World Forest Institute Conference Yields Different Picture of the Industry
11/8/97
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RELAYED TEXT STARTS HERE:
Headline: World Forest Institute Conference Yields Different Picture of
the Industry
Source: Reg Barclay
Date: 11/8/97
Copyright 1997. Contact publisher for permission to use.
Brazil: Myth vs Reality
A recent World Forest Institute conference on Brazil yields
a vastly different picture of the industry than that usually
presented in the North American media.
Brazil, with all of its natural resources, has been called a
country for the future. The sceptics in the past said that
this would always be true. But today, Brazil is catching up
with itself and the reality of achieving its potential now
seems possible.
That observation was put forward by Robert Donnelly, a New
Zealand-based forestry consultant, at a recent World Forest
Institute Conference on Brazil in Portland, Oregon.
Donnelly's view pretty well summed up the general feeling
about where forestry is at in Brazil, and where it is going.
The picture that emerges is that of a country making
progress in stabilizing its economy, which will favour
expansion of the untapped potential of its forest
resources.
It was reported that Brazil is now enjoying a period of
unprecedented economic stability and growing investor
confidence. A new president, Fernando Henrique Cardona and
his governing social democratic party, elected in 1994, are
dedicated to making Brazil a major economic power. Already
the monthly rate of inflation has dropped from 40 per cent
in 1993 to about one to two per cent over the past two
years, while GDP growth is maintained.
Development of the forest product sector in Brazil has been
low relative to its resource size. With 16 per cent of the
world's forest, production is only two to four per cent of
world production. The annual timber harvest in Brazil, for
example, is 75 million M3, about the same as the harvest in
British Columbia, but Brazil has five times the area of
timber resource.
There are good reasons for this under-development. The main
natural forest area is in the Amazon basin. With the
environmental eyes of the world on this area, there has been
a reluctance to initiate a planned program of forest
management development, even though a government agency,
ABAMA, controls the tropical forest har- vest. Of the
original forest, 70 to 80 per cent is intact today, despite
government plans 20 years ago, now suspended, to encourage
farm settlement in the Amazon.
Another reason is the use of non-wood materials in housing,
which is built largely with cement block on concrete pads.
Consumption of wood products is low per capita, resulting in
little demand pull for construction-grade wood products.
Nevertheless, the majority of Brazil's wood products are
consumed internally, mostly for industrial use.
While the natural forest of Brazil covers nearly 400 million
hectares, two-thirds of which is in the Amazon, the dynamic
part of the forest industry is based on five million
hectares of plantation forest, located in southern Brazil
bordering the Atlantic Coast.
Of this, 3.6 million hectares is classified for industrial
use. Species composition is 60 per cent eucalyptus and 40
per cent southern yellow pine, principally loblofly pine.
There is also some acacia, slash and parana pine in the mix.
Loblolly is now the favoured pine species for new
plantings.
The plantation forest resulted from government fiscal
incentives launched in 1966. The purpose was to establish a
sustainable source of wood for expansion of pulp and paper
production, and charcoal for steel manufacture. This
initiative was driven by the need to reduce imports, and to
reforest the cut-over parana pine region in the south.
The initiative was very successful and the plantation
forests have been the heart and soul of an expanding
forest products sector. Success is related to the rapid
growth rates that have been achieved through genetic
research in tree improvement and improved nursery practice
and silviculture treatment, all nurtured by a tropical
climate. Growth rates vary from 20 to 35 M3 per hectare per
year, depending on the species. Rotations, based on pulp and
paper requirements, range from 15 to 25 years with
intermediate cutting every seven years, for both pine and
eucalyptus.
It is not surprising that the pulp and paper industry is the
largest and most advanced part of the forest product sector.
Pulp and paper production has both increased 12 times, from
500,000 to 6 million metric tons over 30 years. Today, there
are over 300 pulp and paper plants in Brazil, situated in
easy proximity to the plantation forest area.
Expansion will continue. Plans for a further five million
metric tons of pulp and three million metric tons of paper
production are on the drawing boards. The emphasis on pulp
and paper is not surprising for a government concerned about
imports. Domestic consumption of paper and board is only 35
kg/capita compared to the US with 330 kg/capita, and with
economic growth in Brazil, consumption will expand.
