The long term trends for timber as an investment opportunity look favourable for a number of reasons.
Firstly there is a strong correlation between the demand for timber and growth, both economically and demographically. The global population recently passed 7 billion, and is forecast to reach 9 billion by 2050. This growth is likely to result in greater demand for wood and wood-related products.
Secondly, as living standards continue to rise across developing markets the demand for processed forest materials like paper and hygiene products increases. Take paper for example; China currently consumes just 45kg per head every year. In the USA that figure is close to 300kg.
As demand grows, the turning over of forested areas to urban and arable developments means timberlands are in increasingly short supply. Around 20,000 hectares of the world’s forests are lost every day, mainly due to deforestation.
And finally, timber increases in value as it grows; meaning it is uncorrelated from the economic cycle. At a time when equity investments are generally far more volatile than they were a decade ago, timber can now make up a reassuringly steady part of a portfolio.
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