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What is the current state of forest
product markets and how will they
develop in the future?
Ragnar Jonsson, Elias Hurmekoski, Lauri Hetemäki,
Jeffrey Prestemon
3.9.1. Introduction
Forest-based industries – pulp and paper, solid wood products, and a number of down-
stream value-added wood-based manufacturers – have received limited attention in
the pursuit of a successful implementation of EU and national bioeconomy strategies.
According to Eurostat, the pulp and paper and solid wood products industries account-
ed for about 4.4% (€277 billion) of the production value and 5.4% (1.61 million) of total
EU employment in manufacturing in 2013. The importance of the sector is far great-
er if one were to include forestry and logging and downstream wood-based industries
(furniture, energy, chemicals, etc.).
The global and European forest-based industries are undergoing major structur-
al changes (Hansen et al, 2013). Most notably, the consumption of graphic papers has
been declining in most OECD countries and increasingly also in non-OECD countries,
such as China, due to the increasing use of electronic media. Moreover, the consump-
tion and production of wood-based products is increasingly shifting from the previous-
ly leading forest industry regions of North America, Western Europe, and Japan to the
rapidly growing large economies of China, Brazil, and India. Furthermore, with emerg-
ing new biobased products, such as biofuels and bioplastics, the boundaries with other
sectors, such as energy, chemical and textile industries, are expected to become increas-
ingly blurred. These changes are producing a growing diversity and complexity in the
forest sector, presenting what are likely to be ever greater economic and policymaking
challenges in Europe and worldwide in the future.
The outlook for European forest-based industries depends on the perspective. In
terms of market growth, looking only at large volume traditional products (sawn wood,
wood-based panels, pulp and paper) may yield a different picture compared to one that
considers also new or emerging wood-based bioproducts. The aim of this section is to as-
sess ongoing trends and likely future developments of European forest-based products
markets, considering the most recent research, expert assessments, and available data.
3.9
Published in Georg Winkel (editor). 2017. Towards a sustainable European forest-based
bioeconomy – assessment and the way forward. What Science Can Tell Us 8, European
Forest Institute.
Towards a sustainable European forest-based bioeconomy – assessment and the way forward
127
3.9.2. Large volume forest-based products
European forest-based industries have been facing major changes in the 2000s compared
to the period 1960–2000, which was characterised by stable market growth for all large-vol-
ume forest products (Hetemäki and Hurmekoski, 2016). The trends from this century are
likely to continue to shape the traditional forest-based industry over the next 10 to 15 years.
Economic globalisation has led to increased trade and a global market for wood-based
products. Focal points of forest products manufacture have become progressively more
spatially separated, with companies placing manufacturing plants at different geograph-
ic locations along the value chain from the forest to the consumer. Intensively managed
forest plantations in the southern hemisphere are gradually replacing temperate and
boreal forests as the predominant raw material resource for the manufacture of wood
products, not least wood pulp, where production has increasingly been moved to Latin
America. Furthermore, while demand for traditional forest-based products is growing
quickly in China, India, and other developing countries – in line with their rapid growth
in income – demographic and economic development is not supporting sustained growth
in Europe. It should be noted that growth is higher in Eastern Europe than in Western
Europe. Europe is a net exporter of most large volume forest-based products, and is ex-
pected to remain so in the medium term (UNECE/FAO, 2011).
The progress in digital information and communication technology (ICT) is having
a negative impact on the demand for graphic paper (Pöyry, 2015). The decline of news-
print consumption started in the USA in the late 1980s, and the substitution impact of
digital ICT has gradually spread to other graphics paper products and markets, includ-
ing emerging economies such as China. Packaging and hygiene paper consumption,
on the other hand, continues to increase in Europe and globally.
EU renewable energy targets continue to stimulate an increasing demand for ener-
gy wood, thereby also influencing the markets for many established forest-based prod-
ucts (Solberg et al, 2014). Bioenergy provides opportunities for new markets for forest
and industrial residues and for post-consumer wood. Selling chips, sawdust, bark or
pellets to energy firms provides income for the sawmill industry. Chemical pulp pro-
ducers may also profit from growing bioenergy markets by producing bioenergy (heat,
power, biofuels) as a side stream of the pulping process. On the other hand, particle
-
board and pulp and paper industries tend to suffer from the development of bioenergy
markets, due to higher prices for wood raw material (Johnston et al, 2016; Jonsson and
Rinaldi, 2017). This suggests a need for improved forest management to increase tim-
ber growth rates, advances in harvesting and technical efficiencies in manufacture, and
acceleration in cascaded uses of woody biomass to avoid further crowding out of ma
-
terial uses by energy uses. There is still considerable uncertainty related to future EU
climate and energy policies, though. A crucial consideration is to what extent, and in
which form, the support for wood-based energy will continue. Moreover, there is uncer-
tainty as to the extent and timing in the emergence of economically feasible alternative
renewable energy technologies.
All in all, there are signs that economic development and demand for traditional,
large-volume wood products in Europe has become decoupled from GDP growth, as
is apparent from Fig. 15. The decoupling results from declining graphic paper markets
due to digital ITC and stagnating solid wood products market as a consequence of de-
mographic developments, while the climate and energy policy environment is favour-
ing the use of wood fuels.