Expansion will not only satisfy increasing domestic needs,
but will contribute to a positive trade balance by exporting
25 to 30 per cent of its low-cost production.
With expansion, industry is paying more attention to
regeneration and planting new areas. The government
incentive was withdrawn in 1986, and new planting has slowed
to 100,000 hectares per year. A renewal of the incentive
program is under review, as clearly plantation expansion
will benefit the economy.
Preoccupation with import substitution may have caused
government and industry to overlook the benefits of
integration. With slightly longer rotations, pruning and
thinning, added value can be realized from using logs first
for lumber or panel products and then chipping the residue
for pulp and paper. As yet the industry is based on whole
log chipping.
Eucalyptus, the main species for pulp, is part of the
problem, as it is difficult to saw and dry. It is a very
dense wood with high internal stresses. For some time now,
some of the larger companies have been 'investing in genetic
research to develop a hybrid eucalyptus more suitable for
lumber and plywood. This has high potential for export
markets in Europe, as eucalyptus can yield high percentages
of clear and shop grades in long lengths.
Sawmilling, by contrast to the well-established pulp and
paper sector, is characterized by thousands of small,
portable, under-capitalized independent mills. Formerly
concentrated in southern Brazil, cutting parana pine and
hardwoods, sawmills move north into the tropical forest,
when the timber dimin- ished. There seems to be few, if any,
large blocks of timber under forest management with a large
permanent mill. The typical par- tem is small cutting
peniiits, and when cut over, the mill moves to a new
location. The outlook is for only modest growth in tropical
hardwood lumber production, as ABAMA controls cutting
permits and favours selective cutting and conservation.
In recent years, 25 to 30 sawmills have been established in
the south, cutting southem pine plantation wood, mainly into
value-added products. These are aimed at the fencing and
millwork market in the US, formerly dominated by Ponderosa
pine. Ponderosa production has dropped 50 per cent since
1990, because of environmental lobbies, opening up a billion
fbm (2.36 million M3) market for imports. Brazilian loblolly
pine is very suitable for this market, and exports have
increased to 250,000 M3 over a few years, with room to
increase. Main export competition is radiata pine from
Mexico, Chile and New Zealand.
Overall lumber production in Brazil is forecast to increase
from 15 to 18 million m3 by 2000. Most of this increase will
be in plantation pine and eucalyptus, both, of which have
export potential. However, total export volume will remain
modest in world terms, as 90 per cent of lumber will be con-
sumed domestically. Much of future pine production will be
used for pine RTA fumiture, a fast-growing industry in
Brazil, and dependent on export markets. Wood-based panel
production has increased rapidly. Plywood utilizes hard-
woods, while particleboard and hardboard are based on
plantation forest wood.
Exports, mainly of hardwood plywood and hardboard, are 20 to
30 per cent of production. It is expected that the panel
industry will grow from current production of 3.2 to 5.5
million M3 by 2000, an increase of 70 per cent, predicated
on plantation wood. Increasingly, hardwood-faced plywood
will use a pine core, and increased use of eucalyptus for
veneer can be expected. The ply- wood and hardboard share of
total panel pro- duction will decline from 72 to 55 per
cent, and the share of particleboard, OSB and MDF will
increase.
Log exports of selected hardwoods are carefully controlled
by ABAMA, who ensure export fibre is surplus to local
industry needs. Exports have varied between 150,000 and
350,000 M3, about half of lumber export volume, and
negligible relative to the resource available.
With world demand catching up to supply, there is, clearly,
a long-term potential in Brazil to substantially increase
its wood production from its huge natural tropical forest,
the world's largest. This should not be a problem for the
environment, as it can be properly managed on a sustainable
basis. The tropical forest, once harvested, regenerates and
grows readily under tropical conditions. In the short term,
this is unlikely to happen. There will be production
expansion, but it will be based on plantation forests. In
terms of world trade, expansion will provide only a small
opportunity for overseas buyers, as the bulk of production
will be consumed domestically, and the new MERCOSUR
free-trade agreement with neighbouring countries will
attract more of Brazil's surplus supply.