Determinants of Swedish pulpwood imports

Pulpwood is imported to Sweden as a result of price discrimination and the monopsonistic features of the domestic pulpwood market. To investigate the determinants of Swedish pulpwood imports, econometric models were developed for the three imported assortments: pine, spruce, and non‐coniferous pulpwood. All prices used in the models were relative to the price of pulpwood imports. The study shows that the relative price of pulpwood (e.g. price of standing timber for sale/price of pulpwood imports) is not a significant determinant of pulpwood imports; it has the wrong sign for spruce pulpwood. This unexpected finding may have been a result of the impossibility of categorizing the price for standing timber according to pulpwood assortments. The relative export price of pulp, however, was found to be a significant determinant of spruce pulpwood imports, although not of pine and non‐coniferous pulpwood. An important determinant is the relative prices of inputs other than pulpwood in pulp production. The study also shows that pulpwood imports respond to price signals with a 1 yr lag, indicating inertia in trade.     

Structural changes in sawlog and pulpwood markets in Finland

This paper presents a short‐term econometric model for the sawlog and pulpwood markets in Finland. More specifically, the effects of structural changes in the market on the success of short‐term market modelling are investigated. Wood prices and quantities traded are stationary. Therefore, valid statistical inference using the levels of these variables is possible. Pulpwood prices were found to be directly proportional to sawlog prices during the study period, and the cross‐price effects were not statistically significant. The results indicated that the price sensitivity of wood supply in Finland increased during the 1980s and early 1990s. Nationwide collective price agreements were found to have increased the level of pulpwood supply and demand from private forests, but to have had no effect on either supply of or demand for sawlogs. Due to a structural change in the 1970s, the models estimated for the whole period cannot be used for short‐term forecasting in the 1990s. Higher‐than‐annual frequency data should be used in developing accurate short‐term forecasting models.     

Economic impacts of accelerating forest growth in Europe

The global forest sector model EFI-GTM was applied to assess regional impacts in Europe of increased timber supply caused by potential acceleration of forest growth in Europe. The EFI-GTM is a multi-periodic partial equilibrium model, which contains 31 European regions and 30 regions for the rest of the world, and trade between the regions. The endogenous sectors include 26 forest industry products and six wood categories. Three alternative forest growth scenarios were analysed: a base line assuming the present annual rate of growth in the European countries, and two accelerating growth scenarios corresponding to a 20 and 40% increase after 20 years in the forest growth relative to the baseline growth. In the accelerated growth scenarios equilibrium prices for logs and sawnwood decreased significantly from the baseline levels, whereas the other forest product prices were not affected much. Depending on region and timber category, the log prices in 2020 were 7–9 and 13–17% lower than the base line prices in the medium and high forest growth scenarios, respectively. For sawnwood, the corresponding price decreases were 2 and 3.5–4.5%. In Western Europe, log harvest and sawnwood production increased because accelerated forest growth substituted for imports of these commodities from Russia and Eastern European countries. This decreased the harvests in Russia and Eastern Europe relative to the base case. In all the three forest growth scenarios the forest owners income as well as the forest industry profit increase over time.     

Price dynamics in the Russian–Finnish roundwood trade

Abstract

This study examines price dynamics in roundwood exports from Russia to Finland, the largest international roundwood trade flow within Europe. The analysis covers six main timber assortments; sawlog and pulpwood dimensions of pine, spruce and birch. The study period, starting from the devaluation of the rouble in August 1998, was characterized by a drastic increase in the volumes of Russian roundwood imported into Finland, and a coinciding structural change in the timber assortment distribution of the Finnish roundwood imports. A basic hypothesis of economic theory, the law of one price, was tested by using quarterly time series and methods of cointegration analysis. According to the cointegration tests, the prices of Finnish and Russian spruce sawlogs have moved closely together. Furthermore, the changes in the prices of spruce sawlogs in the Finnish roundwood market are reflected in the Russian prices and not vice versa. Regarding other timber assortments, price co-movement and consequent market integration was not detected.     

The consequences for the forest sector of nuclear power discontinuation in Sweden

Electricity prices in Sweden will most probably double, or more, during the next 10 to 15 years as a result of the decision to discontinue nuclear power production. This will substantially change the comparative advantage of all forest‐based product industries, some to the worse, some to the better. Roundwood prices and fellings will be affected and possibly the competitive position of wood‐based energy production. This paper estimates various types of effects with a long run pulpwood market model. The effects on electricity intensive production (CTMP, newsprint, etc.) may be drastic. However, the fall in total industrial consumption and price of pulpwood will be limited. The reduction in price is not sufficient to make pulpwood economically attractive as fuel. Own‐price elasticities of electricity demand are greater than reported elsewhere.     

