment decision
to be done in 2017• 900 million € investment carried out by
Chinese Kaidi• 225 000 metric t of biofuels (75% - renewable
diesel, 25% - renewable gasoline)• 2.8 million m3 of wood biomass (energy wood,
harvesting residues and other brown side streams from sawmilling)
Future investments – Most significant projectsKaicell and Haapajärvi are 200 km from each other with no public information of investors.
Kaicell
• Up in operation in 2020• No investment decision yet• Production capacity 450 000 t of coniferous
sulphate pulp • 2.5 million m3 of coniferous pulpwood from
Kainuu region
Haapajärvi
• Announced in April 2016• Up in operation in 2020• No investment decision yet• Production capacity 400 000 t of coniferous
kraft pulp • Wood consumption of 2 million m3/a
(coniferous pulpwood)
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Wood consumption growth in FinlandSignificant number of investments is being planned and to be completed by 2022. Largest wood consumption growth originates in P&P sector. However, sawnwood output is required to increase to get the required fiber for these investments.
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Wood consumption increase per region
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65.3
13
Lapland
52 10
12.5 7
Kainuu
4,66,5 9,3
NorthSavo
20
1,6
5,3
South‐eastern
6
49
CentralFinland
Boreal bioref in Kemijärvi and Kaidi in Kemi, both consuming pulpwood. Greenfield sawmill by Keitele.
Kaicell, cosuming pulpwood.
Finnpulp, cosuming pulpwood and expansion of Stora Enso’s Varkaus mill, both pulpwood and sawlogs.
Äänikoski, consuming coniferous pulpwood. UPM’s Kymi and Kaukas
pulpmills expansions, Kotkamill’s paper machine conversion; all pulpwood.
North Ostrobotnia
Most of pulpwood consumption increase is for coniferous pulpwood.Wood use would increase above local increment in central Finland.
Current forest increment
Current wood consumption
Additional wood consumption
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Conclusions & implications for the sawmilling industry
Outlook for Finnish sawnwood industry Announced P&P investments will significantly increase the demand for pulpwood and pulp chips. All investment plans are close to existing sawmills.
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Operating Sawmills in FinlandUpcoming investments
Outlook for Finnish sawnwood industry Sawnwood production is expected to set new record level but the production growth can most likely be met by the existing sawmills.
It can be expected that future investments in P&P sector will lead to increased sawlog availability on domestic marketEstimates of annual production growth have varied between 1.5 and 3 million m3 – both levels would mean new national record production Regardless of the eventual output increase, the whole production volume can most likelybe produced by the existing sawmills through minor investment and/or debottlenecking as well as adding shifts in production.
Sawnwood production forecast
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16million m3
Additional sawnwood production
Outlook for Finnish sawnwood industryFinnish annual domestic market has been fluctuating between 3 and 4 Mm3 lately, whereas exports have been growing steadily since 2009 reaching almost 9 Mm3 in 2016. In case annual sawnwood output growth exceeds 1.5 Mm3, exports become more and more vital. Emerging markets would be of significant importance to absorb the new volumes.
Sawnwood domestic market
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Sawnwood exports
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Additional sawnwood production
Additional sawnwood exports
Home takeaways
There is a significant gap between the sustainable annual harvesting level and the actual drainregional differencessupply-demand balance varies between wood species and assortments economically available supply smaller than theoretical
P&P industries account for almost 60% of the overall wood consumptionover three quarters is round pulpwood, and one quarter chips
Numerous greenfield and capacity expansion investment announcementsP&P and bioeconomy represents a clear majorityForeign ownership – especially ChineseUnrealistic to expect all investment plans to materialize
New P&P / bioeconomy investments require remarkable volumes of pulpwood as well as processing residues
Forest owners need to be able to sell their logs as well which require higher output from the sawmillsDomestic market can’t alone absorb the expected volume increase
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