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Forest products industry sees growth as construction experiences a resurgence
Globally, the forest products industry has seen a remarkable performance across the last five years, fuelled primarily by the Asia-Pacific region. The global resurgence in construction output, with the West finally starting to see a return to growth, has had a significant impact on forest products as industrial roundwood, sawnwood and wood-based panels are all important in construction.
The global forest products industry grew by 11.4% in 2013, to reach a value of $817.8 billion, representing a compound annual growth rate (CAGR) of 11% for the period spanning 2009-2013.
Growth was primarily fuelled by Eastern Europe and Asia-Pacific, although Western economies also demonstrated growth, with Western Europe and North America recording CAGRs of 3.5% and 4.3% respectively across 2009-2013. This can be attributed to the rebound in construction in countries such as the US and the UK.
Asia-Pacific’s growth was led by China and India’s continued dynamic economic development, fuelled by China’s continued large scale infrastructure projects. India’s primary use of forest products is for wood fuel, and with UN population projections suggesting it will become the most populous country in the world by 2028, the demand for wood fuel is likely to continue to grow.
Of the Western regions, Western Europe demonstrated the weakest growth as the region’s economies continue to struggle. With on-going conflicts in the Middle East and Ukraine pressuring world markets, Western economies are likely to continue to struggle, thus impacting on new construction projects and ultimately the sale of forest products.
However, despite the West’s struggles, KPMG’s global construction survey reveals that between 2010 and 2013 there was a general upward trend in construction backlogs and margins, with many companies expressing optimism over future prospects. Over half of the construction companies surveyed reported backlog increases of at least 5% during 2012-2013, and 66% stated that national government’s infrastructure plans are the biggest drivers of construction growth.
This optimism will inevitably impact on the forest products industry as demand increases for wood based construction materials as construction output increases and new projects are announced. In the short term, it is likely forest products will enjoy a period of stable growth barring any future shocks. Things are looking okay for the lumberjacks, so they can continue to sleep all night and work all day.
For related content, take a look at our Forest Products Industry Guides and Profiles.