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  • Archive for March, 2010

    Canadians Head North (East)

    2010 - 03.30

    By May of this year the British Forestry Commission hopes to have planted more than 3.7 million trees by hand. Planting teams are hard at work in various locations in the North East such as the Kielder Forest, Northumberland and Hamsterley Forest, near Bishop Auckland in County Durham.

    To help meet this ambitious target nine Canadian forestry workers have arrived to join the local planters in hitting the target. This isn’t the first time Canadians have come to the North East to work in Kielder. During the Second World War Canadians came to the North East to help manage forests while the local men served in the armed forces.

    Their modern day counterparts are often woodsmen picking up work before the Canadian forests are replanted later in the spring or young people looking to gain experience of different cultures and tour the world. However, be they local or from abroad, each forester will need to hand plant an estimated 1,500 trees every day.

    The new director of a Northumberland forestry business, Ben Tansey, has taken over as the new leader of Morpeth based Northwoods. This is an organisation, which backs forest businesses in the region with training and advice. They do this by supplying marketing products, securing grants, improving skills and encouraging inward investment.

    Ben, who has a first-class degree in ecological science with honours in forestry, said:

    “When it comes to working in forestry, I think forestry chooses you. But I have always been passionate about the outdoors and the natural environment. Wood is one of the fuels of the future and my job is to help make the most of the opportunities. Fossil fuel prices are unpredictable and have recently been increasing, but well managed woods can produce timber year after year. About 70% of our work at Northwoods is now devoted to the development of the wood fuel sector, showing just what an expanding area this is in terms of the economy and job creation.”

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Palm Oil Plantations and the REDD Controversy

    2010 - 03.29

    The United Nations guideline only defines trees (as carbon absorbers) based on height, without any detail of the species. Therefore the proposal by the Indonesian Forestry Ministry to include palm oil plantations in the forestry sector would allow Indonesia to receive more benefits from REDD based on the expansion of green areas.

    Understandably this sparks huge controversy and several regional governments, such as the North Sumatra Forestry Bureau are against the plan. The essential point to REDD is to avoid deforestation and the incentives of this scheme are based on the ability of a country to avoid deforestation from its natural forest. As this is the case donors will not facilitate funding for areas that are not naturally forested. Looking at this from an objective point of view it looks like the Indonesian government would like to receive double benefits from palm oil. It seems bizarre that they should receive money from investors for plantation development as well as REDD compensation from its status as trees.

    It is for this reason that REDD should not be confused with carbon trading. REDD is often thought to be identical to carbon trading where forests are only perceived as carbon captures. This thinking makes the mechanism dangerous. The importance of biodiversity will be neglected if forest rehabilitation doesn’t consider the forest as an integrated ecosystem.

    The plan to include palm oil plantations as forests just goes to show how narrow minded the REDD scheme is. REDD is the middle option between preserving tropical rainforests and emission reduction from carbon trade. Therefore if REDD is to have any hope of success the national implementation standard of REDD must include biodiversity inclusive environmental impact assessments.

    The conversion of forests for other purposes is inevitable due to the need of land for agricultural estates and the population increase. However without proper consideration plans such as defining palm oil plantations as forest will only legalise the continuous acts of destroying Indonesian forest. It is essential that ecologically important areas maintain their legal status as preserved forest. These preserved forests must also be protected from the change on its biodiversity composition due to illegal occupation. Forest conversions need not always be negative so long as accurate and comprehensive ecological considerations are taken into account.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    The Russian Economy – More Than a One Trick Bear

    2010 - 03.26

    Of the BRIC countries Russia is perhaps the least talked about and least invested in, even though it is in an acronym created to describe the next ‘big’ global economies. At the moment the world’s focus is on the debt problems facing Greece, Spain and the rest of the EU. But with their oil, gas and other commodity prices gaining momentum Russia is finally emerging as a major player.

    This doesn’t mean that Russia’s economy still isn’t ranked as one of the most corrupt nations. Low innovation scores, swinging commodity prices and heavy government intervention make it a less than ideal investing situation. Despite this the risk to rewards ratio may be returning to the investors favour.

    Russia covers nearly 11% of the planet’s surface making it the world’s largest and within it Russia keeps its crown jewels: commodities. The nation is rich in coal as well as various metals and timber and is the largest producer of oil and natural gas. The Russian economy is made up by 60% in commodity prices, which have been rebounding since the world’s economy pushes forward out of financial crisis.

