Forecast: demand for wood products will exceed the availability of plantation resources
Australia’s commercial timber plantation estate is fundamental to the sustainability and competitiveness of our forestry sector. In recent years, the softwood estate has been relatively static, which will impact the future availability of sawlogs to meet an expected increase in demand. What are the implications and opportunities for industry, to address this situation? A new report provides some answers.
As part of the joint FWPA and the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) work program, a recent study was undertaken on the long-term potential of establishing new timber plantations in Australia.
The results have been published in a freely available report — Economic potential for new plantation establishment in Australia: outlook to 2050 — authored by Linden Whittle, Peter Lock and Beau Hug of ABARES.
Four key findings of the report
1. The plantation sector is critical to the forestry industry
In 2015–16 commercial timber plantations, which were split virtually evenly between softwood and hardwood species, accounted for 87 per cent of Australia’s log production.
2. Domestic demand for sawlogs is growing
ABARES forecasts a shortfall in the volume of softwood sawlogs available for the domestic market of 2.6 million cubic metres. In terms of new softwood plantations, an additional 200,000 to 250,000 hectares would be required by 2050 to make up the shortfall. However, given the uncertainty around softwood sawlog supply and log-equivalent demand in 2050, some estimates suggest the required area could be as much as 490,000 hectares according to Omega Consulting.
3. Future plantation investment may not be enough
In order to meet growing demand, the domestic market will become increasingly reliant on imports of sawnwood. ABARES estimates that the volume of softwood sawnwood imports will more than double by 2050. This represents a potential missed opportunity for the Australian forestry sector, unless the current softwood timber plantation estate expands to meet growing demand.
4. The good news
The report modelled five different scenarios to see which market mechanisms could have the most impact on plantation expansion. These included: productivity improvements, changes in agricultural land prices, increases in demand, changes in exchange rates and reductions in the required rate of return (discount rate).
Interestingly, while all the scenarios supported the need for an expansion of the softwood estate, changes in the discount rate had the greatest impact because softwood plantations managed for sawlogs have much longer rotation lengths and therefore payoff periods. For instance a one per cent reduction in the discount rate to six per cent would encourage a further 264,520 hectares of softwood plantation development. In addition a five per cent discount rate could see the softwood estate expand by about 700,000 hectares.
The report states that while there are some limitations of the modelling framework used in this research, the analysis outlines key factors that could influence future plantations and highlights potential missed opportunities for the forestry sector, if action is not taken.
Whittle, L., Lock, P. & Hug, B. (2019). Economic potential for new plantation establishment in Australia: outlook to 2050, ABARES research report, Canberra, February, is available on the FWPA website.