International market prospects and the changing structure of the Australian plantation industry

Australia is located in a region experiencing substantial change in the production and consumption of forest products. Australia's own plantation sector is modern and dynamic. It has expanded rapidly (in both hardwood and softwood) in recent decades and has witnessed substantial investment by international forest corporations. With the exception of woodchips, Australia does not export a large volume of forest products. Australia is a major supplier of hardwood and softwood woodchips to Japan. The volume of hardwood pulpwood which is due to come on-line towards the end of the decade means that Australia has the potential to double current exports of woodchips. Given that an increasing volume of hardwood pulpwood from other countries is also due to come on-line around the same time, there will be increased competition to sell hardwood pulpwood in the Asia-Pacific region. China's need for fibre to meet rapidly growing demand for pulp and paper is commonly suggested as a possible new market for Australian woodchips. URS Forestry believes, however, that China's capacity to import woodchips will be limited by the need for domestic pulp mills to compete in open competitive markets with imported pulp. China's growing imports of pulp, and the potential surplus of hardwood pulpwood in Australia, provide an opportunity to develop a bleached hardwood kraft pulp (BHKP) mill in Australia. If Australia does establish a large new pulp processing capacity, its major competitor will be Brazil, which is already home to the most competitive pulp mills in the world. Softwood sawlogs are the other major plantation product of which available volumes will increase substantially in Australia over the next ten years. Australia has traditionally used a large proportion of its plantation pine domestically and, as such, has had little reason to pursue export markets. However, the threat of competition, particularly from New Zealand, and the possible pursuit of export markets, also ensure that cost reduction is an imperative for Australian softwood sawmills. The potential markets for Australia's softwood include China (growing consumption of sawn timber and logs), Japan (change to importing processed softwood products) and USA (growing demand for imported softwood sawn timber). The outlook for the Australian plantation industry is therefore strong, with opportunity to build on the large new investments that have been made in recent years.