Forestry Investment Blog

At “Forestry Invest” this year,  it has been a pleasure to witness a genuinely  friendly forestry investment community developing. Despite some of the fundamental differences people have in their views,  polite debate has always prevailed here  and in the majority of cases,  opinions have been emailed in on a very civilsed basis, so thank you.

I am more convinced than ever that  by selectively  and carefully researching investments in forestry,  investors will be able to reap significant rewards , given the predictions for global wood energy demand. The additional bonus of protecting the world’s natural forestry assets also appeals to many an ethical investor,  as a result of the highly efficient timber yields from professionally managed plantation forestry investments.

Clonal or genetically modified (GM)  forestry has attracted a good deal of attention from the worlds media opf late, and has prompted a few heated emails into “forestry invest” to boot.  Eucalyptus and Poplar tree farms have been targeted as particular species to create enhanced yields from.  From my own perspective I think it sensible to keep an open mind to all opinions,  but I am mindful of the fact that there will tend to be a human element of resistance to change in most areas. We seem to accept efficiently grown fruit and vegetables, almost all the products on our supermarket shelves have undergone modification to meet the growing demands the worlds population boom has put on agriculture. Without the increased yield in wheat etc, we would be  facing a huge deficit in production with a un unpalatable dilemma as to how to address the problem .  The current population of the world is in the 6-7 billion region and is forecast to hit 9 billion by the middle of the century. It is easy to dismiss statistics as there are so many sloshing around,  but 3 billion more mouths to feed and homes to build for and energy to supply is no small matter.  Do we control birth rates or increase productivity? Resistance to change is a natural process in us all, but significant investment in better forestry yields seems requisite and, in so doing, this  will protect the natural forestry we cherish and have so mistakenly taken for granted.

Many different sources of energy will be needed over the coming decades, but sustainabilty is keyword nowadays if we are to learn from the mistakes of the past. Fossil fuels are not infinite resources and, with the benefit of hindsight, that’s probably just as well.  Oil and coal have much to answer for in our planets current climate problems.  Over in Copenhagen, governments, industries, environmentalists are duty bound to come away with some solution to address the problems posed by excessive carbon emissions.  As far as the forestry investments are concerned,  they have been highlighted as one of the most important matters to be resolved. We can debate the merits of about deforestation until the cows come home, but unless we are prepared to change our lifestyles, (which is wholly unrealistic in my view), the world is going to become increasingly reliant on wood/timber/forestry products in its many forms for the forseeable future.

To digress a little from forestry matters for a moment, the paperless world is area I have tended to steer clear over the years, since I am not one of  the most IT savvy folk. But, like everyone else nowadays, I am slowly becoming slowly conditioned to getting much of my personal information paperlessly via the internet. I have even recently been bought an “e reader” ( a sort of laptop for books for want of a better description). Book content is  instantly downloaded to the electronic devive. No more browsing in the local  book shop or library? .A passing fad or the final death knell for the paperback industry and high street retailer? It does seriously beg the question as to whether the publishing world and paper industry will have to adapt in a similar way to the music industry. Will there be literature file sharing in the way music has struggled against copyright theft? Apparently the Amazon Kindle (the latest e reader) has been witnessing huge sales in the USA,  with downloaded books becoming the norm for the next generation of book readers. A concept many literature traditionalists thought would never come to fruition.

Some of the so- called  “fads” which some have cited as being a passing phase are now completely embedded in our customs. We book our airline travel on line. No more tickets, no more posting confirmations. The paper and pulp industry is having to adapt to the changing nature of this switch to paperless systems. The construction markets are cyclical with demand for wood swinging hugely over these cycles. The  US construction market almost ground to halt with wood demand crashing. . Recovery in the industry is forecast to be slow, but nevertheless, seen over the long term it is hard to see general levels of demand reducing.

So looking back over the year 2009 as far as forestry is concerned,  for me the outstanding forestry news of 2009 has been the underlying fact the fact that wood energy markets are now clearly presenting the oustanding case for investment within the  forestry sector.  This has been really re inforced up by some of the big hitters in the forestry investment community of particular note  RISI,  probably the highest authority on world timber trends. They have  produced an outstanding report outlining the future trends for wood energy.   I believe investors in forestry will witness an ever growing case for wood energy investing in its various forms in 2010 and  well beyond.   I hope to continue to keep our readers here as up to date as time allows.

As the holiday season is almost in full swing,  I want to wish all the readers of ” Forestry Invest” a very Merry Christmas and hope to be able to build on the success on this web log in the New Year.

John

Forestry Invest Is Sponsored by Greenwood Management

Over two hundred companies from the forestry investment sector have joined forces to lobby the climate conference in Copenhagen, Denmark this month.

