An investment opportunity occurs when rising demand for a commodity is matched by a falling supply. This is the world position for timber. Demand is increasing steadily along population and GDP growth. Most of the timber presently being harvested is from natural forests. The available supply is diminishing because of exploitation, economic and environmental pressures.
Plantation forests are an alternative, sustainable source of high quality timber. Plantations currently supply only 4% of the world’s timber needs. The bulk of wood comes from “old growth forests” which take 60 to 300 years to mature. These forests are being felled at a rate equivalent to the size of a football field every second.
We are rapidly approaching a situation where global timber demand will exceed the available supply. From the current level of 5.8 billion, the world’s population will exceed 8 billion by 2020- an extra 2.2 billion humans to clothe, feed and house. The present global timber harvest of 3.5 billion m3 per annum is expected to soar to 5.95 billion m3 per annum by 2020 - an increase of 2.45 billion m3 in less than 25 years.
The next facet of a good opportunity is in locating an ideal source of the commodity. While trees will grow in many places New Zealand’s combination of fertile soils and unique climate enable us to grow Radiata pine faster and better than anywhere in the world. Radiata pine, a Californian native, thrives in New Zealand conditions. Since the first plantings in the 1850’s Radiata has established itself as a major export earner. It is the mainstay of an industry predicted to make a significant contriubution to the New Zeland economy by the year 2020. In 2002 New Zealand earned $3.6 billion from forest product exports making it the countries third largest export earner.
New Zealand is well positioned to substitute radiata for dwindling supplies of hardwood and North American softwood.
In the medium and long term, diminishing supplies from natural forests and an increase in demand for products made from wood is likely to result in higher prices. This situation provides excellent prospects for plantation grown timber.
Market prospects for New Zealand radiata are very positive. Radiata can be efficiently grown in plantations. New Zealand grown radiata pine matures in just 25-30 years. After a century of research New Zealand has become the world leader in plantation forestry. New Zealand forest management, tending practices, processing technology and genetic improvements are second to none.
There are still opportunities to further improve our skills at growing radiata pine, but the level of knowledge, skills and technology already available give New Zealand forest growers and investors alike a considerable advantage for some time to come.
New Zealand forestry offers excellent opportunities for local and international investors to protect their capital whilst gaining significant returns.
New Zealand plantation grown wood is seen as a renewable resource grown for export and domestic consumption, which allows us to manage most of our remaining natural forests for other purposes. The Resource Management Act provides a framework for the protection of water and soil values and an assurance that the commercial, environmental and socio-economic interests are suitably balanced. This in turn provides an excellent basis for eco-labelling and environmental management certification, which are likely to be required by some of our future customers.
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