1. No category

Japan, Korea and Taiwan SW and HW Woodchip Demand Trends and Why Doug Massey Pacific Rim Woodchip Trade Supply and Demand Trends Conference – 2012 dougmassey@forestrysi.com Industry living Chinese curse Purported to be a Chinese proverb and curse Pacific Rim Woodchip Trade (including China) US 4% Brazil 3% Malaysia Others NZ 1% 3% 2% 2012 1Q 2010 18.2 million BDT 20+ million BDT? Indonesia 4% Australia 29% South Africa 9% Chile 13% • 
Malaysia 1% Indonesia 7% Australia 19% 2011 Thailand 10% • 
South Africa 9% NZ Brazil 1% 2% Brazil NZ Malaysia 19.8 million BDT 3% 2% 2% Others US 3% Vietnam 3% 22% Indonesia 6% Australia 22% Asian suppliers South Africa Thailand, Vietnam and 7% Indonesia market share increasing Australia and South Africa’s expense Thailand 18% Chile 15% • 
Thailand 12% Source: Global Trade Atlas / RISI Pulpwood Review Vietnam 27% Chile 13% Vietnam 28% Vietnam, Thailand and Chile combined currently control 61% of market as of 1Q 2012 Snapshot of Japan HW chip imports NZ 1% Malaysia 2% Ecuador 1% Indonesia 1% 2010 10.1 million BDT Brazil 6% South Africa 15% Australia 36% Chile 24% Vietnam 11% 40% Australian chip to Japan between 2010 and 2011 was down by 28% South Africa 15% Brazil 6% NZ 1% Ecuador 1% PNG 0% Australia 26% Vietnam 17% Source: Global Trade Atlas / RISI Pulpwood Review Australia 28% 49% 9.9 million BDT Chile 26% 2.6 million BDT Chile 28% Thailand 8% 51% 2012 1Q Vietnam 14% 2011 South Africa 13% Malaysia 2% Thailand 7% Malaysia 2% Thailand 6% • 
Brazil NZ 4% 1% • 
But Australia is seeing a slight recovery so far this year HW chip import costs on the rise? Japan HW Chip Imports ($US CIF) $280 $260 $240 $220 Supplier FOB changes in local currencies 2010 vs 2011 2011 vs 2012 -­‐20% -­‐6% Australia
-­‐1% 3% Brazil
2% -­‐3% Chile
9% 5% South Africa
13% -­‐1% Vietnam
$200 $180 $160 $140 $120 $100 2005 2006 2007 Australia • 
2008 Brazil Chile What a great eme to be a supplier!? Sources: RISI & FSI 2009 South Africa 2010 Vietnam 2011 2012 YTD Need to look at JPY to get full story Japan HW Chip Imports (JPY CIF) ¥24,000 ¥22,000 ¥20,000 ¥18,000 ¥16,000 ¥14,000 ¥12,000 ¥10,000 2005 2006 Australia 2007 Brazil 2008 Chile 2009 South Africa 2010 Vietnam 2011 2012 YTD How have chip prices moved? HW Chip Imports Price Movement (JPY) 2005 vs 2008 2009 vs 2012 2005 vs 2012 Japan HW Chip Imports JPY Price Movement in % 15.00% Australia 28% 4% 22% Brazil 12% -­‐2% 9% Chile 23% -­‐4% 13% South Africa 25% 0% 16% Vietnam 27% -­‐11% 1% 10.00% 5.00% HW Chip Imports Price Movement (US$) 0.00% -­‐5.00% 2006 2007 2008 2009 2010 2011 -­‐10.00% -­‐15.00% Australia Source: RISI Brazil Chile South Africa Vietnam 2005 vs 2008 2009 vs 2012 2005 vs 2012 2012 YTD Australia 37% 21% 68% Brazil 19% 15% 50% Chile 31% 12% 56% South Africa 33% 17% 60% Vietnam 35% 5% 39% A look at so\wood chip origins 2010 2.0 million BDT Canada 10% •  Japanese sojwood market dominated by US and Australia NZ •  Australia volume down in 2011 due to increases from 14% Canada and NZ •  Radiata pine from Australia and NZ makes up 45~50% •  Sojwood prices going up in US$ while returns for non-­‐US suppliers go down 2011 200 140 Douglas-­‐fir US 33% Fiji 6% Russia 1% Australia 29% NZ 17% Radiata 120 SPF 100 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 80 Source: RISI Australia 36% Canada 14% 160 60 Fiji 7% 1.9 million BDT 180 Russia 1% US 33% How are sales? Sales Year-­‐on-­‐Year (millions of yen) ¥1,400,000 Sales Year-­‐on-­‐Year Change as % 15.0% ¥1,200,000 10.0% 5.0% ¥1,000,000 10.3% 4.7% 2.8% 6.2% 3.6% 2.2% 0.2% 0.0% -­‐5.0% ¥800,000 Oji Nippon Daio Mitsubishi Hokuetsu -­‐0.3% -­‐5.2% -­‐10.0% -­‐7.6% -­‐15.0% ¥600,000 2007 2008 2009 2010 2011 2012 (Forecast) ¥400,000 ¥200,000 ¥0 Oji Nippon 2007 2008 Daio 2009 2010 2011 Mitsubishi 2012 (Forecast) Hokuetsu Some doing be`er than others