Not many industries are as competitive as the eucalyptus pulp and paper business in South America.  Due to the combination of breeding and climate conditions, a eucalyptus tree reaches the optimum harvest  point in around seven years – the  global growth average is at least double that period.

During its lifecycle,  every single eucalyptus tree is able to absorb up to 200 tonnes of carbon dioxide,  the largest single contributor to global warming.   But  despite the huge benefit this high level of carbon dioxide absorption brings,  the forests planted before the expiry of the Kyoto Protocol are not included in the list of projects of Clean Development Mechanism.

The proceeds from the Clean Development Mechanism are considered to be vitally important to accelerate plans for forestry investments and for new areas by companies like Suzano and fibre (from the merger of Votorantim Papel e Celulose Aracruz).

The maximum price of carbon credits linked to the Clean Development Mechanism is $ 34 per tonne and the paper manufacturers have two million hectares of plantation forests,  and another 2.9 million hectares of native forests.

Elizabeth Carvalhaes,  president of Bracelpa said the proceeds from the CDM would be used mainly in the expansion of the stocks of reforested wood.  The aim is to increase the cultivation of eucalyptus and pine in 2018 by a quarter to 2.5 million hectares.   At present the only alternative for the forestry sector is trying to sell claims on these areas in Carbon Exchange of Chicago, where the price is $ 5 per tonne.   ”The lack of regulation means that there is no interest from investors or from the countries that need to offset their emissions,”  commented the spokesperson  from Bracelpa.

Forestry Invest is a blog sponsored by Greenwood Management.

Forestry investment projects worldwide could be the benficiary of a new plan unveiled by George Soros, the billionaire financier.

Mr Soros has submitted a proposal this week to give poorer nations up to $100bn,  using the International Monetary Fund’s  reserves to deal with the threat of climate control .  Speaking at the Climate Control summit in Copenhagen,  Mr Soros argued that the Huge IMF reserves are unnecessary, and could be better used by being lent to the poorer countries,  through a “green fund”  which could finance forestry and agricultural projects  in emerging economies.

Mr Soros commented  “It is possible to substantially increase the amount available to fight global warming…..All that is lacking is the political will… Yet it could make the difference between success and failure at Copenhagen” . The talks in Copenhagen had reached something of a stalemate with regard to financing. Poor countries are requesting $100bn a year by 2020 from rich countries, in order to deal with climate change.However the more prosperous nations have made proposals which fall well short of these figures.

Mr Soros believes that the fund would become self-financing as the projects would eventually make  a profit.  He suggested that the IMF should use a portion of its gold reserves. As a result of rising gold prices, gold stocks held by the IMF are valued at as much as $100bn more than the value attributed to them currently. The proposals have been generally welcomed by the G77 of developing countries.

Greenwood Mangement are sponsors of Forestry Invest

Staying with forestry investment news in Australasia as promised,  Gunns has just  completed the acquisition of ITC Timber for A$88.5 million. This forestry acquisition follows the statement by the Australian Competition and Consumer Commission that it did not intend to oppose the acquisition.

Speaking on behalf of Gunns, Wayne Chapman stated  “The acquisition represents a logical combination of two complementary businesses and is expected to deliver significant realisable synergies by the end of year one.” The acquisition of ITC Timber from Elders extends Gunns’ interests in hardwood sawmilling and wood chips in Victoria and Tasmania. The deal includes a 50% stake in Smartfibre, a woodchip export joint venture with Forest Enterprises Australia.

Gunns is one of the largest  forestry investment companies in Australia, and from its website it claims to be “presently growing the equivalent of 460 trees for every person in Tasmania on its plantation estate”.  Gunns’ first plantation was planted in the early 1900’s and now it employs around 2200 employees in their operations in Tasmania, Victoria, South Australia and Western Australia.

Greenwood Management are the sponsors of forestry invest

We have really seen a big pick up in numbers checking us out at  “forestry invest” judging by the  quantity of emails we’ve been receiving of late.  Generally the feedback has been quite positive, but thanks for any feedback,  good or bad.  A wide range of investors in forestry have sent in private comments,  so we are definitely gathering some momentum.  As you’ll be aware, Greenwood Management are sponsoring this site and many of their clients which follow forestry markets appear to be keeping an eye out on the updates we put out.  So,  all in all,  an encouraging start so far  for “forestry-invest.com” .

We have had a really strong interest from Australasia and the far East, and I have been asked for some more forestry news content on this geographic region. Aiming to please,  I am trying to cover this a little more. My own areas of forestry investment historically have been largely in Europe and Latin America and so we have naturally covered this more closely since my knowledge of the regions has a greater depth.

