Lee Nutter chairman, president, and CEO, Rayonier.

GLOBAL AND REGIONAL TRENDS FOR FIBER

Several regional trends stand out in the demand growth for roundwood. For one, Asia will continue to play a dominant role in the global trade of forest products. Another trend will be an accelerated shift away from natural forest harvests to plantation harvests. Production from natural forests, including hardwood forests in the U.S. South, will come under increasing environmental pressure. However, the U.S. South is the single largest producer of softwood fiber for the paper industry, and the pine fiber from that region, used in the manufacture of pulp and paper, will still remain highly competitive in world markets.

ASIA AS A MAJOR INFLUENCE. On the supply side, most world regions produce as much or more industrial roundwood as they consume. The single, major exception is Asia, where roundwood consumption is well in excess of production.

In 1996, this gap between consumption and supply totaled about 55 million m³. It seems clear that Asia, represented by a major wood deficit on one hand and rapidly growing demand on the other, will have a major influence on the patterns of global forest products trade throughout this century.

HARVESTS SHIFT TO PLANTATIONS. An important trend in wood fiber production is the continuation, at an accelerating pace, of the shift in harvests from natural forests to plantation forests. In part, this is driven by the steady increase in restrictions imposed on the harvest of native timber, and these governmental or socially imposed restrictions are seen in all regions of the world.

Over time, production from plantation forests will ensure that more volume is produced from fewer acres. This is key to the future fiber supply, since the world’s area under forest cover is shrinking. According to the U.N.’s Food and Agriculture Organization (FAO), the world’s forest area declined by 1.6%, or about 140 million acres, between 1990 and 1995.

In the relatively near term, we will see some substantial increases in harvest volumes from several countries in the Southern Hemisphere as their plantations mature. Perhaps most notably, softwood harvest levels in New Zealand, Australia, and Chile are increasing rapidly. Also, fast-growing, short rotation hardwoods are quickly coming on stream.

As plantations become more prevalent, there will be a trend toward the production of smaller timber. We are already witnessing the changes in manufacturing that have resulted in part from changes in the character of the available wood supply. Manufacturers of reconstituted board products, engineered wood products, and narrow dimension lumber are all fast becoming major competitors for the same fiber that has traditionally gone to the pulp or paper mill.

FIBER IN THE SOUTHERN U.S. The U.S. South is a very significant contributor to world roundwood production. It by far the single largest regional supplier of pulpwood fiber to the world’s forest products industry.

Wood fiber is the primary product of the South’s plantation forests. Typically, 50% to 60% of a plantation harvest is pulpwood, with 40% or more of the remaining volume coming back from the sawmills in chip form. Overall, 70% to 75% of a typical harvest is fiber suitable for the pulp or paper industry. The comparative cost stability in the South is in part a function of the fact that non-industrial private owners hold about 70% of the commercial forest base. These owners are willing to sell when the price is right, but withdraw from the market when prices are too low.

Between 1987 and 1999, pulpwood production in the South exhibited a trend growth of 1.6%/yr. During that period, the percentage of hardwood pulpwood has gradually increased, growing from 29% in 1987 to 34% over the last three years. Since the bulk of the South’s hardwood pulpwood production depends on the harvest of natural forests, this will prove to be a supply problem in the future due to environmental concerns.

Productivity gains in southern plantations have come from steadily increasing incremental investments in silvicultural treatments and tree genetics. In today’s plantations, the growing volume per acre is nearly three times the rate of 1960-era plantations. While the viability of future supplies has been questioned based on perceptions of “overcutting,” the increasing productivity of existing and future plantations should maintain a steady supply of pine timber.