Trends in global production and trade

This report examines key trends in global production and trade in Wood, Pulp & Paper. Our focus is on the competitiveness of emerging economies ('low-cost countries', LCCs) as global source countries.

The study is based on an analysis of cross-border trade flows. Flows of cross-border trade reflect the views of investors and traders on the ability of source countries to supply international markets.

Between 2002 and 2006, world exports of Wood, Pulp & Paper products grew at an average annual rate of 10.6 percent.

With exports from emerging economies growing at a higher rate (15.4 percent), their share of world exports increased from 23.7 percent in 2002 to 28.1 percent in 2006.

Chart 1B shows the importance and dynamics of low-cost countries as locations of production by sector:

► In terms of world export share, LCCs are more important as source countries for wood products than for pulp and paper.

► Also, since 2002, LCCS have gained more ground in wood (5.0 percentage points) than in pulp (3.7 and paper (3.5) products.

According to Chart 1C, Asia is the leading low-cost source region for Wood, Pulp & Paper. Over time, the Americas' share of world low-cost exports has slightly increased, mainly at the expense of that of Asia.

The geographical reach of a product's supply chain reflects the tradeoff of users between (a) accessing the most competitive source of supply worldwide, and (b) the benefits of proximity to end-product markets.

In this study, we measure the reach of supply chains by examining the extent  to which imports from LCCs cross regional borders (as reflected in the relative size of intra and extra-regional import flows).

Chart 2A brings out the importance attached by users of wood, pulp and paper to sourcing within their home regions. Yet, regional supply chains play a greater role in wood and paper than in pulp. In all products, there is a trend towards an increased geographical reach of supply chains since 2002.

The overall importance of intra-regional supply chains is also reflected in Chart 2B, showing the geographical reach of supply chains by region.

Chart 3A lists the ten leading low-cost source countries for wood, pulp and paper products. With a world export share of 5.3 percent in 2006, China is the leading source country, being followed by Brazil (3.9), Indonesia (3.3), Russia (2.5), and Malaysia (2.1).

Since 2002, the share of the Top-5 source countries in world low-cost exports increased by 2.7 percentage points to 61.0 percent in 2006. This points to a slight tendency of concentration in favour of today's leading source countries ― mainly China ― in the export of wood, pulp and paper products from emerging economies.

Between 2002 and 2006, China's share of world low-cost exports increased by no less than 8.4 percentage points to 18.7 percent in 2006.

Relative to other LCCs, China's advantage lies mainly in the paper sector. But, since 2002, China has lost ground in this sector, while strengthening its position in wood products.

Between 2002 and 2006, Brazils share of world low-cost exports increased by 2.0 percentage points to 14.0 percent in 2006 (while stagnating since 2004).

Relative to other LCCs, Brazil has an advantage in the pulp sector. Since 2002, Brazil has strengthened its position in this sector, while losing ground to other LCCs in wood products.

Between 2002 and 2006, Indonesia's share of world low-cost exports declined by no less than 6.4 percentage points to 11.7 percent in 2005.

Relative to other LCCs, Indonesia has an advantage in the pulp sector. Since 2002, Indonesia has strengthened its position in this sector as well as in paper products, while losing ground in the wood sector.

Between 2002 and 2006, Russia's share of world low-cost exports declined by 0.7 percentage points to 9.0 percent in 2006.

Relative to other LCCs, Russia has an advantage in mainly the pulp sector, but also in wood products. Since 2002, Russia has strengthened its position in the latter sector, while losing ground in pulp and paper products.

Between 2002 and 2006, Malaysia's share of world low-cost exports declined by 0.6 percentage points to 7.6 percent in 2006.

Throughout this period, Malaysia has enjoyed a stable competitive advantage over other LCCs in the wood sector.

Emerging economies are today the origin of slightly more than one quarter of world exports of wood, pulp and paper products.

In imports from LCCs, users of wood, pulp and paper products favour regional sources of supply. Yet, the geographical reach of supply chains varies markedly across sectors.

Based on our assessment of low-cost export flows between 2002 and 2006, we expect the following trends to shape global production and trade in Wood, Pulp and Paper products in the short to medium term:

► A continued growth in the share of low-cost countries in world exports in all sectors.

► A tendency among the leading LCCs to diversify their sector portfolios, either in favour of wood products, or in favour of pulp and paper products.