Roundwood Prices Research Articles

MERCADO PARANAENSE DE MADEIRA EM TORA PROCEDENTE DE SILVICULTURA ENTRE 1999 E 2005

Este trabalho analisa o mercado paranaense de madeira em tora no período de 1999 a 2005. O objetivo foi analisar se o aumento de preço da madeira em tora no período em questão foi provocado por uma variação da demanda ou da oferta de madeira. Foram calculadas as taxas anuais de crescimento do preço e da quantidade de madeira em tora, e estas relacionadas conforme os deslocamentos das curvas de oferta e demanda. Os resultados indicaram que o aumento do preço da madeira em tora no período de 1999 a 2005 foi devido a fatores relacionados, principalmente, à demanda externa.

Forest sector market impacts of changed roundwood export tariffs and investment climate in Russia

The Russian Federation is the world's largest net exporter of roundwood. To encourage shift in exports from roundwood to value-added industrial products, Russia has set large tariffs on its roundwood exports, and announced that even higher ones would be introduced in the future. Using a global forest sector model, the EFI-GTM, we analyse how the Russian and global forest product markets will evolve towards 2020 under alternative tariff levels and assumptions on investment climate in Russia. Our results show that the tariffs decrease harvest and roundwood prices in Russia, but improve the speed of development in the Russian sawnwood and pulp industry. The results also suggest that policies which improve the investment climate in Russia are more vital than the tariffs for the Russian forest industry to develop favourably. Among the tariff settings considered, the prevailing one of 15€ per cubic meter with non-coniferous pulpwood exempted, seems most beneficial for Russia. With a tax of 50€ per cubic meter, its forest industry would not develop much stronger than in the 15€ case, but forestry would suffer from a drastic harvest decrease caused by a nearly complete stop in the Russian roundwood exports, and negligible tax income would be generated. Outside Russia, the main importers of Russian roundwood would experience significant wood price increases and decreased forest industry production. The decline in the forest industry output would be largest in Asia, due to scarce supply there of raw material substitutes for wood imported from Russia, whereas the highest relative increase in roundwood prices would take place in the EU.

Global outlook for wood and forests with the bioenergy demand implied by scenarios of the Intergovernmental Panel on Climate Change

The Global Forest Products Model (GFPM) was modified to link the forest sector to two scenarios of the Intergovernmental Panel on Climate Change (IPCC), and to represent the utilization of fuelwood and industrial roundwood to produce biofuels. The scenarios examined were a subset of the “story lines” prepared by the IPCC. Each scenario has projections of population and gross domestic product. These projections were used as input in the GFPM simulations. The IPCC also makes projections of forest area, which were integrated in the timber supply sub-model of the GFPM. The IPCC scenarios also predict bioenergy production. These projections were used in the GFPM to determine forest area, forest stock, and the demand, supply, prices, and trade of forest products up to 2060. The main finding concerns the important impact of the high demand for biofuels implied in some of the IPCC scenarios. In particular, scenario A1B would induce a nearly 6-fold increase in the world demand for fuelwood by 2060. As a result, the real price of fuelwood would rise and converge towards the price of industrial roundwood by about 2025. At that point, industrial roundwood, which was used in the past to manufacture sawnwood, panels, and pulp, would begin to be used for energy production. The price of all wood would then continue to rise steadily up to 2060, and the price of manufactured product would increase in concert. The high fuelwood harvest would imply ecologically stressed forests in several countries, even under scenario A2 with a nearly 3-fold increase in fuelwood production by 2060.

Implications of the Russian roundwood export tax for the Russian and global wood products sectors

Russia is the world's largest exporter of roundwood, mainly to China, Finland and Japan. The Russian government recently announced an increase in its export tax on softwood roundwood from the present 6.5% of export product value to 80% by January 2009. The effects of this policy on the world forest sector to 2020 were simulated with the Global Forest Products Model. The predicted results were lower Russian roundwood exports and prices, lower global wood supply and higher world roundwood prices. In response, the USA, Germany and New Zealand would increase production and export of roundwood. Major consumers of Russian roundwood would suffer a reduction in production and export of wood products. By 2020 Russian harvests and roundwood exports would be 49 million m3 (19%) and 51 million m3 (50%) lower, respectively. The price of roundwood in Russia would be 16% lower. This would encourage a modest increase in Russian forest product production: 1–3% higher. However, Russian export revenues would be US $3.4 billion (23%) lower as growth in processed exports would fail to offset reduced roundwood export revenue. Value added in all manufacturing sectors would be US $225 million higher in Russia, while it would be US $1.3 billion lower in Finland and US $728 million lower in China. Owing to the tax on exports the Russian forest stock would be 1 billion m3 (0.3%) higher in 2020.

