The timber market

Timber is a low-risk, high-return asset; it has grown steadily in price for the last 200 years and has returned an average of 6.5% a year for the last century. In the current financial climate, investors will be interested to learn that timber is the only asset class in existence to have risen in three out of the four market collapses of the 20th century.*

Forests are amongst the most valuable eco-systems in the world, containing over 60 per cent of the world's biodiversity, yet a massive 32,000 hectares of rainforest are deforested each day. Despite increased awareness of the importance of rainforests, deforestation rates have not slowed. Figures taken from the Food and Agriculture Organization of the United Nations (FAO) show that tropical deforestation rates increased by 8.5% from 2000-2005, while loss of primary forests expanded by 25 percent over the same period.

Demand for timber is growing; with the strain on existing forests reaching a peak and the devastating climatic effect of deforestation becoming widely accepted, sustainable timber is urgently required. China´s urban population is predicted to increase from 530 million people to 875 million people by the year 2030, resulting in almost 50 cities the size of greater London being built over the next 20 years. Meeting this demand is equivalent to finding another source of supply of timber with five times the output of the UK each and every year, according to the FIM Timber Index. Chinese lumber consumption doubled between 2000 and 2003, and the WWF predict demand to grow by 30% in the next five years.

* Jeremy Grantham