Private forest investment and long-run sustainable harvest volumes

Private timberlands in the United States have the biological potential to provide larger quantities of timber on a sustainable basis than they do today. Most opportunities for increasing growth and harvest lie on nonindustrial private lands in the South. Past studies, based on fixed scenarios of future prices, also suggest that many of these opportunities for intensified management can be undertaken with positive economic returns. Translation of these physical and apparent economic potentials into projections of future management and harvest requires a model of private timber management investment behavior. This study examines the dynamics of investment in private forest management according to a model of timber markets and timber supply in which intertemporal levels of private investment, harvest, and timber prices are all endogenous. The results of this model are used to examine the extent and types of possible future private management investments and how these will affect timber supply. In addition, the sensitivity of these projections to variations in key market and behavioral determinants is examined through simulation of alternative scenarios involving reduced public timber harvest and constraints on planting investment of nonindustrial private owners.The base case illustrates the substantial potential of timberlands for increased growth and harvest. This requires, however, investments in planting well beyond those observed in recent years. Given this, the area in planted forests would almost triple within the next 30 years. Expanded investment would allow immediate increases in timber harvest and sustained increases in timber inventory, with virtually no trend in softwood log prices. Projected increases in plantation area would concentrate timber production on fewer hectares, with more hectares managed passively. Naturally regenerated forests in the future would cover at least three-quarters of the private timberland area, with hardwoods continuing to dominate. Restricting nonindustrial private plantation investment to levels observed in the recent past markedly alters projections for softwoods, thus raising prices and reducing timber harvest relative to the base case across the full projection period. In contrast, reductions in public timber harvest alone result in increased prices and reduced total cut in the near term, but have limited impact on the outlook three-five decades hence, because private investment effectively compensates for public timber harvest reductions.     

The effects of subsidized regeneration measures on timber supply,once again

Using an econometric model of the sawtimber and pulpwood market in price region 1 (the northern part of Sweden), it is considered whether the subsidies paid to regeneration costs in this region have had any measurable effect on short‐run wood supply. The analysis is a continuation of the work presented by Brännlund et al. (1985 b), in which it was claimed that subsidies have had a non‐positive effect on short‐run supply. A more elaborated test is used in this study. The test is based on the use of a reference model which, in this case, consists of an econometric model for the whole country of Sweden. The results from the test cannot be used to reject the conclusion that subsidies have had a non‐positive effect on short‐run wood supply.     

Price integration for domestic and imported sawlogs and pulpwood in Finland: an update

This paper provides an analysis on the integration of prices for imported coniferous pulpwood and sawlogs, and respective domestic stumpage prices in the Finnish wood market. Eight real price series were investigated during 2002–2014 using monthly observations. The bounds testing approach by Pesaran et al. [(2001) Bounds testing approaches to the analysis of level relationships. J Appl Econom. 16: 289–326. doi:10.1002/jae.616], indicates there are long-run relationships between prices of domestic and imported wood. For more detailed information, the vector error correction model (VECM) approach was used. Estimation of a system with all eight prices with interpretable results did not succeed; therefore, we estimated models for prices of sawlogs and for pulpwood separately. For sawlogs, two co-integrating vectors, one for pine and one for spruce, were found. For pulpwood prices, one co-integrating vector was identified. The estimated VECMs confirm the results of bounds testing approach, suggesting that causation in the Finnish wood market runs from domestic prices to prices of imported wood. We conclude that prices of domestic and imported coniferous logs and pulpwood are closely connected. The question of full integration remains open, as border prices and stumpage prices by definition differ, at least, by logging and transportation costs.     

Optimizing the joint production of timber and bilberries

Berries and mushrooms are increasingly appreciated products of Finnish forests. Therefore, there is a need to integrate them in silvicultural planning. Bilberry (Vaccinium myrtillus L.) is an economically important wild berry that is widely collected for household consumption and sale in North Karelia, Finland. In this study, bilberry yield models developed recently were included in a stand growth simulator and the joint production of timber and bilberry was optimized by maximizing soil expectation value (SEV) with 3% discounting rate, assuming that 75% of the bilberry yield is harvested. The effect of bilberry production on the optimal stand management increased with increasing bilberry price. With high bilberry prices (4–8 € kg⁻¹) it was optimal to manage the mixed stand of Scots pine, Norway spruce and birch, and the pure stand of Norway spruce so as to promote bilberry production. In the Scots pine stand, where bilberry yields are higher, bilberry production affected optimal stand management already with a price of 2 € kg⁻¹. Compared to timber production, joint production led to longer rotation lengths, higher thinning intensities, more frequent thinnings, and higher share of Scots pine in the mixed stand. The contribution of bilberries to the total SEV increased with increasing bilberry price and discounting rate. In the mixed stand and pine stand the SEV of bilberry production, calculated with 3% discounting rate, exceeded the SEV of timber production when bilberry price was 4 € kg⁻¹.With 4% discounting rate this happened already with bilberry price of 2 € kg⁻¹. It was concluded that forest management which promotes bilberry yields is the most profitable in pine stands where the potential bilberry yields are high.     