Heterogeneity in nonindustrial private roundwood supply: Lessons from a large panel of forest owners

This study examines heterogeneity in nonindustrial private forest owners’ timber supply by using a large panel data set of Norwegian landowners. The full sample is divided into more homogenous subsamples. We apply four econometric panel data specifications. Three of the specifications have seldom or never been applied previously in such a supply analysis. Interpretations and results for estimated slope parameters vary substantially between estimators. Supply responses differ considerably with respect to property size and across regions. Changes in roundwood prices and interest rates are the main determinants explaining the decrease in supply during the period 1989–1997. Future roundwood supply analysis should preferably account for heterogeneity in order to avoid inconsistent estimators that could mislead decision makers.

Transmission of price changes in sawnwood and sawlog markets of the new and old EU member countries

In the European sawnwood markets, competition is tight between producer countries, with the new EU countries gradually gaining larger market shares. This paper focuses on the pass-through of sawnwood prices to supplier countries’ national roundwood prices. Price-change effects on market shares are known to be large, but not so much is known about the timing and duration of price transmission between competitor countries. Our empirical analysis concerns the exports of four large sawnwood supplier countries in Europe (Finland, Austria, Estonia and the Czech Republic) to German markets, using quarterly panel data for 1995–2003. The transmission process was found to differ between countries, and the relationship was most clearly detectable between Finnish sawlog and sawnwood prices. Results based on seemingly unrelated regression analysis indicated that price transmission exhibits similarities between old (i.e. Austria, Finland) and new EU member countries (Estonia, Czech Republic). Overall developments in both sawnwood and sawlog prices displayed convergence in the study period, which indicates that deepening integration in European markets is also detectable in the forest sector.

Economic impacts of increased forest conservation in Europe: a forest sector model analysis

Scenarios with either 3% or 5% of the productive forest stock in Western Europe set-aside for conservation are compared to a baseline case. The latter case is further compared to cases where the whole of Europe and North America join the 5% conservation program. The scenarios are created by employing a global forest sector model, EFI-GTM. The aggregate conservation impacts seem relatively low, mainly because international trade counterbalances regional shortages and because roundwood harvests are well below the annual forest growth in many European countries. Conservation increases the forest owners’ wood sales income. The 5% set-aside raises roundwood prices in Western Europe by 4% and decreases harvests by 3% from the base case levels during 2010–2020. The production of pulp and mechanical forest products then decrease by 1.4 and 1.7%, respectively. The paper market is affected least. The leakage impact of forest protection is most pronounced in Russian roundwood harvests. Simultaneous conservation in the whole of Europe raises the roundwood costs of the Western European forest industry, but it does not prevent the leakage of roundwood harvests to Russia. Conservation in North America has a low impact on the European roundwood market.

Increasing Forest Conservation in Norway: Consequences for Timber and Forest Products Markets

This paper analyses the impacts on timber and forest products markets of increasing forest conservation in Norway. A partial equilibrium forest sector model is applied to analyse effects on roundwood and forest products prices, quantities and trade of four alternative conservation extents. These alternatives are based on a recent biological analysis of the conservation needs in order to protect biodiversity in Norway. Roundwood prices are projected to increase moderately when conservation increases domestically only, since the Norwegian forest industry substitutes imported fibre for domestic. The impacts on roundwood prices are more substantial if also Norway’s forest products trading partners increase the forest conservation. If forest owners voluntarily conserve forests subject to an economic compensation (which currently is the most likely policy in Norway), the model results imply that forest owners on average are better off with increased conservation. Domestic sawnwood production is projected to reduce when assuming increasing forest conservation, while the production level in the pulp and paper industry is almost unaffected in the short-run. Finally, increasing demand for forest products as a result of “environmental good-will” may increase roundwood prices and harvest levels in unaffected forest areas significantly.