Profits (in millions of yen) (millions of yen) ¥40,000 ¥77,158 Profits over last 4 year financial years for each company -­‐¥53,397 -­‐¥6,933 -­‐¥10,661 ¥31,476 ¥30,000 ¥20,000 ¥10,000 ¥0 Oji Nippon Daio Mitsubishi Hokuetsu -­‐¥10,000 -­‐¥20,000 -­‐¥30,000 -­‐¥40,000 -­‐¥50,000 1.3% -­‐0.9% -­‐0.3% -­‐0.9% Profits as % of sales over last 4 year financial years for each company 2007 2008 2009 2010 2011 2012 (Forecast) 3.2% Who was making what in 2010? Paper Paperboard Pulp 5,000 4,500 4,000 3,500 3,000 2,500 29.3% 25.8% 2,000 1,500 1,000 500 0 Source: JPA / RISI 12.6% 11.2% 6.7% 5.8% 3.5% 2.2% 1.8% 0% 1% Recovered paper usage trending up Japan -­‐ Raw Material Use 25,000 Thousand Tonnes 20,000 53% 62.1% 15,000 Domesec Pulp Thousand Tonnes 38% 31.6% 10,000 Imported Pulp Thousand Tonnes Recovered Paper Thousand Tonnes Linear (Domesec Pulp Thousand Tonnes) Linear (Recovered Paper Thousand Tonnes) 5,000 0 •  Since 1991, raw material use in paper and paperboard produceon 28.8 million tonnes to a peak of 31.5 million tonnes and was about 27.7 million tonnes in 2010 Source: JPA/ RISI Kra\ pulp makes up 89% of producdon (thousands of tonnes) 2000 2005 2008 2009 2010 2011E 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Bl. Sojwood Kraj Bl. Hardwood Kraj Unbl. Kraj Semichemical •  Since 2000, kraj pulp produceon has been made up between 86% to 92% of overall pulp produceon Source: RISI Mechanical Industry news – Japan • 
Nippon Paper –  hardest hit by last year’s earthquake & tsunami –  Ishinomaki reconstruceon progressing –  reorganizaeon begun; NPI and other consolidated subsidiaries merge into NPG • 
Mitsubishi Paper –  hit hard by earthquake and tsunami at their mill in Hachinohe –  resumed 90% of operaeons at Hachinohe last Sept • 
Daio Paper –  loans scandal forces restructuring of business and execueve –  Number of subsidiaries drasecally reduced • 
Oji Paper –  due to open China pulp mill later this year –  established Forest Resources and Environment Markeeng Company from April 1 2012 •  “to expand the high-­‐value added wood business and the pulp manufacturing business” • 
Hokuetsu Kishu Paper –  New Medium-­‐Term Management plan to focus on expansion overseas and CO2 reduceon –  green-­‐field investment in 600k ton paperboard mill in Guangdong South Korea chip import trends Indonesia 7% China 1% 2012 1Q 2010 150 thousand BDT 575 thousand BDT Thailand 16% South Africa 14% Thailand 20% Vietnam 53% Chile 5% • 
Australian chip has disappeared from South Korea’s mix Vietnam 84% Thailand 13% Russia 0% 2011 593 thousand BDT • 
Vietnam 87% Source: RISI Vietnam and Thailand dominaeng sales in S. Korea Average CIF price for South Korea South Korea -­‐ Imported Woodchip US$/BDT CIF $260 $240 $220 Australia $200 China Indonesia $180 South Africa Vietnam $160 USA Thailand $140 $120 $100 2006 2007 2008 2009 2010 2011 •  Keen compeeeon from Asian suppliers and need to be either FSC or plantaeon is the reason why Australia does not show up on the list of suppliers to South Korea Source: RISI Taiwan chip import trends Indonesia 10% 2010 2012 1Q 920 thousand BDT 233 thousand BDT Indonesia 13% Australia 39% Australia 40% Thailand 31% Thailand 44% 2011 Vietnam 6% • 
Australian and Thai chip dominate Taiwan market 866 thousand BDT Indonesia 12% Australia 34% Thailand 45% Source: RISI Vietnam 17% Vietnam 9% • 
Vietnam and Indonesia making inroads into Taiwan chip market Average CIF price for chip into Taiwan $210 $190 $170 $150 $130 $110 $90 2006 2007 Australia 2008 China 2009 Indonesia Thailand 2010 Vietnam •  Cheap Vietnam chips are driving the prices in this market downwards Source: RISI 2011 Average CIF woodchip prices in US$ $240
$220
$200
Japan
$180
China
Korea
$160
Taiwan
$140
$120
$100
2004
Source: RISI 2005
2006
2007
2008
2009
2010
2011
Doug Massey dougmassey@forestrysi.com