    Recently the President Dmitry Medvedev stressed the need for the country to expand its technology and innovation. As the telecom and financial industries have expanded considerably the economy has become more diversified. In addition steps have been taken by the government to reign in corruption, beginning with the imprisonment of energy billionaire Mikhail Khodorovsky. In order to appeal for foreign investors Russia is also moving to round up many former KGB agents who run its companies.

    In addition, the Russian Ruble, represented by CurrencyShares Russian Ruble Trust (NYSE:XRU), has been a tear recently which could lead to interest rate cuts. According to Forbes, the ruble is at a 14-month high and any easing in monetary policy could see the economy move in real positive direction. Analysts are predicting round 5% GDP growth in 2010.

    Russia is an ideal candidate to prosper from the growing world economy due to its rich natural resource reserves. But as a typical middle child of the BRIC nations Russia tends to be ignored. However with its recent steps to stem corruption the risk/reward ratio is finally moving into the investors favour. Investors looking to take the long term approach with Russian have one of two options. They could either add one of the two exchange traded funds to their investment portfolios or invest in individual companies, such as steel producer Mechel (NYSE:MTL).

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Indonesia partners up with the US

    2010 - 03.23

    Last week Indonesian forestry officials were in Washington trying to develop closer cooperative efforts between the two countries. Chairman of Indonesia’s Forestry Ministry Wandojo Siswanto told reporters that he hoped that President Barack Obama’s visit to Indonesia next week would result in a bilateral agreement to enhance the US – Indonesian forest management collaboration.

    Indonesia is the world’s third largest carbon polluter when deforestation and land use and not just smokestack pollution is taken into account. Wandojo and Indonesia’s director for forestry and water resources conservation Basah Hernowo were quick to point out that an injection of international aid funds (separate from offsets) were needed to help developing countries, in particular Indonesia tackle global warming. However, they were unable to give any further details regarding how much money they sought and what it would be used for if granted.

    During the UN sponsored conference in Copenhagen last December rich countries were called on to create a $30 billion fund over three years in order to help poorer countries to combat climate change. By 2020 that ‘fast start’ fund is expected to grow to $100 billion a year.

    The next UN climate meeting is scheduled for November of this year in Mexico. After Copenhagen expectations are not high for it to conclude with a binding, international deal on how to battle global warming once the Kyoto Protocol expires in 2012. However there are hopes that a worldwide accord on managing forests can at least be decided on there.

    “We need international support with forest protection”, Wandojo said, adding, “We believe that the (U.N.-led) negotiations couldn’t be moving forward without the leadership of the U.S.”

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Study Finds Forestry Investments Key to Global Warming

    2010 - 03.17

    It is well known that investment in the forestry sector to store carbon in the trees and soils is one of the viable options for mitigating the potential effect of global warming.

    A study by Punjab Agricultural University (PAU) has stated that agricultural lands could be major potential sink areas, which could absorb large quantities of carbon if trees are reintroduced to the agri-system and are carefully managed along with crops.

    In areas that have been by passed by the Green Revolution this study of agro-forestry by the University’s Department of Forestry could be the key to prosperity for the poor suffering from hunger, abject poverty, malnutrition and deterioration of the environment. Other studies support this theory and have shown that the inclusion of trees in the agricultural landscape can often improve the productivity of the systems, while also providing opportunities to create carbon sinks.

    The study, which was recently made available to the media stated that, “the key component to mitigate the crisis in agriculture is to increase soil organic matter, which can be done with the integration of forestry, livestock, green manure, conservation agriculture in the farming system.” It also pointed out that an increased concentration of greenhouse gases in the atmosphere had raised the global temperature, resulting in catastrophic changes in the climate.

    With the excessive deforestation to meet the wood requirements of increasing population in developing countries, the distribution of carbon in its natural pool and in atmosphere had been affected adversely.

    The study pointed out that while carbon dioxide was the largest single greenhouse gas currently trapping about half of the total heat contributing to global warming removing atmospheric carbon and storing it in the terrestrial biosphere was one of the options that had been proposed to compensate greenhouse gas emissions under the Kyoto Protocol.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Let’s Stop Pretending Wood Comes From The Lumberyard

    2010 - 03.16

    Last month the California Air Resources Board was forced to put the brakes on its forestry portion of a provisional carbon cap and trade system aimed at lowering California’s greenhouse gas emissions. Strangely it wasn’t an oil company that derailed this deal, instead it was a Tucson based environmental lobby called the Centre for Biological Diversity.

