GROWTH IN TIMBER DEMAND GLOBALLY

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Author: Mohamed Hamza Ghaouri

Despite the Covid-19 pandemic, the timber industry performed quite well in 2020 as the demand on wood was still in its highest levels. The main challenges were in maritime transport, as travel and transport were limited around the world. In anticipation of the post-pandemic period, many players in the wood industry are looking for ways to increase productivity. The demand on timber is consistently growing as it has multiple uses such as constructions, chipboard, decking / Sheds, fencing, pallets, Biomass / Energy, Pulp – paper & packaging, etc.

As we have spoken in previous blogs about timber as a socially responsible private equity and highlighted the problems it faces as well as the solutions offered, in this blog we will highlight its global demand and its drivers.

Globally, the vast majority of countries have set significant targets to reduce carbon emissions to net zero by 2050. Timber will play a key role in this transformation. The dual effect of urbanization and decarbonization will be more new homes and cleaner, low-carbon buildings made from wood. Wood will increasingly replace steel and high-carbon concrete.

Over the past 20 years, global timber consumption has increased by 1.1% per year, driven by increasing urbanization and global demands for housing construction. In the coming years, timber consumption is expected to increase even more due to: Urbanization, Decarbonization, House Building.

  1. Urbanization

The UN predicts that the world’s urban population will increase by 53% over the next 30 years, driven by both population growth and the shift from rural to urban areas in pursuit of prosperity; a job, a better standard of living, better access to health care, education and longer life expectancy. Urbanization and rising GDP per capita increase demand for wood.

Residential and commercial construction, the main driver of wood consumption, is increasing due to urbanization and rising GDP per capita. The first stage of urbanisation -urban migration – leads to a demand for resources such as timber, concrete and steel in order to provide basic infrastructure and housing. The impact on the physical environment has historically led, in almost all cases, to governments building affordable public housing, usually mass-built, leading to a second construction boom and another surge in wood demand.

  • Decarbonization

Under the 2016 Paris Agreement, signatories are required to keep global warming “well below” 2 ° C and, if possible, 1.5 ° C above pre-industrial temperature levels. Almost all of the EU and many other countries are aiming for a 40% reduction in emissions by 2030 and full carbon neutrality by 2050.  Global momentum to decarbonise economies is expected to further accelerate timber consumption, as wood is increasingly seen as a clean and low carbon alternative. Timber is the natural and sustainable low-carbon substitute product in building and basic energy. It can support the global transition to a more sustainable economy and more efficient in the use of resources, especially in construction, energy and bioproducts.

  • Timber is a natural and sustainable low carbon alternative construction material with desirable build properties, it helps reduce CO2 emissions in several ways:
  • Timber has equivalent or better building characteristics to traditional materials
  • Timber has superior insulation properties, lowering operating emissions
  • As an alternative to other construction materials, it locks up rather than emits CO2
  • Timber permits off-site prefabrication, reducing building times,
  • deliveries and cost

The clearest way to reduce carbon footprint is through the use of timber.

  • Increase in housing construction:

House Building, regardless of the additional uses of wood, continues to support wood consumption.

Timber -based construction is gaining more and more traction around the world (Mjosa Tower, Norway; The Cube, Shoreditch; HoHo, Vienna; Maierhof, Austria; Oakwood Tower, London).

The dynamics of demand and supply raise the question of how much wood is available for sustainable harvest and consumption. Therefore, governments around the world encourages sustainable forestry practices. In Malaysia, sustainable plantations are encouraged around the world to help the country meet the global demands and conserve virgin forests. In this regard, Finterra Global Plantations is an example of a sustainable timber plantation.

The unique species of Paulownia which Finterra and its partner has selected grows rapidly in the Malaysian tropical weather, is resistant to diseases, maintains its high-grade quality and characteristics. It has been selected to meet the needs of both the domestic and international markets for planting materials required for afforestation, bioenergy products, feedstock, furniture, industrial usage, while other new uses and related products are continuously being developed ensuring it remains in high demand and of economic importance throughout the year. This initiative is in line with the government’s commitment to plant 1 million forest trees over a period of 10 years for the rehabilitation of degraded forest.

Finterra Global Plantations is taking advantage of this great demand for timber not only in Malaysia but also globally by introducing sustainable investment opportunities in the form of Islamic Redeemable preferential shares. The opportunity is for 40 months and provides partners (investors) between 8-=15% returns per annum which are paid on a quarterly basis making them very attractive for those investors looking for passive income. Additionally, the criteria which FGP uses is that it never cuts down any virgin forest for its plantation work. Instead, it uses idle land or unused plantation lands. In this way, it manages to support the UNSDG goals for environment and allows for individuals to take their personal responsibility in their hands and make a positive impact to the environment while profiting from it as well. In the end, it’s a win-win situation. Those keen to learn more about this sustainable investment project, can log onto http://www.finterraventures.com.

References

https://www.fdmasia.com/index.php/focus/item/761-tropical-timber-market-report

https://www.thestar.com.my/news/nation/2021/09/04/rm12bil-of-wood-products-exported-in-first-half-of-2021-says-commodities-minister

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