Mathematical modeling for evaluating gain of logging companies in the timber market

We propose a game-theoretic model for a first-price sealed-bid auction (FPSB auction) of standing timber. A FPSB auction means that bidders simultaneously submit sealed bids so that no bidder knows the bid of any other participant. The highest bidder pays the submitted price. The mathematical model has been elaborated considering only two bidders. Each bidder is supposed to know only the probability distribution of the bid of the other bidder. Using appropriate distributions, the adversity and propensity of a bidder to risk can be described. From the view point of a bidder, the conservative solution is calculated for both types of the other bidder. If a standing timber belongs to a public owner, the market has to follow a public evidence procedure, including public auctions. The function obtained is illustrated with a numerical example of a typical standing timber auction from a forest located in central Italy. Considering average costs and prices of the local chestnut timber market, winning bids and expected gains are estimated. Their amounts are comparable with the currently average stumpage price registered in this market.     

Comparing multipurpose forest management with timber management,incorporating timber,carbon and oxygen values: A case study

Abstract

This paper comparatively examines two forest management planning approaches: multipurpose forest management and traditional timber management, with carbon, timber and oxygen production objectives in mind. The effects of both approaches on carbon and oxygen values were estimated with an oxygen and carbon flow matrix, while timber production was modelled through a growth and yield model. The estimated values were simultaneously integrated into a linear programming model developed for this study. The objective was to maximize the net present value (NPV) of the profits of timber, oxygen and carbon under the constraints of an even flow of timber production and ending forest inventory for each planning approach. The results showed that the ecological and environmental regulations in multipurpose management substantially decreased the NPV of timber production even though they increased the NPV of carbon and oxygen flow. The results also indicated that over a 100 year planning horizon the total NPV of all forest ecosystem values including carbon, timber and oxygen is almost the same (only 1.9% reduction in multipurpose management approach) in both management approaches. Although multipurpose management creates more NPV of carbon and oxygen than timber management does, the latter provides better results in terms of timber production. It is therefore important to take into account the NPV of all apparent and quantifiable forest values in preparing forest management plans, particularly in developing new management planning approaches.     

Producing softwood of different quality: does this provide risk compensation?

This study analysed whether the production of high-quality assortments, saw timber and pulpwood in Norway spruce (Picea abies) and Scots pine (Pinus sylvestris) stands leads to effects of risk compensation. Mixtures of conventionally treated pruned and non-pruned stands, as well as mixtures of stands which had been optimized concerning the occurrence of assortments and financial criteria were considered. The price simulation was done by bootstrapping to avoid the assumption of a certain distribution of timber prices, and to preserve the correlations of the timber prices from different assortments. The financial valuation was carried out with annuities within a Monte Carlo simulation with 10,000 repetitions. To quantify the effect of natural hazards, the calculations were repeated with and without this factor. Minimum risk portfolios were determined and optimization performed using both a utility function as well as the value-at-risk approach. The mixtures with minimum risk were dominated by pine stands, as they are less affected by natural hazards and prices for pine timber have a lower volatility, although pine timber prices are generally lower compared to that of spruce timber. These pine dominated portfolios showed risk reductions up to 92% compared to the riskiest single stand, but the annuities were reduced even more. In contrast to this, the portfolios optimized with the utility function and the value-at-risk approach consisted of spruce stands. These spruce portfolios showed an efficient risk reduction of up to 60%. Additionally, higher annuities and larger diversification effects occurred in the portfolios containing the optimized stands. Integrating the risk of natural hazards, the annuities decreased, as did the correlation of the annuities of the different stands, while risk increased. Altogether these effects led to higher relative risk reductions when forming optimal portfolios. These results indicate that producing different assortments of spruce and pine leads to risk compensation, especially when considering portfolios consisting of optimized stands.     