FORESTRY SECTOR REFORM AND DISTRIBUTIONAL CHANGE OF NATURAL RESOURCE RENT IN INDONESIA

After the collapse of the centralized Soeharto regime, deforestation caused by over-logging accelerated. To tackle this problem, an IMF/World Bank-led forestry sector reform program adopted a market-friendly approach involving the resumption of round wood exports and raising of the resource rent fee, with the aim to stop rent accumulation by plywood companies, which had enjoyed a supply of round wood at privileged prices. The Indonesian government, for its part, decentralized the forest concession management system to provide incentives for local governments and communities to carry out sustainable forest management. However, neither policy reform worked effectively. The round wood export ban was reimposed and the forest management system centralized again with cooperation from a newly funded industry-led institution. In the midst of the confusion surrounding the policy reversal, the gap between the price of round wood in international and domestic markets failed to contract, although rent allocations to plywood companies were reduced during 1998–2003. The rents were not collected properly by the government, but accumulated unexpectedly in the hands of players in the black market for round wood.

Lithuania

In Lithuania forests occupy about 2 million hectares, it consists 31.3% of total land area. 32.2% of forests are privately owned. Annual removal is 6.5 million m³. The main production of the Lithuanian woodworking industry is sawn wood, furniture. Lithuanian forests are not only the source of wood products but also non- wood forest products such as berries, mushrooms, game etc. Forests are owned by 222.2 thousands private forest owners and 42 state forest enterprises. Forest industry consists 873 companies; most of there are SME’s. The main factors effecting the competitiveness of forest-wood /non-wood/servicesconsumer chain from the point of view of entrepreneurship in Lithuania: rich wood and non-wood products resources; low level of round wood prices;, favourable geographical location; low cost of labour; the possibilities to get financial support from EU funds. Barriers to entrepreneurship: low level of domestic market development for wood and non-wood products (especially for small-sized round wood); the small-scale private forestry; high transaction cost for entrepreneurship; low capital resources (GDP per capita is low; biggest part of consumption expenditures fall to food and housing); low level of investments and innovations; very weak integration of forest sector to rural development programmes; low knowledge of business establishment and management; weak connections between research and business. The main problems and research questions for enterprise development in the forest sector: domestic market development strategies; urban consumers demand for forest products and services, integration of forestry into rural development; clasterisation of wood working industry; social structure of small-scale private forest owners; conflicts resolutions of multipurpose forest utilisation.

Projecting pulpwood prices under different assumptions on future capacities in the pulp and paper industry

Capacity changes in the pulp and paper industry affect demand for pulpwood and thus pulpwood prices. This paper analyzes the impacts on roundwood prices in Norway of two possible capacity changes (one new machine and one close-down) that currently are high on the agenda in the Norwegian paper industry, and assesses the generality of the results obtained from these case studies. The two cases are implemented exogenously into a regionalized partial equilibrium forest sector model, and the capacity change scenarios are compared with a business as usual scenario assuming no demand shocks. The projected pulpwood prices change significantly in regions near mills where capacity shifts, at least for the close-down case, but only moderately at an aggregated national level. The reduction in prices under the close-down studied is higher than the price increase from the possible capacity increase case. The asymmetric price responses projected for the two case studies are supported by sensitivity analyses on other regions and cases (technologies). For the capacity increase case it is shown that the level of the projected pulpwood price is sensitive to assumptions on base-year prices and transport costs of imported roundwood, but the magnitudes of the price increases projected as a result of increased demand are less affected by these assumptions.

