IFI Magazine Feb March 2019 International Forest Industries Magazine Feb March | Page 6
ISSUE 67
FEBRUARY / MARCH 2019
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EDITOR’S COMMENT
Mixed outlook for forest products in 2019
I
Editorial Director
John Chadwick
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Editor
Chris Cann
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Dr Patrick Moore – Chairman and Chief
Scientist of Greenspirit (Canada)
Darren Oldham – Managing Director
Söderhamn Eriksson (UK)
Professor Piotr Paschalis-Jakubowicz –
Warsaw Agricultural University (Poland)
Mr Kim Carstensen
Director General
Forest Stewardship Council
Eduardo Morales
South American Forestry Consultant
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4 International Forest Industries | FEBRUARY / MARCH 2019
was asked recently for my view on global
markets for this year and, while it’s always
flattering to be asked for opinion, providing
a meaningful response felt close to a mission
impossible.
In one sense, the outlook appears good,
underpinned by an encouraging global GDP
forecast of 3.6%, which in theory should see
demand for wood products in general push
forward materially.
Indeed, this is the expectation of wood
industry research group, Wood Markets,
which is expecting consumption of softwood
lumber to grow by an impressive 2.8% – 350
million m3 – in 2019 having recorded growth
of 2.1% last year and 1.9% in 2017.
The overall strengthening demand trend
reflects the likelihood for gains in all major
regions, led by the US and China, which
are both poised for demand growth of 7%,
according to Wood Markets. Canada and
“some European nations” were expected to
record “moderate growth”. Japan was among
a handful of poorly performing jurisdictions.
Pricing is also likely to move higher if the
firm’s forecasts for global supply are accurate
and the fundamentals of supply-demand
economics hold up.
Wood Markets has a 2018 supply forecast
that attempts to keep track with demand but,
at 2.4% (342 million m3), is almost half a
percentage point adrift, implying a deficit is
on the cards.
The research group suggested US production
would continue to rebound and have a
“sustaining influence” on production
elsewhere in the world.
“Our forecast calls for an impressive gain of
up to 4.5% in the US and little advancement in
Canada, with the latter potentially diminished
by the outcome of US import duties”, the firm
stated.
Wood Markets was forecasting the
continuation of a difficult period for Canada,
with the increased tariffs imposed by its
formerly friendly neighbour set to coincide
with a fall in value for British Columbia timber,
effected by mountain pine beetle. Japan,
again, was the only country likely to post a
negative number.
That supply summary from Wood Markets
provides the first hint of the potential
disruptors for this rosy outlook – the Donald
Trump-led protectionist trade policy. Though
most countries were disappointed by the US
policy, from a global perspective it was not the
worst thing in the short-term, as the US led a
resurgent macro economy and, over the first
half of last year, growth reached 4%.
By the second half of the year, though,
Trump’s short-term measures were fading
and this year economists at Morgan Stanley,
among others, are expecting a continued
decline in the face of “tighter labour markets,
fading fiscal stimulus and the absence of
monetary accommodation”.
This wouldn’t be such a concern if Trump
were a logical policy maker and could be
relied upon to see the writing on the wall and
change course. But he’s not, and he can’t.
The trade war with China then becomes
a critical determinant of global and wood
industry fortunes. China – already slowing
considerably from its halcyon days a decade
ago – will be further curtailed if the US
persists along its current course.
Meanwhile, Europe remains under pressure
due to not only Brexit but tensions in Italy
and in France that undermine confidence and
investment in the Eurozone.
And, on top of this, the world is on the cusp
of a debt crisis, with federal banks unable
to further leverage their favourite monetary
policy tool – interest rates – should that crisis
eventuate.
Whether heavy rains will fall from any or all
of these dark clouds cannot be modelled into
forecasts. And, so, while the numbers may
look good right now, I’d prefer to reserve
judgement.
Enjoy
Chris Cann