Forestry moves forward with better prices

High demand for dissolving wood pulp (DP) and packaging materials is set to boost the forestry sector in the coming year.

Production was about 18 million tons in 2021, and this is expected to remain unchanged, as land for forestry is limited by government licensing.

Despite facing logistical challenges as a result of the COVID-19 pandemic in 2021, which reduced profitability, the forestry sector bounced back late last year far more quickly than expected. This upward trajectory is expected to continue as markets for most products recover.

Steve Binnie, CEO of Sappi, said the profitability of DP was being driven by buoyant demand and significantly better market prices.

“Furthermore, high demand for raw materials and commodities, coupled with long lead times and an inability to restock inventories as a result of shipping challenges, fuelled worldwide inflationary pressures.” Looking ahead, Binnie said that supply chain challenges and the extraordinary energy cost inflation could affect profitability.

“But overall, market conditions for DP continue to be strong. Lower viscose staple fibre (VSF) supply and a widening price differential to cotton will fuel a significant rise in VSF pricing, which should be positive for DP pricing as well.

“The underlying demand in the packaging and speciality papers segment remains robust in both the North American and South African regions, and opportunities for further growth in sales volumes exist in Europe.”

He noted that global logistical challenges and a shortage of vessels were expected to continue through 2022, which could have an ongoing negative impact on export sales.

“It’s unlikely that any improvement in supply chain reliability will be realised in the first quarter.” An area due to receive more attention in 2022 was forestry certification.

Steve Germishuizen, general manager of the South African Forestry Assurance Scheme, noted growing discontent with forestry certification processes, and their value.

“Research shows that most purchase decisions are made based on price, quality and ideas brought about by advertising. Certification proving environmental sustainability is not front of mind, so there’s growing concern over the necessity to go through these certification processes, since they only seem to benefit the certification bodies.”

He noted a difference between what happened in practice in forestry and what certification bodies expected.

“We need to streamline these processes to ensure that whatever is being monitored has an impact on sustainability, and doesn’t serve just to tick boxes.”

Both the macadamia and pecan nut industries are expecting favourable conditions in 2022 as markets rebound and harvests play into favourable supply and demand curves. While growth in the macadamia nut crop was slowing down, the lower supply meant more favourable pricing. It was predicted that the crop would not reach 60 000t this year due to adverse weather conditions during flowering. The 2021 crop ended on 54 174t nut-in-shell (NIS).

As the nuts were still small at the time of going to print, industry role players were reluctant to provide specific figures; however, considering the poor weather experienced in September 2021, they anticipated an increase in volumes of less than 10%.

According to Alex Whyte, sales and marketing manager for Europe, Africa and the Middle East at Green & Gold Macadamias, the COVID-19 vaccination roll-out had brought confidence to the market, resulting in stable prices with only slight increases. “At this stage, most processors are well sold, so there’s little carry-over stock going into the new season,” he added.

Roelof van Rooyen, director of Marquis Macadamias, said that lower volumes on the market had resulted in supply and demand favouring growers.

“We expect that when prices are released in early March, they’ll be positive. However, we’re facing the pressure of smaller kernel styles, since the nature of how they are used (for baking and confectionery) necessitates product development. It’s therefore a priority for us to create more effective products and markets to absorb the smaller styles.”

Adding to this, Whyte expressed concern over the future of the NIS market for South Africa, specifically in terms of the overstocked Beaumont variety. “Last year, we saw for the first time how the Chinese crop influenced global sales: when their crop came in, NIS sales dropped. As their crop grows, it’ll [be] more of a factor in our ability to sell NIS onto that market. [In future], they’ll only be interested in higher grades.”

Meanwhile, the pecan nut industry was looking forward to a larger crop, which would give them more negotiating power in the market.

Andreas Snyman, executive manager of GWK International, said smaller pecan nut harvests from Mexico and the US meant that smaller volumes would be shipped to China, creating more room for South African nuts.

“We expect to see higher prices in China and Europe. Our bigger crop also means we’ll be better able to differentiate the quality grades, which will result in better prices.”