# Presentation: 164080

## Forest Industry Trends

**2005 Conference**

**Forest Industry Trends**

## Forest Products Industry_Introduction

**Trends**

**Forests     ****	****	****        ****	***New owners*
**Paper     ****	****	****        ****	***Consolidation, Brazil, Asia*
**Wood products          ****	***OK –good – outstanding?*
**Bio materials             ****	***Something is happening*
**Business decisions  ****	***Too early to tell*

## Forest Products Industry_Introduction

**Guiding Principles**

**Change is natural**
**Unique strategy = success**
**Double-double**

## Forest Products Industry_Introduction

**Guiding Principles**

**Make low, sell high**
**Customer**
**World economy**

## Forest Products Industry_Introduction

- 20 year average = 3.5

-     _2Q05_
- U.S.     3.6
- China   9.5

**Guiding Principles - Economy**

- Source: Economist September 3, 2005

## Forest Products Industry_Introduction

| Product | 2003 | 2004 | 2005E | 2006E | Normalized | Current |
| --- | --- | --- | --- | --- | --- | --- |
| Pulp | 535 | 617 | 625 | 640 | 625 | 655 |
| Newsprint | 503 | 547 | 605 | 630 | 595 | 610 |
| UFS | 628 | 676 | 750 | 770 | 700 | 725 |
| LWC | 829 | 860 | 1,000 | 1,050 | 1,010 | 1,035 |
| Linerboard | 421 | 468 | 500 | 490 | 450 | 455 |
| Lumber, #2 btr | 278 | 394 | 355 | 300 | 305 | 351 |
| OSB | 380 | 369 | 305 | 220 | 200 | 262 |

- Source: CIBC World Markets, July 2005

**Guiding Principles - Economy**

## Forest Products Industry_Introduction

**Exchange rates**
**Political stability**
**Industrial production**
**Trade balance**
**Disasters, terrorism**

**Guiding Principles - Economy**

## Forest Products Industry_Trends

_**Impacts**_
- Easier to optimize and evaluate **performance**
- Forest land will go for its **highest value**
**Financially driven** decisions

**1.  New Owners of Forestland**

**Two important side notes**:
- 1.  High cost fiber is not the culprit
- 2.  Quantity may become more important than quality

## Forest Products Industry_Trends

_**Predictions**_
- Product prices continue to decline
- Value of timberland will continue to decline
- Ag uses of forest in developing countries
- Developing countries will demand capital for processing facilities; world is flat

**1.  New Owners of Forestland**

- Source: CIBC World Markets, June 2005

## Forest Products Industry_Trends

**1.  New Owners of Forestland**

**The China link**

**China is short on wood**
**Don’t forget recovered paper**

**Imports = 55%**

**Imports = 65%**

**52%**

**26%**

**22%**

## Forest Products Industry_Trends

**Quick overview of paper – **
- 	*75 million tons*
*	**China growing  *
*	**Brazil growing**	*

**2.  Paper Consolidating**

**Consumption**

- Source: Jaakko Poyry, July 2005

- 350 million tons

## Forest Products Industry_Trends

**Quick overview of paper – **
- 	*75 million tons*
*	**China growing  *
*	**Brazil growing**	*

**2.  Paper Consolidating**

**Growth Projections to 2020**
- Emerging markets		4.0%
- Mature markets		0.6%

- Source: Jaakko Poyry, July 2005

## Forest Products Industry_Trends

**Quick overview of paper – **
- 	*75 million tons*
*	**China growing  *
*	**Brazil growing**	*

**2.  Paper Consolidating**

**0**

**5**

**10**

**15**

**20**

**25**

**30**

**35**

**40**

**Total**** ****Number**** ****of**** ****Machines**

**News**

**UCFS**

**TIS**

**North America**

**Europe**

**Asia**

**South**** ****America**

**Bd**

## Forest Products Industry_Trends

**2.  Paper Consolidating**

## Forest Products Industry_Trends

**2.  Paper Consolidating**

## Forest Products Industry_Trends

**Quick overview of paper – **
- 	*75 million tons*
*	**China growing  *
*	**Brazil growing*
*	**U.S. south is long fiber bread basket*
*	**One paper grade makes sense*
*	**Innovation and nanotechnology and packaging*

**2.  Paper Consolidating**

**Industry Examples**
- 	IPMeadWestvacoCascadesSonoco

- Paper is not dead in the U.S unless we talk it to death

## Forest Products Industry_Trends

**Quick overview of wood – **
- 	*Katrina’s impact unknown – 200,000 houses*
*	**Imports from Canada down; other countries up*
*	**Culture against stick-built houses in China*
*	**New product opportunities greater than paper*

**3.  Wood products is OK?**

**The China link**

## Forest Products Industry_Trends

**China – **
- 	 *Biggest emerging competitor of finished wood products*
*	**40% self sufficient in roundwood*
*	**Bulk of plantations are not for industrial users?*
*	**Most softwood logs from Russia*
*	**China is largest export market for U.S. hardwood lumber*
*	**China is largest plywood and MDF producer in world*

**3.  Wood products is OK?**

**The China link**

## Forest Products Industry_Trends

**Tree – **water
- 	hemicellulose	20-35%
- 	lignin		20-35
- 	cellulose 		40-45%

**4.  Bio materials is real**

## Forest Products Industry_Trends

**4.  Bio materials is real**

## Forest Products Industry_Trends

**4.  Bio materials is real**

**The China link**

- China’s oil consumption is 1/15 that of the U.S.
- Since 2000, China has accounted for 75% of the increase in global oil demand

## Forest Products Industry_Trends

**Examples **EVAselling forest landsunique strategies

**5.  Better Business Decisions**

## Forest Products Industry_Conclusion

**North Carolina is the place**

## Forest Products Industry_Conclusion

**North Carolina is the place**

**118,000 employees****3,100 facilities**

## Forest Products Industry

**Trends**

**Forests     ****	****	****        ****	***New owners*
**Paper     ****	****	****        ****	***Consolidation, Brazil, Asia*
**Wood products          ****	***OK –good – outstanding?*
**Bio materials             ****	***Something is happening*
**Business decisions  ****	***Too early to tell*

## Forest Products Industry

**Trends**

**Forests     ****	****	****        ****	***New owners*
**Paper     ****	****	****        ****	***Consolidation, Brazil, Asia*
**Wood products          ****	***OK –good – outstanding?*
**Bio materials             ****	***Something is happening*
**Business decisions  ****	***Too early to tell*