Getting back to forestry related news.   From New Zealand(!), a conference scheduled to take part in at Auckland next March will be looking at re- inforcing the links between the forestry industry and the investment community. The financial turbulence of late has forced many industries and invetment funds to more closely monitor their risk aversion policies. At the same time, forestry in New Zealand has thrived throughout 2009 via its export market and now the country looks to be poised to capitalise on recovering business conditions for domestic and export products. Many of the nations that are the major purchasers of New Zealands forestry products are now coming out from recession.

John Stulen of the Forest Industry Engineering Association said  “Forest products companies in New Zealand have huge export opportunities in both bio-energy supplies and carbon credits– and finance company risk managers need to learn more about these.”  The conference being held in March is entitled “Future Forestry Finance”. It is  being co ordinated by in conjuction with several other important  forestry assocations  such as theNew Zealand Forest Owners Association and Wood Processors Association and Forest Industry Contractors Association.

During 2009 forestry harvest levels have remained stable since China,  New Zealands biggest forestry  client,  has raised its imports of softwood logs from New Zealand by almost 50 percent. This has widened the market base for plantation forestry exports. Further good news in the wood energy sector for New Zealand as a new bio-energy plant will be commissioned in the spring.

Commenting further on the forestry outlook in John Stulen commented,  “There have been some important changes in forestry ownership in New Zealand with treaty settlements adding significant Maori ownership of the timberlands. With Maori making up a big percentage of the workforce in traditional forestry their new land ownership role bodes well for the industry’s future. Finance industry leaders and executives will also learn a lot from the collection of international forestry investment experts who will play a leading part in the conference on 4-5th March at the Rendezvous Hotel in Auckland.”   So a conference well worth attending if its in your neck of the woods.

Forestry invest is sponsored by Greenwood Management

http://www.climatefundsupdate.org/listing/forest-investment-program

Staying with the environmental side of forestry news, as part of “National Tree Week”  in Great Britain,  its main television broadcaster the BBC has initiated an investment ina  forestry project to plant a million trees across the country, in a scheme entitled  ‘Tree O’Clock’.  The World Record attempt took place on Saturday 5th December 2009.

According to the BBC,  the aims of “Tree O’Clock” are:

-  Create a ‘big moment in time’ dedicated to the celebration of trees
- Bring trees to the attention of a much wider audience across the UK
- Create new forestry and woodland, including.tree planting for hedges and community orchards, which can improve the landscape, enhance wildlife, soak up particular air pollution in cities, reduce the build-up of heat in cities.
- Provide an educational insight into the value of trees and forestry.

Certainly a cause worth supporting.

Forestry invest is sponsored by greenwood management

An American based investment company,  Cogent Partners intends to make a sizable forestry investment in a eucalyptus project in Ontario,  Canada comprising 11 thousand hectares of  plantation. Cogent Partners invest in several countries in the area of reforestation.

The company responsible for developing the project and managing the forestry investment, Timber Value,  has its headquarters in Sao Paolo Brazil.  The licence for the forestry investment project will be issued by the Nature Institute of Ontario.

The president of the Brazilian company,  José Leal  gave some details about the eucalyptus forestry investment  “We chose the area, we made the purchase and all the technical project will be our responsibility. We chose Ontario because it is a state with great potential. ” he said.

After a few years, the eucalyptus trees planted will be used for the production of charcoal and pulp, and distributed to several neighbouring states.  “In addition to creating dozens of jobs for the planting and maintenance, the state grows with the supply of products and the environmental impact is highly positive,” said Leal.  The president of Timber Value stated that  “Ontario is the state where one perceives the political will to contribute to investments of this size”.  The governor has shown that and we’re excited. ”

The eucalyptus investment programme for the region has a big future according to Jose Leal .  “The intention is to transform the region into a hub of eucalyptus production,” he concluded.

Forestry invest is sponsored by Greenwood Management

France has proposed that one fifth of the money raised for developing countries to deal with climate change is ring-fenced for the fight against deforestation and investments in forestry projects,  for the next three year,  in order to  protectof natural forestry and mitigate climate change.

French president, Nicolas Sarkozy, spoke about the proposal at a recent meeting with President Luis Inacio Lula da Silva,  according to Brazils Foreign Minister,  Celso Amorim.

“The proposal of France, let’s see what comes out in Copenhagen,” said Amorim.

Also, the non-governmental organization World Wildlife Fund proposes the creation of an annual fund of $ 160 billion for a period of five years, with developing countries committing formally to combat climate change.

