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An overview of key issues in the global forest industry, including comparisons between Finland and Canada, and future opportunities and strategies needed.
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Some Views on the Future of the Forest IndustryPhil Riebel, M.Sc.
foret shot
State of the Global Forest Industry
UPM 3
Some Key PointsSource: Jaakko Poyry, World Fibre Outlook, 2009
� In past years the growth of paper production has shifted from mature markets (NA and western EU) to emerging markets
– China, rest of Asia, Eastern EU
� Rapid growth in Asia– Fibre requirements 41% of global consumption (1990 - 24%)
– Will grow to 50% by 2025
� NA and Western EU has declined from 62% (1990) to 47%– Forecasted to continue down to 35% by 2025
� Market pulps - from 21% of global pulp consumption (1990) to 32%– New pulp mills close to fast-growing plantantions
– High demand in fast-growing markets
UPM 4
Source: Jaakko Poyry, World Fibre Outlook, 2009
UPM 5
Source: Jaakko Poyry, World Fibre Outlook, 2009
UPM 6
Source: Jaakko Poyry, World Fibre Outlook, 2009
UPM 7
Source: Jaakko Poyry, World Fibre Outlook, 2009
UPM 8
Concerns
� The growth in Asia and China is putting pressure on wood availability in Russia, Indonesia, and South America
� There is a danger that a large amount of biodiversity will continue to be lost in the Southern Hemisphere due to conversion of natural forests to plantations
� Buy certified forest products (ex: FSC, SFI)
UPM 9
UPM 10
Indonesia: 9000 ha clearcut starting
UPM 1111
Forestry Needs to Promote Biodiversity
Native tree species Deadwood Valuable habitats
Water resourcesForest structure Natural Forests
UPM 12
North America
� Many closures in Canada– Deteriorated cost competitiveness /
Poorly maintained asset base
– CAD vs US exchange rates
– Wood availability
� And...– Affordable subsitute for paper in
communications and advertising
– E-MEDIA
– Declining advertising revenues = less paper purchased
� Probably no new pulping capacity unless there is a dramatic change in business conditions
Source: Jaakko Poyry, World Fibre Outlook, 2009
UPM 13
Questions?
� Where will the wood come from in growing markets? What are the impacts on the planet?
� How have other countries / companies coped with these global changes? ex: Finland
� What new strategies are being looked at by leading companies?
� Is there hope for our Canadian forest industry and the economy it supports?
Canada vs Finland
UPM 15
Finland....Many similarities with Canada
� Beautiful country
� Nature, fishing, hunting
� Clean � Well developed economy
� Turbulent history, proud heritage
� People:– Honest, by the book– Reserved by our standards
� Long summer days…short and cold winter days
� Sauna, reindeer meat
UPM 16
Finland and Canada
CANADA
� Population: ~33 million
� Forest area 310,134,000 ha
� Corruption Index: 14th� Environmental Sustainability
index: 46th� Gross value of forest industry's
production: $54.2 billion � 16% of the total value of
industrial production in Finland
� R&D investments of forest cluster = $500 million
FINLAND
� Population: ~5 million
� Forest area: 22,500,000 ha
� Corruption index: 2nd� Environmental Sustainability
index: 12th
� Forest Sector Revenues: $ 27.5 billion
� Share of GDP: 1.7%
� R&D: $364 million
6.6x
13.7 x
2 x
0.7 x
UPM 17
Lesson #1: A modern and state-of-the-art infrastructure is cost competitive
� Modern asset base – Automated, low production costs– Good training system– Lower wages than US and Canada
� Regular upgrades and re-investments in paper, pulp and energy
� Ex: 1.5 billion in biomass energy in 10 years (just UPM)
� Driven by long term thinking and strategy development + EU policy
� Technology focus – BAT
� Government support
UPM 18
Effluent Flow
0
20
40
60
80
100
120
140
160
UPM
Company
Flo
w, m
3/M
t
EU Best-available-technology level 10-15 m³/t
Water use at European and North American non-integrated printing paper mills
(ex: magazine / catalog paper)
Lesson #2 :..it also improves environmental performance and helps product marketing
UPM 19
Lesson #3 : Renewable Biomass Energy = Lower Production Costs ...lower carbon footprint + creates value on EU ETS + better for product marketing
Cost: 75-100 million euros
Annual fossil CO2 reductions range from 75,000 to 350,000 MT CO2 per facility
UPM 20UPM 20
Lesson #4 : Energy-efficiency in Logistics also helps lower cost …and carbon footprint
Fossil CO2 emissions from transport
US truck = 45 – 55 g/tkm
EU truck = 33 – 45 g/tkm
US diesel train = 30 g/tkm
EU Diesel rail = 23 g/tkm
Ship = 13-20 g/tkm
Electric rail EU = 4-12 g/tkm
UPM 21
Lesson #5 : Take care of the forest...and keep it sustainable
� More intensive forest management system, i.e. semi-commercial forests
– High timber quality
� Some company owned forest but mainly privately owned
– Avg woodlot size ~3-5 ha
� High level of certified forests (90%+ PEFC)
� Companies offer a Forest Service to private woodlot owners
� Every person's right to use any forest
UPM 22
Lesson #6 : Advanced utilization of biomass creates more value
� Finland is one of the most advanced countries for full use of biomass from the forest.