A restricted Leontief profit function model of the Canadian lumber and chip industry: potential impacts of US countervail and Kyoto ratification

Estimation of output supplies and factor demands with a range of functional forms provides a basis for bounding possible supply responses to exogenous shocks. No prior study, to our knowledge, has used a generalized Leontief functional form to estimate lumber and chip supply responses in Canada. The own price lumber supply elasticities estimated from the restricted Leontief profit functional form used in this study are lower than those presented in most other studies, while the lumber supply response with respect to roundwood price change is somewhat higher than some studies. We simulate the impacts of current US countervail processes on Canadian lumber supply. The simulated responses to duties might be considered to be conservative estimates, while the lumber supply responses to roundwood price increases could be on the high end of expected responses. Estimation of profit and supply functions indicates that rather than being a distinct production decision, chip supply follows lumber supply. The supply responses of chips and lumber to the various combinations of duty, roundwood price increases, and energy price increases indicate a number of patterns. First, if Kyoto policies increase energy prices (up to 10%), these changes are not likely to have a large impact on lumber and chip production. Second, British Columbia and Quebec tend to have lumber and chip supplies that are more sensitive to duties and increased roundwood prices than Ontario. Third, Quebec is more sensitive to roundwood price increases, while British Columbia is more sensitive to the effects of duties.

Development strategies for privately owned forestry in the mountainous region of Sweden

Forestry in Sweden as well as in other European countries is characterised by intense and increasing international competition resulting in decreasing roundwood prices in real terms. This is especially the situation in the mountainous region of Sweden with long transportation distances between the felling site and the processing industries located at the coast. The question arises whether forestry must be run more extensively than at present to achieve the optimal rate of silvicultural activities compared with the amount of timber cut. With this in mind, optimising economic analyses have been performed at the stand level as well as at the level of forest estates. Results of the analyses reveal that more intensive thinning (more frequent operations) and shorter rotation periods would increase profit and offset continuously decreasing roundwood prices. Intensive pre-commercial thinning (cleaning) is especially important for profitability of the subsequent thinnings and the final cut. The large number of cuts during the rotation will increase logging costs. However, this will be more than offset by the increasing production of economically matured dimensions of timber, an effect that will be still more pronounced when using new harvesting technology. Moreover, frequent high thinning operations (thinning ‘from above’ or removal of dominant trees) will result in more dense wood close to the pith, more evenly distributed year rings, and fewer and smaller knots in the lower part of the stem — in other words more valuable roundwood which will justify high transportation costs. Several biological and technical aspects of these treatment programs are discussed in the paper.

Roundwood supply in Norway: micro-level analysis of self-employed forest owners

This paper presents a short-run roundwood supply analysis of self-employed Norwegian forest owners, based on a two-period utility maximising consumption-savings model. The supply function was estimated by applying the Tobit model on an unbalanced panel of approximately 160 Norwegian farmers, from 1976 to 1997, representing a total of 3413 observations. Simultaneity between the single forest owner's harvesting level and his individual tax rate was allowed by estimating simultaneous equations Tobit models. The current roundwood price and standing stock per hectare had significant positive impacts on the supply, while harvesting costs, age of the owner, tax rate and lagged roundwood price (representing expected price) had negative impacts. Price and cost elasticities were relatively sensitive to the prices forecasted for the owners who did not supply roundwood in a given period. These results suggest that price subsidies and operating subsidies, as well as tax relieves, could increase the harvest level, which is considerably lower than the sustainable harvest level. An operating subsidy seems at least as efficient as a price subsidy, while tax reliefs are the least efficient of the three policy means.

Financial, economic and environmental profitability of reforestation of Imperata grasslands in Indonesia

The reforestation of Imperata grasslands is considered financially, economically and environmentally important. The successful establishment of a forest plantation on Imperata grassland needs heavy investment at the outset. It was estimated that the minimum establishment costs are US$840/ha. The total pulpwood production costs at the mill gate were calculated to be US$21/m 3 by water transport and to US$27/m 3 by road transport. During the first rotation, roundwood production in fast-growing plantations resulted in a real rate of return of 3.3% on the investment with the present pulpwood price of US$20/m 3 and a mean annual increment (MAI) of 25 m 3/ha. The relatively low financial profitability is mainly due to the country's undeveloped pulpwood markets. The IRR rose to 18% when the present roadside price was applied as a stumpage price. The support by the Indonesian government's industrial timber estates (HTI) scheme raised the IRR to 7%. Financial profitability was sensitive to the roundwood price and harvesting costs. The reforestation of Imperata grassland was more profitable economically than financially, resulting in an economic rate of return (ERR) of 21%. When the environmental economic impacts are taken into account the reforestation can be considered very profitable, raising the value of an area from US$1000 to 2500/ha. In this study, the following conclusions can be drawn: (1) a high MAI can only be reached with intensive establishment and management; (2) roundwood price should be allowed to fluctuate according to demand and supply; (3) reliable estimation of the harvesting costs before starting a project is recommended; (4) an adequate prefeasibility study of a forest plantation should be a prerequisite for the investor before the government's financing or other incentives are offered; (5) the government's support should be provided according to the real costs; and (6) application of incentives is justified in economically, socially or environmentally profitable projects but not in financially profitable projects.

