MB under fire
Brazil: Myth vs Reality
A recent World Forest Institute conference on Brazil yields a vastly different picture of the industry than that usually presented in the North American media.
By Reg Barclay
Brazil, with all of its natural resources, has been called a country for the future. The sceptics in the past said that this would always be true. But today, Brazil is catching up with itself and the reality of achieving its potential now seems possible.
That observation was put forward by Robert Donnelly, a New Zealand-based forestry consultant, at a recent World Forest Institute Conference on Brazil in Portland, Oregon. Donnelly's view pretty well summed up the general feeling about where forestry is at in Brazil, and where it is going. The picture that emerges is that of a country making progress in stabilizing its economy, which will favour expansion of the untapped potential of its forest resources.
It was reported that Brazil is now enjoying a period of unprecedented economic stability and growing investor confidence. A new president, Fernando Henrique Cardona and his governing social democratic party, elected in 1994, are dedicated to making Brazil a major economic power. Already the monthly rate of inflation has dropped from 40 per cent in 1993 to about one to two per cent over the past two years, while GDP growth is maintained.
Development of the forest product sector in Brazil has been low relative to its resource size. With 16 per cent of the world's forest, production is only two to four per cent of world production. The annual timber harvest in Brazil, for example, is 75 million M3, about the same as the harvest in British Columbia, but Brazil has five times the area of timber resource.
There are good reasons for this under-development. The main natural forest area is in the Amazon basin. With the environmental eyes of the world on this area, there has been a reluctance to initiate a planned program of forest management development, even though a government agency, ABAMA, controls the tropical forest har- vest. Of the original forest, 70 to 80 per cent is intact today, despite government plans 20 years ago, now suspended, to encourage farm settlement in the Amazon.
Another reason is the use of non-wood materials in housing, which is built largely with cement block on concrete pads. Consumption of wood products is low per capita, resulting in little demand pull for construction-grade wood products. Nevertheless, the majority of Brazil's wood products are consumed internally, mostly for industrial use.
While the natural forest of Brazil covers nearly 400 million hectares, two-thirds of which is in the Amazon, the dynamic part of the forest industry is based on five million hectares of plantation forest, located in southern Brazil bordering the Atlantic Coast.
Of this, 3.6 million hectares is classified for industrial use. Species composition is 60 per cent eucalyptus and 40 per cent southern yellow pine, principally loblofly pine. There is also some acacia, slash and parana pine in the mix. Loblolly is now the favoured pine species for new plantings.
The plantation forest resulted from government fiscal incentives launched in 1966. The purpose was to establish a sustainable source of wood for expansion of pulp and paper production, and charcoal for steel manufacture. This initiative was driven by the need to reduce imports, and to reforest the cut-over parana pine region in the south.
The initiative was very successful and the plantation forests have been the heart and soul of an expanding forest products sector. Success is related to the rapid growth rates that have been achieved through genetic research in tree improvement and improved nursery practice and silviculture treatment, all nurtured by a tropical climate. Growth rates vary from 20 to 35 M3 per hectare per year, depending on the species. Rotations, based on pulp and paper requirements, range from 15 to 25 years with intermediate cutting every seven years, for both pine and eucalyptus.
It is not surprising that the pulp and paper industry is the largest and most advanced part of the forest product sector. Pulp and paper production has both increased 12 times, from 500,000 to 6 million metric tons over 30 years. Today, there are over 300 pulp and paper plants in Brazil, situated in easy proximity to the plantation forest area.
Expansion will continue. Plans for a further five million metric tons of pulp and three million metric tons of paper production are on the drawing boards. The emphasis on pulp and paper is not surprising for a government concerned about imports. Domestic consumption of paper and board is only 35 kg/capita compared to the US with 330 kg/capita, and with economic growth in Brazil, consumption will expand. Expansion will not only satisfy increasing domestic needs, but will contribute to a positive trade balance by exporting 25 to 30 per cent of its low-cost production.
With expansion, industry is paying more attention to regeneration and planting new areas. The government incentive was withdrawn in 1986, and new planting has slowed to 100,000 hectares per year. A renewal of the incentive program is under review, as clearly plantation expansion will benefit the economy.
Preoccupation with import substitution may have caused government and industry to overlook the benefits of integration. With slightly longer rotations, pruning and thinning, added value can be realized from using logs first for lumber or panel products and then chipping the residue for pulp and paper. As yet the industry is based on whole log chipping.
Eucalyptus, the main species for pulp, is part of the problem, as it is difficult to saw and dry. It is a very dense wood with high internal stresses. For some time now, some of the larger companies have been 'investing in genetic research to develop a hybrid eucalyptus more suitable for lumber and plywood. This has high potential for export markets in Europe, as eucalyptus can yield high percentages of clear and shop grades in long lengths.
Sawmilling, by contrast to the well-established pulp and paper sector, is characterized by thousands of small, portable, under-capitalized independent mills. Formerly concentrated in southern Brazil, cutting parana pine and hardwoods, sawmills move north into the tropical forest, when the timber dimin- ished. There seems to be few, if any, large blocks of timber under forest management with a large permanent mill. The typical par- tem is small cutting peniiits, and when cut over, the mill moves to a new location. The outlook is for only modest growth in tropical hardwood lumber production, as ABAMA controls cutting permits and favours selective cutting and conservation.
In recent years, 25 to 30 sawmills have been established in the south, cutting southem pine plantation wood, mainly into value-added products. These are aimed at the fencing and millwork market in the US, formerly dominated by Ponderosa pine. Ponderosa production has dropped 50 per cent since 1990, because of environmental lobbies, opening up a billion fbm (2.36 million M3) market for imports. Brazilian loblolly pine is very suitable for this market, and exports have increased to 250,000 M3 over a few years, with room to increase. Main export competition is radiata pine from Mexico, Chile and New Zealand.
Overall lumber production in Brazil is forecast to increase from 15 to 18 million m3 by 2000. Most of this increase will be in plantation pine and eucalyptus, both, of which have export potential. However, total export volume will remain modest in world terms, as 90 per cent of lumber will be con- sumed domestically. Much of future pine production will be used for pine RTA fumiture, a fast-growing industry in Brazil, and dependent on export markets. Wood-based panel production has increased rapidly. Plywood utilizes hard- woods, while particleboard and hardboard are based on plantation forest wood.
Exports, mainly of hardwood plywood and hardboard, are 20 to 30 per cent of production. It is expected that the panel industry will grow from current production of 3.2 to 5.5 million M3 by 2000, an increase of 70 per cent, predicated on plantation wood. Increasingly, hardwood-faced plywood will use a pine core, and increased use of eucalyptus for veneer can be expected. The ply- wood and hardboard share of total panel pro- duction will decline from 72 to 55 per cent, and the share of particleboard, OSB and MDF will increase.
Log exports of selected hardwoods are carefully controlled by ABAMA, who ensure export fibre is surplus to local industry needs. Exports have varied between 150,000 and 350,000 M3, about half of lumber export volume, and negligible relative to the resource available.
With world demand catching up to supply, there is, clearly, a long-term potential in Brazil to substantially increase its wood production from its huge natural tropical forest, the world's largest. This should not be a problem for the environment, as it can be properly managed on a sustainable basis. The tropical forest, once harvested, regenerates and grows readily under tropical conditions. In the short term, this is unlikely to happen. There will be production expansion, but it will be based on plantation forests. In terms of world trade, expansion will provide only a small opportunity for overseas buyers, as the bulk of production will be consumed domestically, and the new MERCOSUR free-trade agreement with neighbouring countries will attract more of Brazil's surplus supply.
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