    “We commend the Air Resources Board for its commitment to addressing the critical environmental questions related to forest carbon credits,” crowed a CBD spokesperson. “It’s crucial that the state not give incentives to business-as-usual clear cutting and other destructive logging practices that hurt our forests and do nothing to address the immediate impacts of climate change.”

    The Intergovernmental Panel on Climate Change (IPCC) has recommended that California cut more of its own wood and use it instead of concrete, steel and other wood substitutes. By cutting forests in countries that have lower regulations deforestation and environmental degradation is increased along with greenhouse emissions. The forests in California have the capacity to produce all the wood needed in the state as well as have plenty to export. What is surprising then is that California imports 75% of their wood and it is a sure bet that the wood they import isn’t harvested under restrictions as comprehensive as those within California’s Forest Practice Rules requiring Timber Harvesting Plans that consider water, wildlife and other concerns.

    The California Air Resources Board adopted a programme that includes allowing forest management activities for which CO2 emitters can buy carbon credits. According to the Centre for Biological Diversity logging practices hurt forests and do nothing to slow climate change. However the United Nations IPCC disagrees. According to the IPCC deforestation and degrading forests accounts for 20-25% of greenhouse gas emissions although they do omit timber harvesting from this statistic.

    The IPCC favours three different strategies to prevent deforestation and degradation. The first, carbon conservation includes preventing forest conversion to agricultural uses and other non forest uses as well as controlling major fires. The second option is carbon substitution whereby wood products are used instead of non-wood products, which require more fossil fuel based energy and materials. The third and final option is carbon sequestration and storage, which would involve expanding the forest area and/or biomass of natural and plantation forests. Of these three options the IPCC recommends carbon substitution as according to them it has the greatest mitigation potential in the long term.

    Many environmental groups such as the Sierra Club and the Centre for Biological Diversity have made a concerted effort to restrict logging. However if the green groups really understood the implications for reducing CO2 they would embrace forest management in California.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Northern Pulp to Purchase Land

    2010 - 03.15

    Neenah Paper is selling all of its remaining woodlands in Nova Scotia for $82.5 million to Northern Pulp and Nova Scotia is loaning $75 million to help Northern Pulp purchase the 475,000 acres of land.

    The land will ensure a wood supply to the Abercrombie, Pictou Co. a pulp mill as well as protect the land as a forestry asset. In total the forest industry contributes $700 million to Nova Scotia’s gross domestic product and employs about 11,000 people as well as exporting more than $1 billion, which makes up 17% of Nova Scotia’s export trade. Within this Northern Pulp is a major player within the province’s forestry and paper industry.

    It has also been confirmed that the province will also invest $16.5 million to purchase 55,000 acres of the land Northern Pulp is buying. Already the majority of it has been earmarked for protection in Cumberland, Colchester, Pictou, Halifax, Hants and Guysborough counties.

    “This purchase includes some exceptional natural land for protection at an excellent price and will help us move toward our goal of protecting 12 per cent of the province’s land mass by 2015,” said John MacDonell, Minister of Natural Resources.

    The province was purchased well below market value at $300 per acre. This investment will also allow Northern Pulp to invest $5 million to reduce the odour in the community surrounding the Abercrombie mill.

    The Northern Pulp loan funding will come from the province’s Industrial Expansion Fund, which was budgeted for in September 2009.

    These transactions are consistent with the 2006 Softwood Lumber Agreement. None of the parties involved, Northern Pulp, Northern Timber, nor Neenah Paper, own or operate sawmills, nor are they related to softwood lumber producers.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Moving towards a bio-age

    2010 - 03.11

    Canada’s woes continue as the forestry sector struggles with the sluggish demand, bankruptcies, the closing of plants, job losses across the country and to cap it all off pricing pressure from competitors in developing countries.

    Canada is still feeling the effects of continuous setbacks over the past five years. In particular, the drawn out softwood lumber dispute with the US. The sector is in serious need of a solution so it can return to stability and maintain and support its 270,000 workforce.

