Notícia

27/08/2009

BRAZIL DEDICATED TREE PLANTATIONS SIGNAL RISE OF TRUE GROWTH INDUSTRY

Along with the hardy, fast-growing eucalyptus tree, investment interest in Brazilian tree plantations is soaring — but the species is a main reason for the keen investment interest, as plantations dedicated to producing biomass energy are vital to meeting increasing domestic and European demand



^{A densely planted clonal variety of eucalyptus species, grown for charcoal in Minas Gerais to support steel production}


Tree plantations that provide bioenergy are becoming among the most sought-after investments in Brazil lately due to soaring domestic and European demand.

Eucalyptus for biomass is by far the biggest reason for the increased interest, says Bob Flynn, director of international timber at global forest-products industry information provider RISI and author of its South American Tree Farm Update on opportunities for investment in biomass-energy plantations.

Brazil has the largest area of tree plantations dedicated to energy production of any country in the world, with about 4.2 million hectares of eucalyptus planted and an expected 1.5 to two million additional hectares expected over the next 10 years.

The number of worldwide dedicated energy-production plantations are about 12–15 million, with China and India following Brazil. However, the South American giant is likely to hold its lead since there is a lack of available land in China and India, and because it cannot be privately owned.

Domestically, Brazil’s fast-growing steel and soya industries drive a high demand for wood for fuel. About 1.5 million hectares of eucalyptus plantation alone are used by the country’s domestic steel industry.

The steel sector uses charcoal from coal or wood, but the additional incentive of being able to sell carbon credits has boosted the use of charcoal from wood as long as it comes from sustainable plantations. Currently, the steel industry uses about 50% native and 50% sustainably planted eucalyptus, which means there is potential to double the use of dedicated tree plantations.

Fossil fuels or wood are used in drying and processing soya, the usage of which is expected to double to more than 100 million tonnes by 2015 in Brazil.

On a smaller scale, sugar-cane growers in the state of São Paulo are turning to eucalyptus because a law mandating mechanised harvesting makes it difficult to harvest cane on slopes.

Producers burn eucalyptus at their mills during the off season, when they have no bagasse left from the sugar-cane harvest.


The case for dedication

Flynn says some Brazilian companies are also studying the establishment of tree plantations to provide power for biomass-power stations of 15–90 megawatts (MW).

“There are trees going in the ground now, but there are no power plants that have actually been built to utilise them,” says Flynn. He also notes that at least three companies have hired consultants to study the cost and rate of return for growing wood fibre in Brazil and exporting it to the EU.

“This is primarily driven by the incentive programme in the UK,” says Flynn. “If you use biomass, you get one credit, but if you use biomass grown in a dedicated energy plantation, you get an extra 50% credit.”

Pension funds and other institutional investors have recently shown huge interest, says Flynn, because of the growing demand. Potential investors include European power companies offering long-term contracts.

“There is a big opportunity to invest where you know you are going to have a guaranteed market,” says Flynn.

He explains that there is some protest against dedicated plantations, with environmentalists worried that forests will be cleared for plantations. However, Flynn says, dedicated tree plantations are based in the areas near steel mills (largely within the state of Minas Gerais), and in the north and northeast, and not in “the true Amazon region”, or in the well-developed south.

Nevertheless, Flynn warns over-eager investors that all may not be rosy. European power companies have strong incentives to increase their use of renewable energy, “but what happens if governments change targets in two or three years?”, he asks.

He notes that the EU has already pushed 2010 targets back to 2020; the carbon credit market is such an emerging sector.

“A lot of those regulations are still sort of evolving,” says Flynn. “It’s not 100% certain that if you plant trees today, you are necessarily going to get carbon credits in three years.”

Planting for the domestic industry in Brazil is “reasonably secure” because of the expansion potential. With improved bond ratings, “the perception of Brazil as being a risky place to invest has lessened”, says Flynn.

He adds: “The economy has actually weathered this current recession in Brazil better than it has in a lot of countries.”

Wood grows quickly in Brazil, but the plantations are highly intensive-mechanised systems requiring a fair bit of capital.

“Brazil is efficient, but to say it’s cheap is going too far,” concludes Flynn.