Estimating the annual supply potential and availability of timber and logging residue using forest management records of the Tochigi prefecture, Japan

We used forest management records to estimate the annual supply potential and availability of timber and logging residue from profitable subcompartments for all the cities and towns in the Tochigi prefecture. Five log markets and three factories in the Tochigi prefecture were assumed to be the destination of timber and logging residue, and the forest operation systems were set on the basis of interviews with forestry cooperative officials. The results showed that the annual supply potential of timber and logging residue was 450,304 m³ and 549,957 tons, of which 6 % (26,304 m³) and 37 % (204,122 tons) were from precommercial thinning operations, 61 % (276,180 m³) and 50 % (276,276 tons) were from commercial thinning operations, and 33 % (147,820 m³) and 13 % (69,559 tons) were from final-felling operations, respectively. When the unit price of the logging residue was 10,000 yen/ton, the annual logging residue availability from profitable subcompartments could almost cover the annual demand of the three facilities that we considered in this study. Introduction of feed-in tariffs had a significant impact. However, the ratios of the availability to supply potential with unit prices of logging residue of 3,000, 6,000, and 10,000 yen/ton were estimated to be only 1.67, 2.06, and 4.09 %, respectively. Considering the subsidies, the ratios respectively increased to 5.79, 7.35, and 13.09 %. Furthermore, the annual logging residue availability with subsidy could meet 70 % of the annual woody biomass demand of the large-scale factory in Sano city, which is 100,000 tons.     

Financial performance of mixed-age naturally regenerated loblolly-hardwood stands in the south central United States

To estimate the financial performance of a natural mixed species and mixed-age management in the loblolly-pine forest type, we examined 991 FIA plots in the south central states. The plots were of the loblolly pine forest type, mixed-age, and had been regenerated naturally. We gauged the financial performance of each plot from the equivalent annual income (EAI) produced by growth and harvest, between two successive inventories. The real price EAI (REAI) measured the financial performance based on the real price change, net of inflation, between surveys. The constant price EAI (CEAI) measured stand productivity at prices at the time of the first survey. Thus, the REAI is a measure of real economic performance, including timber growth and price changes. In contrast, the CEAI is a quantity index of timber growth, the growth of each product being weighted by its price. During the period 1977–1994, the main determinant of the REAI was the price change. Due to an overall favorable price trend, the mean REAI ($158 ha⁻¹ year⁻¹) was much greater than the mean CEAI ($24 ha⁻¹ year⁻¹). Due to increasing prices, the best performing plots had very high stocking levels. Thus, the best financial strategy was to hold the stock, making the opportunity cost of conservation negative. Instead, CEAI tended to be lower on stands with high basal area, and higher in stands with many trees, a low share of hardwoods, and many trees near sawtimber size.     

Climate change mitigation through increased wood use in the European construction sector—towards an integrated modelling framework

Using wood as a building material affects the carbon balance through several mechanisms. This paper describes a modelling approach that integrates a wood product substitution model, a global partial equilibrium model, a regional forest model and a stand-level model. Three different scenarios were compared with a business-as-usual scenario over a 23-year period (2008?C2030). Two scenarios assumed an additional one million apartment flats per year will be built of wood instead of non-wood materials by 2030. These scenarios had little effect on markets and forest management and reduced annual carbon emissions by 0.2?C0.5% of the total 1990 European GHG emissions. However, the scenarios are associated with high specific CO₂ emission reductions per unit of wood used. The third scenario, an extreme assumption that all European countries will consume 1-m³ sawn wood per capita by 2030, had large effects on carbon emission, volumes and trade flows. The price changes of this scenario, however, also affected forest management in ways that greatly deviated from the partial equilibrium model projections. Our results suggest that increased wood construction will have a minor impact on forest management and forest carbon stocks. To analyse larger perturbations on the demand side, a market equilibrium model seems crucial. However, for that analytical system to work properly, the market and forest regional models must be better synchronized than here, in particular regarding assumptions on timber supply behaviour. Also, bioenergy as a commodity in market and forest models needs to be considered to study new market developments; those modules are currently missing.     