128
w h at s c i e n c e c a n t e l l u s
3.9.3. New forest-based products
The concept of “new forest products” or “innovative bioproducts” has been increasing-
ly on the policy and industry agenda in the 2000s (Philippidis et al, 2016; Cowie et al,
2014). There are two reasons for this. Firstly, there is a clear desire by policymakers and
others to reduce the fossil fuel dependency of the global economy. Secondly, the forest
industries seek to diversify their businesses, due to stagnant or declining markets for a
number of traditional products. As there is no established definition for new products,
it is useful to distinguish the following categories:
1. Old products with newly increasing demand due to changes in the operating en-
vironment. For example, dissolving pulp for the textile industry due to the need
to find substitutes for cotton, as its production competes for land with food and
feed production and consumes scarce water resources for irrigation.
2.
Old products with incremental improvements, such as lighter weight or lower
production costs. For example, paper and packaging coatings and fillers based
on nanocellulose.
3. Novel products or products with radical improvements. For example, the use of
nanoscale organic matter in electronics.
In the future, the relative importance of new products can be expected to grow further.
It is conceivable that, beyond 2030, there will be a large number of product categories,
none of which dominates the sector to the extent that paper and wood products did in
the past century, particularly in terms of value (see Figure 16). However, currently it
seems that there will be only a few individual product groups whose annual produc-
tion volume in the EU will exceed one million metric tons or a million cubic meters per
year by 2030, such as biofuels, dissolving pulp (for textiles, etc.), and engineered wood
Figure 15. Consumption per capita of forest-based products and GDP growth in Europe (excluding Russia)
(Data: FAOSTAT, World Bank).
60
70
80
90
10
0
110
12
0
130
14
0
150
60
70
80
90
1
00
110
120
130
1
40
150
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Index 2000 = 100
Packaging paper & board
Graphic paper
Wood pulp
Sawnwood
GDP per capita (real)
Wood-based panels
Wood fuel
Consumption per capita in Europe (excl. Russia)
Towards a sustainable European forest-based bioeconomy – assessment and the way forward
129
products (notably cross laminated timber). This would be in the face of around 105 Mm
3
sawn wood production and 37 Mt of pulp production in the EU in 2015.
The long-term outlook for other product categories appears more uncertain at the
moment. For example, there is no policy pull for bioplastics like that experienced in bi-
ofuels, which is why the production of biofuels is expected to reach seven million met-
ric tons in the EU by 2020, compared to less than one million metric tons of bioplas-
tics (Pöyry, 2016). The majority of these volumes are based on agricultural feedstock,
yet wood-based feedstock can be significant in regions with a high dependency on for-
est industry. Yet, the increasing political commitment for a circular economy (European
Commission, 2015), and the problems caused by plastic waste (e.g. ocean pollution), may
change this trend in the coming decades.
Although small in terms of volume, the new products are often expected to provide
high value. The secondary wood products sector (joinery and carpentry, prefabricated
wooden buildings, etc.) already exceeds the sawmilling sector in terms of production
value in the EU, despite an estimated 10 times lower production volume. If forest bi-
omass-based production was to capture only 1% market share of the global fuels and
plastics markets, it would create new turnover of €40 billion for the forest-based sector
(Pöyry, 2016). However, very little independent research exists to judge the likelihood
or possible impacts of such developments, partly because data on the emerging prod-
ucts are elusive. Nonetheless, the unit value of biofuels or bioplastics is not necessari-
ly high, compared to some of the established forest products, such as sanitary papers.
The interdependencies between forest product markets may play an even stronger
role in the future, as the residues from the production of intermediate wood products
(most notably sawn wood and pulp) account for a significant source of raw material for
Figure 16. Examples of the possible end uses of new wood-based products (Cowie et al, 2014; Pöyry, 2016).
HIGH VALUE
• Medical, environmental, and industrial sensors
• Water and air filtration
• Cosmetics
• Organic LEDs
• Flexible electronics
• Photovoltaics
• Recyclable electronics
• Battery membranes
• Insulation
• Aerospace structure & interiors
• Aerogels
• Food & feed additives
• Paints and coatings
• Textiles
• Biofuels (crude oil, diesel, ethanol, jet fuel)
• Construction elements
• Cement additives or reinforcement fibers
• Automotive body & interior
• Packaging & paper coatings
• Paper & packaging filler
• Plastic packaging
• Intelligent packaging
• Hygiene and absorbent products
HIGH VOLUME
130
w h at s c i e n c e c a n t e l l u s
the production of energy, wood-based panels, and chemicals that can substitute for oil-
based products. For example, the global forest industry produces annually 50 million
metric tons of lignin. In the absence of other uses, lignin is typically used directly for
energy production; however, in the future it could be used for a various assortment of
fuels, platform chemicals and plastics (Pöyry, 2016). The profits from current products
may provide the funding for investments in new products, or the new products will help
to sustain the production of established products, through improved utilisation of side-
streams. For example, the profitability of sawn wood production is to some extent de-
pendent on the ability to sell mill residues for energy production or wood-based panel
manufacture. Furthermore, with shrinking demand for electricity in some regions, due
to declining energy-intensive industrial activity and increasing energy-efficiency, invest-
ments in further processing of by-products into higher value-added products may guar-
antee the continued operation of sawmills.
