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MARKET WATCH

Wood Supply Shortage May Occur in Mato Grosso do Sul

Posted by Suz-Anne Kinney on October 7, 2014

An article on Forest2Market do Brasil’s study of wood supply and demand in Mato Grosso do Sul, Brasil appears in Painel Florestal: Com maior expansão florestal do País, MS pode ter déficit de madeira até 2024. Continue reading for an English version of the article.

Mato Grosso do Sul state, located in Brazil’s Midwest region, has emerged in the national scenario as the center of the forest products industry today. Despite an uptick in the number of hectares of planted forests, a wood supply shortage may be in the region's future.

Competitive prices and ready availability of land, together with good soil and weather conditions, a silviculture-friendly policy, and good logistics have attracted forest sector investments in recent years. The result has been the rapid development of planted land. In the last eight years, the number of planted hectares has quintupled, reaching approximately 600,000 (See our post on the relationship between forest inventory and wood supply.) These hectares are primarily eucalyptus plantations.Undeniably, large pulp mill projects, specifically the Fibria and Eldorado projects, are the main drivers of this expansion of planted land. However, the establishment of these mills has promoted the development of a cluster of forest investments by forest producers (TIMO’s and individuals) and new businesses such as sawmills, plywood mills and energy producers.Pete_Brazil

Forest2Market do Brasil has just finished a detailed wood supply chain study for Mato Grosso do Sul. Considering the future participation of some potential new players in the market, Forest2Market do Brasil analyzed wood supply and demand to 2024 for multiple demand scenarios.

The results highlighted the fact that production from these newly created plantations will take time to get to the mills. In the current-case scenario, which includes no new demand from additional industry projects, the analysis shows that a wood supply shortage could last until 2017. This fact has led some companies to sign supply agreements for timber hauled long distances, sometimes from outside state boundaries.

In a second scenario, in which only new projects with a high chance of success were considered, the wood supply shortage will extend five additional years, to 2022. In a final scenario, which included all announced future projects—regardless of their chances of success—the balance between supply and demand would occur only after 2024.

The analysis completed by Forest2Market specialists shows that demand for wood will be fierce in Mato Grosso do Sul in the coming years. And the competition for the available supply explains the high level of interest of companies in the state in detailed wood pricing information.

Based on this interest, Forest2Market do Brasil is expanding its delivered wood price benchmark report to cover Mato Grosso do Sul. The report is the only price benchmark available to the Brazilian market based 100 percent on real market transactions.

According to Pete Stewart, Forest2Market do Brasil’s CEO, the interest of local companies in highly accurate price information is easily explained and familiar for Forest2Market: “The detailed understanding of price dynamics is crucial for every developing market. The demand for this data repeats a pattern similar to what we have observed in other countries. Companies aim to be competitive, and to do so they must be well informed about the commercial practices of their main competitors.”

Forest2Market do Brasil has several customers in the State of Mato Grosso do Sul. In the next 30 days, the company will begin collecting the necessary transaction data in order to prepare a monthly benchmark report for the forest products industry in the state.

About Forest2Market do Brasil

Forest2Market do Brasil LLC, located in Curitiba–Paraná, provides market price reports and benchmarks and supply chain expertise to the forest products industry in Brazil.  Visit us at www.forest2marketdobrasil.com.br. Or check out our Brazil products:

Portuguese               English

Topics: Wood supply in Brazil

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