Forestry Investment Blog

Millions of trees are ready to go into “carbon forestry” as soon as Australia’s emissions trading legislation is completed. In July, Carbon Conscious, a part of the Australian Agricultural Contracts, signed a carbon sink forest deal with Origin Energy potentially worth up to $169 million. .Carbon Conscious also has recently completed a deal with BP to plant up to 10 million oil mallees across Australia’s wheatbelt

At the time of the carbon sink deal,  it was Australia’s largest carbon forests sink project, but this may be overtaken by the announcement by South Africa’s Standard Bank, which plans to invest up to $250m into an Australian forestry fund. Standard Bank is aiming its forestry investment at “compliance clients” who don’t want to manage a forest, but who need the carbon offsets which a  forest can supply. The forestry investment fund will cover the planting and management of 50,000hectares  by Perth-based agribusiness investment firm Rewards Group Ltd. Forestry is a route for land managers to be able to generate tradeable carbon offsets under the current Kyoto-compliant draft of the government’s Carbon Pollution Reduction Scheme (CPRS).

According to ABARE modelling, carbon forestry would be a competitive enterprise across 26m ha of agricultural land if carbon prices climb to around $30/tonne.

At a carbon price of about A$20 per ton, which is marginally lower than the current trading rate for carbon under the European Union’s ETS, ABARE estimated that carbon forestry would be competitive across about 5.8m ha of agricultural land. Some doubts were expressed by Australian Farm Institute executive director Mick Keogh. “It’s evident that the planning and approvals process for carbon forestry is mainly at the State and local government level, and that there is no real overview of the issue.”

The Global Forest Coalition said an examination of international trading companies has revealed a new and growing global industry in wood for energy.

In Europe, small-scale woodchip power plants make use of locally harvested timber and wood waste, but such sources will not be able to feed the industry’s huge need for wood in convenient bulk deliveries over the next few years.  Worldwide  production of wood pellets is set to double in the next five years from the present 10 million tonnes to 20 million

At anational level, Britain’s demand for wood will increase more than sevenfold.  MGT Power is creating a new waste-to-energy plant. Power firms claim that generating electricity by burning wood emits an equal or lesser amount of CO2 than the quantity absorbed by the trees through photosynthesis in forests.

Forestry Stewardship Council claims that “properly managed plantations are essential to stop the destruction of natural forests”.

The significance of the forestry and timber  industry to the worlds economy was outlined at the World Forestry Congress by Jose Urtubev, the representative of the Food and Agriculture Organisation of the United Nations.  Mr Urtubey quantified  the international trade in forestry investment specifically referring to wood panels, pulp and paper  for 2006,  was in excess of 330,000 million US dollars, whilst the  furniture industry contributed 54,000 million dollars.  He went on to say about 1,200 million people are reliant on forestry in one way or another.  Mr Urtubev highlighted the key role also exists in forestry of carbon uptake and the carbon sink process which combats desertification.

Some forestry news from Brazilian timber investors. Brazilian pulp and paper maker Suzano is raising the price for Eucalyptus pulp from the beginning of November 2009.

A spokesperson  for  Suzano stated in the company’s Executive Summary, that global market pulp shipments from producers remained stable in the  third quarter of  2009 and were 1.7% and 9.2% higher than in the second and third quarters respectively.

In Europe  eucalyptus pulp prices rose from $650/ton to $700/ton.  In North America  from $700/ton to $730/ton.  In Asia,  from $640/ton to $660/ton, and  in China from $590/ton (net) to $660/ton.In the statement of earnings from Suzano  commented.

“The current global demand is a result of the high demand for market pulp in China which, in 3Q ‘09, was 93.4% higher than in the same period of last year (the start of the global financial crisis) . Additionally, there was a recovery in demand in North America and Western Europe in 3Q 2009, in comparison with the two previous quarters.”

Forestry sector clearly showing positive signals for the forestry investment community.

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