    This solution could come in the form of a year long study commissioned by the Forest Products Association of Canada (FPAC). Called the bio-pathways project it revealed that forestry companies can capitalise on the bio-age by integrating bio-energy production with existing operations.
    “It’s really about the transformation of the sector,” says Catherine Cobden, FPAC’s vice-president of economics and regulatory affairs.

    Headed by Don Roberts the managing director of CIBC world markets in Ottawa, the study pulled together more than 60 industry experts, executives and governments.  It assessed 27 traditional and emerging bio-chemical and bio-energy technologies on an economic, social and environmental level.

    The outcome of the study revealed that forest product producers need to look no further than their existing operations. While producing traditional products forestry companies can convert biomass (wood fibre) into bio-energy and bio-chemicals by integrating with the biotechnology.

    “There are some segments that are always going to be profitable. Lumber is the most obvious one. It will be cyclical in nature, but at the end of the day it will be profitable,” says Cobden, who admits much of the pulp and paper segment needs transformation.

    Due to their chemical base pulp mills have the most significant opportunities in the bio-chemical field. Although in order to take advantage of them saw mills and pulp mills would need to work together.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Tottenham Hotspurs in Regeneration Launch

    2010 - 03.10

    According to the Lee Valley Regional Park Authority volunteers are working on improving the states of the Clendish Marsh and Tottenham Marshes. The initiative was launched with the help of Tottenham Hotspur Football Club.

    For more than 30 years Tottenham Marshes have been the victim of vandalism but this is all changing thanks in part to a series of improvements that were launched this month by Spurs midfielder Lukas Modric.

    “Getting kids and families leading healthy lifestyles is something we promote at Spurs through the Tottenham Hotspur Foundation,” said Modric. “We want to encourage young people and families to get out and enjoy their local parks and Tottenham Marshes provide the ideal spot for fun and activities with the family.”

    To date the regeneration of the marshes has taken more than five years as part of a £2million investment in the area. So far the entire Marigold entrance has been refurbished and volunteers have been working on clearing the pathway through Clendish Marsh and coppicing the hazel, which grows in abundance.

    “I am very pleased that the Forestry Commission is able to support this particular project,” said Ron Melville the Forestry Commission Regional Director.

    “Trees are immensely valuable in many ways, including biodiversity, quality of life and adaptation to climate change. They are important for our future and it is particularly appropriate that children and families are involved in this planting scheme since they will see these trees grow to maturity.”

    The official launch was yesterday and saw school children, families and volunteers come together in order to demonstrate how the area has become a great place to play sport as a recreational destination for the whole family, as well as place for wildlife and plants.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Advantages of a timber investment

    2010 - 03.03

    Over the last decade prices for gold and copper have risen by 300% while timber prices have fallen by 32%. By the looks of it timber is set for a growth spurt and a number of factors, not least the mass urbanisation of the Chinese economy will contribute towards this.

    Residential construction is soaring in China with 20 million people moving from the country to the city each year. So it isn’t surprising that China has reserved almost £90bn from its economic stimulus plan for low cost housing and the majority of that will come from wood frame construction. Experts predict that China’s demand for timber will grow by one-third over the next five years. China’s myriad infrastructure projects have been heavily reliant on imported wood since it passed a widespread logging ban in 1998 following disastrous floods.

    The Chinese demand for timber is equally strong away from the construction sites. Rising living standards have meant a growing appetite for processed forestry products such as toilet paper, cardboard and paper.

    Timber has also benefitted from a new enthusiasm in more developed countries; this is partly due to the fact that it is easier to recycle than steel or concrete. As an added benefit there is a flourishing interest from developed countries in second generation biofuels that bolsters this trend.  New techniques have been developed to produce bioethanol from wood fibres by extracting cellulose.

    As governments seek to reduce carbon emissions pressures on commercial forestry will mount. The brake on supply is likely to become very significant leading to forced up prices. Case in point would be that countries in the tropics are using environmental legislation to restrict logging in primary forests.

    The advantages to timber investment are its low correlation with equities that provides a useful diversification benefit. In addition over the last century timber prices have risen at 3.3% above the rate of inflation, indicating that the commodity is an excellent potential hedge against rising consumer prices.

    While growing trees is good for the planet, cutting some down is important to provide for global economic health. Investors can enter this market through specialist funds and maybe branch out (forgive the pun) into a new area of investing.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here