An Economic Analysis to Aid the Marginal Decision on Rotation Length: II Development of the Technique

The economic principle, which was presented in an earlier paper(Forestry, 37, 161), is developed into a flexible techniqueof economic analysis for use in forest management. The techniqueprovides a rapid method for analysis of the marginal decisionon financial rotation length; whether to fell now, or in fiveyears or so. The developments include incorporation of a price-sizegradient, different product prices, various costs of operation,reductions in volume yield, and various establishment and maintenancecosts. Now in its final form, it can incorporate these changesin stand conditions without any laborious calculation. The techniqueis used to analyse the effect of financial factors on the marginaldecision, i.e. prices, costs, and productivity. It is suggestedthat financial rotations are fundamentally dependent on therelation between physical production and the interest rate.Second, establishment and annual maintenance costs have no effecton the decision. Third, prices, or more specifically the ratioof pulpwood price:sawtimber price, are not of major importance,because they influence the decision within the limits alreadyimposed by production and interest rates. The justificationfor pulpwood rotations is also examined. This paper has developeda basic technique for projects of forest economics. It is partof the research work into the economics of timber production,which is being undertaken by the author at the Forestry Department,University College of North Wales, Bangor.     

Timber Prices in South West England and their Implications for Plantation Management

Forestry Commission timber sales in the period 1979–82in Southwest England provide consistent data on the relationshipbetween timber prices and the diameter at breast height of treesfrom which logs are taken. The relationship indicates a greater premium for size than iscurrently assumed in generalised price: size curves. It impliesthat, firstly, rotations should be extended by between 5 and15 years beyond the rotation of optimum discounted revenue basedon the generalised curves, and secondly, heavier thinning regimesshould where feasible be followed in order to accelerate thediameter growth of main-crop trees.     

Optimal forest rotation periods: integrating timber production and carbon sequestration benefits in Pinus tabulaeformis plantations on the Loess Plateau,P.R. China

Determining the optimal rotation period was a crucial component of forest sustainable management strategies, especially under climate change. This paper had two objectives: (1) to determine the economic benefits and optimal rotation periods for timber production when coupled to carbon sequestration, as predicted by time series prediction models for Pinus tabulaeformis plantations in China; and (2) to evaluate how different carbon prices and interest rates affected optimal rotation periods using the forest land expectation value. The results suggested that time series prediction models were valuable for estimating timber volumes and carbon sequestrations based on surveys of different-aged stands. Importantly, since integrating carbon sequestrations into timber production benefits did not increase optimal rotation periods, this should promote P. tabulaeformis plantation management. In the sensitivity analysis, a higher carbon price increased the profitability of carbon sequestration and timber production, but not optimal rotation periods, though they were reduced under higher interest rates. In conclusion, incorporating both timber production and carbon sequestration benefits would sharply increase forest-based revenues, while realizing the carbon sequestration potential of P. tabulaeformis plantations. This approach was clearly useful to the development of reforestation/afforestation projects trying to mitigate climate change and also provided a theoretical basis for sustainable forest management.     

Japanese forest sector modeling through a partial equilibrium market model

The structure of Japanese timber markets has changed drastically during recent decades. After the introduction of a large amount of imported softwood products. Japanese timber producers have faced global competition with foreign timber suppliers such as Canada, the US, and recently Nordic countries. In this paper, we present a forest sector model for lumber markets with a focus on eight aggregate regions (Tohoku, Kanto, Hokuriku, Chubu, Kinki, Chugoku, Shikoku, and Kyushu) in Japan. The proposed model is based on the Samuelson-partial equilibrium formulation, which searches for an optimal solution by maximizing the net social payoff subject to demand and supply constraints. A nonlinear programming solution technique is incorporated into the proposed model. Three types of lumber are considered,i.e., domestic lumber, the lumber processed in Japan from imported logs, and imported lumber from the US and Canada. Using data for 1998, our analysis indicates that the derived equilibrium solution has a higher price for the imported lumber supply in all regions, and a lower price for the other two products in most regions than the actual current price in 1998. The derived net social payoff gains 1.6% compared with the one derived with the current set of prices and quantities. This is research was supported by the Grant-in-Aid for scientific Research (No.11691090) from the Ministry of Education, Culture, Science, Sports, and Technology of Japan.     

Effect of land prices,transportation costs,and site productivity on timber investment returns for pine plantations in Colombia

The relative importance of land costs, site quality, and forest location are major concerns in forestry investments, but little research has been done to assess the impacts of these or other factors on financial returns. In response to this issue, the effects of land prices, wood transportation costs, site productivity, and discount rates on timber investment returns for pine plantations in the Andean Region in Colombia were estimated. For all the scenarios analyzed, the internal rate of return varied between 6.4 and 15.6%. High site quality with high growth rates were profitable in all scenarios at real discount rates ranging from 8 to 12%, but low site qualities seldom had positive net present values. Less expensive land and locations close to mills had better rates of return. More distant locations, poor quality sites, or areas with high land costs generally did not meet the discount hurdle rates. Site quality, which is the factor most easily manipulated by intensive forest management and improved technology, was substantially more important than land prices and transportation differences in determining timber investment returns.