� Pulp, paper, timber, other wood products
� Energy from biomass - Tops, branches, stumps, thinnings
� Use of fossil fuels in Finland is low (biomass, hydro ,nuclear)
UPM 23
UPM 24
Stumps from private woodlots piled at roadside for use as energy wood - Finland
UPM 25
Thinnings from private woodlot piled at roadside fo r use as energy wood - Finland
UPM 26
Wood residue left in a cut block (NB, Canada)
Missed opportunity and missed value creation?
UPM 27
What is the New Forest Industry?
� Full and more versatile utilization of biomass
� A key sector in the development of the next industrial wave: thebio-economy - Products from plant-based materials
� Leading companies are changing their strategies to capture this future
� Some government incentives and programs for innovation (EU, Agenda 2020 in the US, biorefineries)
UPM 2828 February 201028 9/2/10
The sixth industrial revolution is bio-based
Inno
vatio
n
1. waveIron
Water powerMachines
TextileTrade
2. waveSteam engine
RailwaysSteel
Cotton
3. waveElectricityChemicals
Combustion engine
6. waveSustainableBio economy
Renewable energyGreen chemicalsIndustrial ecology
Green nanotechnology
1785 1845 1900 1950 1990 2020
4. wavePetrochemicals
Aircrafts and space
Electronics
5. waveDigital web
BiotechnologyInformationtechnology
Source: Worldwatch Institute / State of the World
UPM 29Source: FIFF
Bio-based products have substantial markets
Wood-based biomass procurement and logistics
Bioenergy – heat and electricity for industry and households
Biofuels for transport
Biomaterials
Biochemicals
Nanoproducts
Added value
Volumegrows
Second generation biodiesel: emissions 85% lower than with
fossil fuels
Pulp, paper, plywood and timber products
e.g. bio oil and bio ethanol
e.g. composite products
UPM 30
Example: Liquid Biofuels from Wood
� Wood waste can be processed using a modified Fischer-Tropsch method
– Gas to liquid technology that produces petroleum substitute
– i.e. 2G biodiesel for transportation
� No food crops needed..just wood
� R&D underway for 5 years
� Biorefinery producing liquid biofuels -adjacent to kraft pulp mill
� EU policy - % of transportation fuel must be renewable by 2020
85% less CO2 emissions than fossil fuels
UPM 31
Forest Products have a Great Environmental Story to Tell
� Sustainable managed forest provide unique social, environmental and wildlife values
� They take up carbon and help mitigate the effects of climate change
� They protect air and water resources
� Products are renewable, recyclable, re-usable...key sustainability features that few products have
� We are sitting on a gold mine of opportunity for the next bio-based industrial revolution...if we make the right decisions
UPM 32
Opportunities in NB
� Biomass…yes
� Modern mills?� Market for biomass?� Green government policy that drives an economy?� Green energy incentives?� Good R&D infrastructure?
� Will NB be an exporter of chips and pellets…to countries that have done their homework?
� We need to "get out" and learn from what other have done…the world is changing quickly
UPM 33
Additional Information
Phil RiebelSenior Advisor, Sustainability & Environmental [email protected]: 506-773-7304Cell: 506-625-7304