The interdependencies may also pose challenges, such as in the case of increasing
pulp production capacity in Finland and Sweden. Due to integrated pulpwood and log
procurement – i.e. the important role of sawmills as suppliers of chips for pulping – the
investments in pulp capacity also necessitate a major increase in sawmilling, yet the de-
mand for sawn wood may not grow at the same pace as the demand for market pulp.
Take home messages:
• On a global level, continued growth in the production and consumption of for-
est-based products – with the exception of graphics paper that competes with
electronic ICT – is expected. However, in the EU, sawn wood, pulp and paper
markets are likely to experience stagnation until 2030, because of unfavourable
demographic developments, slow economic growth, increasing global compe-
tition, and a number of market-specific drivers, notably progress in digital ICT.
• The outlook for the forest-based products sector in the EU contrasts with 20th
century experiences, when production and consumption of all forest-based prod-
ucts followed economic development and population growth. The changing sit-
uation is due not only to the long-lasting economic downturn, but also the re-
sult of numerous structural changes.
•
Global trends, notably demographic developments and progress in electronic
ICT, will likely continue for many decades. The outlook for major forest-based
product markets outlined above thus provides a reasonable baseline for fu-
ture developments of the sector. However, there are a number of uncertainties
around future developments.
•
A prominent uncertainty concerns the evolution of climate and energy policies, as
they have been shown to exert a strong influence on forest-based products markets.
•
Yet another uncertainty regards growth prospects of emerging forest-based prod-
ucts. Even though they may not turn out to be very important in terms of vol-
ume, they may provide significant economic value by 2030.
•
Finally, the trend analysis outlined above does not consider potential game chang-
ers or wild cards, such as technological breakthroughs or, for example, the in-
troduction of a strong support scheme for negative emissions.
• Given the importance of global forest products markets to the economy, employ-
ment and forests, and the changes taking place in the markets, the overall scale of
independent, transparent academic market research is alarmingly low. There is also
a need to better connect market developments to wider sustainability concerns.
Towards a sustainable European forest-based bioeconomy – assessment and the way forward
131
References
Cowie, J., Bilek, E., Wegner, T.H., Shatkin, J.A., 2014. Market projections of cellulose nanomateri-
al-enabled products – Part 2: Volume estimates. Tappi Journal 13, 57–69
European Commission, 2015. Closing the Loop – an EU Action Plan for the Circular Economy, Eu-
ropean Commission, Communication COM (2015) 614/2.
Hansen, E., Panwar, R., Vlosky, R. (Eds.), 2013. The Global Forest Sector: Changes, Practices, and
Prospects. CRC Press.
Hetemäki, L. and Hurmekoski, E., 2016. Forest Products Markets under Change: Review and Re-
search Implications. Current Forestry Reports 2, 177-188. DOI 10.1007/s40725-016-0042-z
Johnston, C.M.T., van Kooten, G.C., 2016. Global trade impacts of increasing Europe’s bioenergy
demand. Journal of Forest Economics 23, 27–44.
Jonsson, R and, Rinaldi, F., 2017. The impact on global wood-product markets of increasing con-
sumption of Zood pellets within the European Union. Energy 133, 864–878.
Philippidis, G., M’barek, R., Ferrari, E., 2016. Drivers of the European Bioeconomy in Transition
(BioEconomy2030): An exploratory, model-based assessment. Joint Research Centre, Europe-
an ommission.
Pöyry Inc., 2015. World fibre outlook up to 2030. Vantaa, Finland.
Pöyry Inc., 2016. The Recarbonisation Trilogy. Pöyry Point of View – January 2016.
Solberg, B., Hetemäki, L., Kallio, A.M.I., Moiseyev, A., Sjølie, H.K., 2014. Impacts of forest bioen-
ergy and policies on the forest sector markets in Europe-what do we know? in: Pelkonen, P.,
Mustonen, M., Asikainen, A., Egnell, G., Kant, P., Leduc, S., Pettenella, D. (Eds.), Forest Bioen-
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Policy recommendations:
• It is important to understand various interdependencies between material and
energy uses of wood, as well as between existing and emerging markets. Policy
decisions, particularly those directed at the scale and scope of renewable ener-
gy standards, targets and incentives, are likely to markedly influence future de-
velopments of traditional forest-based industries due to these various depend-
encies (synergies as well as competition) between forest products markets.
• To promote synergies and reduce as much as possible any undue crowding out
of material uses of wood through lop-sided support to energy uses, measures
to enhance material efficiency, such as cascading, should prove useful.
• Increasing diversity and complexity of forest products markets implies difficul-
ties for monitoring the development of the sector. It also makes the design of
regulation more complicated. Therefore, there is an increasing need for policy
coordination across different policy sectors, as well as a long-term stable policy
environment that helps to reduce uncertainties and, consequently, makes the
investment environment more predictable.