It is expected that resources will be announced by the industrialized countries as early as the Copenhagen climate conference this coming week. The British Prime Minister, Gordon Brown, has pledged $ 13 billion in three years for an environmental fund for developing countries.

Brazil believes that a global fund to protect forests that will also support national plans for reduction of greenhouse gases is required, the so-called Namas ( Nationally Appropriate Mitigation Actions).

Forestry invest is sponsored by  Greenwood Management

The rainy season in Brazil is from December to July and is universally recognised by the forestry operators in situ as the optimum time for planting out the seedlings destined for the forestry plantations.  Beyond this period, the weather becomes very dry and extremely hot, with temperatures ranging from 35 degrees to as much as 45 degrees in the shade, which makes the working environment particularly arduous and even more important, the conditions for the seedlings’ survival very difficult.

Suzano Papel and Celulose, one of the largest forestry investors in the region has deployed a solution following a particularly wet winter last year, where two months of the “planting window” were lost due to the exceptionally high rain fall levels (their required levels of planting had not been achieved which therefore forced  the creation of a solution).  Suzano trained and developed a system of “night planting” having already lost two months planting.  The night planting naturally required excellent lighting and a more ergonomic,  adaptable system for the workforce.

Another vital factor was the use a special hydrogel  for the seedlings,  in order to keep the soil conditions moist for a longer period. The  results have been reported to be promising, making night planting a serious option when the conditions dictate.  The company has also kept jobs in the region as a consequence.  Necessity is the mother of invention,  as they say.

Foresty invest is sponsored by Greenwood Management

Wood Energy features in the news from India and the United States.  An Indian power generation company has recently announced that negotiations are ongoing with “Green Energy Resources” with respect to a supply of more than 7 million tons of wood chips, valued at over $576 million over a 12-month period. Green Energy Resources sources its wood from urban wood waste streams, recycled wood, storm damage and tree farms.

The five year deal, would be valued somewhere in the region of $3billion and discussions are ongoing. As a part of their renewable energy obligations under the Kyoto agreement, India is planning to purchase in excess of 36 millions tons of wood chips annually from various sources worldwide, and India’s international procurement programme is reported to be well under way.

Based in the United States, Green Energy Resources, formerly, New York International log & lumber co. was founded in 1997.In September 2004, the name was changed to Green Energy Resources. Its forestry products are environmentally certified, Kyoto compliant, and Green Energy has a corporate goal of preserving global forests. They have a very positive outlook on wood energy markets. Their statement regarding wood fired power plants makes that position very clear.

“The emergence of a green energy demand in Europe comes at a time when waste wood is at an all time high in the United States. The European Unions’ Energy Council projects wood fired power plants will consume annually between 50 -110 million tons of wood. The venture is environmentally sound, benefits our trade balance, reduces an overabundance of supply, and is geographically positioned to fill the market demand” and  “Increasing the role of biomass in America’s energy future will help to improve our economy, environment, and energy security”.  Green Energy Resources produce biomass and woodchips for direct energy in order to reduce coal-polluting emissions in co-firing.

In order to meet the requirements for the Indian power plants,  Green Energy will have to make approximately 15 shipments per month, which in itself is quite a logistical challenge.

Forestry invest is sponsored by greenwood management

According to the Brazilian Association of Planted Forests, the planting of teak forests is one of the most rapidly advancing in Brazil.

In 2008  the cultivated area of teak increased 10% to almost 60000 hectares.  In 2005 that number was 40,000  hectares. Reforestation projects have already attracted institutional forestry investors like pension funds and now there are signs that the teak industry is appealing to private forestry investors. The director of the company “Brazilian Forestry”, Luis Flavio Veit says “In the major timber producing countries such as Indonesia, the wood takes at least twice as long to reach the cutoff point, compared with Brazil,” The worldwide market for teak is growing at rates of 14% per year and domestic demand is high also.

The climate and soil conditions in Brazil encourage more rapid growth which is feeds the demand for more teak plantations. The forestry plantations are thinned in the early years to provide better growing conditions for the trees. The thinned trees extracted at this stage are often used by the biomass industry.for example as charcoal for the steel industry. Additional derivatives from the teak are bark and leaves which have a number of uses such as tannin agents.

Much of the final timber product is used  in the high quality furnishings or even in the manufacture of boats, as the marketing manager of Intermarine( a leading shipbuilder in the country, specializing in high performance boats) Allyson Yamamoto commented,  “We chose teak because of its beauty and durability. As the boats taking the sun and rain and are in environments with high humidity and salty air, it is important that the wood resist these conditions. In addition, the use of wood gives status to the product.”

Forestry Invest is sponsored by Greenwood Management