The Global Timber Market

The global production and trade of major wood products such as industrial roundwood, sawnwood and wood-based panels have surged to their highest level since the Food and Agriculture Organization began recording forest statistics in 1947.

According to the latest data released by FAO, record volumes of wood-based products were produced and traded around the world in 2018. The value of international trade was 11 percent higher than in 2017.

timber demand - iPaulownia
timber demand – iPaulownia

The primary factors to an on-going increase in demand for timber globally are:

An increasing population to 8.2 billion in 2030

Global GDP projected to grow from US$16 trillion in 2005 to almost US$100 trillion by 2030

Rapid growth of developing countries, particularly in Asia

Environmental policies reducing the amount of old growth forests marked for wood production.

Industrial round wood will be increasingly likely to come from sustainable plantations in the future as factors outlined above continue to drive overall timber demand.

Something needs to change

There is an urgent global need for commercial reforestation programs to replace the rapidly diminishing supply of rainforest timbers, which supply more than 75% of the world’s trade in hardwood logs, over 50% of the trade in sawn hardwood and a significant portion of panels and pulp.

It is widely acknowledged that areas of old-growth forest available for logging are nearing exhaustion, and the associated environmental impact with some traditional forestry methods have far reaching and damaging effects. Sustainable commercial forestry plantations such as those implemented by iPaulownia must become the major source for commercial use timber.

At present, hardwood saw log plantations are almost non-existent. Most plantings thus far have focussed on the market for pulpwood. Prices for hardwood have jumped considerably in the last few years as a result of supply constraints.

Paulownia wood, a real sustainable alternative

paulownia vs oak

The 7 to 10-year growth-to-harvest average cycle of the paulownia trees and subsequent regeneration from the stump, as opposed to the 20-plus years and subsequent replanting for traditional hardwood plantations, affords a significant competitive advantage to meet market demand and achieve considerable market share.

While significant markets exist for paulownia timber particularly in China and Japan, the greatest potential for paulownia  timber is to replace products currently imported from rainforests around the world including Asia and South America, old growth forests, and other severely depleted hardwood species. Supply of such species has recently dropped dramatically and is expected to become even harder to procure on world markets within the next decade or so due to tightening of logging regulations and the literal near exhaustion of these rainforests. Equally dramatic price rises have accompanied the fall in supply.

A recent forecast from Jeremy Grantham is how he sees various asset classes performing over the next 7 years.  The following graph forecasts annual real returns over the period.

Long term investors should consider reducing exposure to stocks and bonds, and increasing exposure to emerging-market stocks and timber

Jeremy Grantham

Timber has averaged at least an increase of 5% per annum over the last 100 years. In fact, timber has outperformed almost every other sector in the last 40 years!

The prospects of entering into a sustainable forestry investment such as the ones managed by iPaulownia are excellent from both perspectives (enviornmental and economical) which is the reason we propose that you join us on this exciting and economically beneficial venture!