Is sustainable tropical timber production financially viable? A comparative analysis of mahogany silviculture among small farmers in the Brazilian Amazon

Conservationist arguments for international trade restrictions on tropical hardwoods, along with counter-arguments by the wood industry, are both based on the claim that key hardwoods, like mahogany, can be either sustainably managed in their natural forest habitat or sustainably produced in silvicultural settings. This paper examines the financial feasibility of three mahogany planting regimes found among small-scale family farmers in the Brazilian Amazon State of Rondonia: degraded fallow enrichment, agroforest consorciation (e.g., mahogany and coffee), and pure-stand plantation. The sensitivity of net future and present values from each of the three systems to changes in real interest rate of capital, opportunity cost of labor, production time, seedling survival rate, and producer roundwood price was tested under 10 scenarios. Overall, mahogany production was found to be financially viable in 21 of the 30 alternative scenarios considered, with pure-stand plantations offering the most profitable alternative. Based on financial criteria alone the most promising approach to blending tropical timber trade with natural forest conservation would be through mahogany plantations, especially if they are located outside the tropical forest zone of the Amazon region.

Factors Affecting the Supply and Demand of Timber from Private Nonindustrial Lands in Sweden: An Econometric Study

Abstract This is an econometric study of the roundwood market and, in particular, the supply of roundwood from private nonindustrial forest lands in Sweden from 1961-1984. The independent variables of the supply function are the price of roundwood, the unit felling cost, the net (post-taxation) real rate of return on capital, and the resource inventory of mature trees ready for final feiling. The short-run roundwood demand is dependent on capacity, roundwood short-run average revenue product and the price of roundwood. All the coefficients exhibited the signs suggested by economic theory. For. Sci. 35(4):946-961.

A local roundwood supply and price assessment model

Models to analyze subregional forest products markets are needed as policy tools. This paper develops a model that can be used for such analyses. It is a simulation model that predicts the economic stock supply of primary products on the basis of estimates of product demands and production costs. Two market levels are considered: one for primary wood products and one for stumpage. The model recognizes quantity and price determinants for roundwood delivered f.o.b. the mill. These determinants include differential harvesting and transportation costs, complementary–competitive relationships between primary products, and landowner response to price. Thus, what is sometimes called "economic timber supply" by practitioners is determined. Components of the model are described and an application is presented.

Optimal timber-harvesting programmes in a model with adjustment costs

In the Swedish forest policy debate, the current roundwood supply, the capacity of the forest-based industry, etc., are regularly related to a standard "appropriate" level. This level is based on a constant sustainable harvesting concept, i.e., the harvested volume of today (this decade) must not exceed the available volume of tomorrow (any decade in the future). This "steady-state" rationing norm has been criticized. The uneven age composition of the Swedish forest suggests that it would be optimal to increase cuttings temporarily during the current and the next decade. On the other hand, an increase in total supply may decrease the price of roundwood and therefore, variations in supply should not be too large. This paper reports on a linear age-class model that is used to calculate optimal long-run harvesting programmes. The model maximizes the present value of the income stream from cutting subject to the constraints of a linear technology of forest production. Thinnings are exogenous. Adjustment costs, proportional to changes in timber supply, are introduced. The results indicate that with an uneven age distribution, "overcutting" may be optimal even when adjustment costs are relatively high. This conclusion is confirmed by some results from simulations using the more specific, but nonoptimization, long-range forestry planning model of the Swedish Board of Forestry.

The concept of a roundwood price level and its determination in forestry

The concept of a roundwood price level and its determination in forestry