The Covid-19 pandemic caused overall greenfield foreign direct investment (FDI) project numbers to decline by 17.5% in 2020. However, as the world reopened in 2021, investors reacted quickly and FDI levels rose by 18.1%.
Most sectors witnessed a rise in their number of projects, with companies keen to make up for lost time, yet the rise is not expected to be sustained. Investment levels will likely fall again in 2022. Russia’s invasion of Ukraine has led to heightened geopolitical tensions, a global cost of living crisis, slow economic growth and continued supply chain disruptions, all of which will claw back the resurgence FDI experienced in 2021.
Forestry and wood FDI declined in 2021
When it comes to greenfield forestry and wood FDI, our FDI Projects Database shows that there were 37 projects in 2021, down from 41 the year before. However, the numbers recorded in 2020 were 36.7% higher than in 2019, showing the industry’s resilience during the Covid-19 pandemic, and an overall growth of 23.3% in the period from 2019 to 2021.
Out of all the projects in forestry and wood FDI in 2021, 78% of them were new, while the remaining 22% were expansion projects.
Where are the leading destinations for forestry and wood FDI?
Western Europe was the leading region when it came to attracting FDI projects in forestry and wood in 2021, with 37.8% of all projects announced or opened globally. In fact, the region saw the exact same number of projects in 2021 as in 2020.
North America scored the second-highest number of projects, with an increase of 33.3% in the number of projects between 2019 and 2021.
Meanwhile, the Asia-Pacific region came in third in 2021 with a total of six projects, up from only one in 2019.
The US remained the leading destination country for forestry and wood FDI in 2021, seeing a growth of 25% from pre-pandemic levels. It received a total of ten forestry and wood FDI projects in 2021, up from eight in 2019 and nine in 2020.
Germany, with seven projects, ranked second, but it constituted a slight decline from nine in 2020. This is, however, higher than the three projects recorded in Germany in 2019. France ranked third with three projects in 2021, up from two the year before and one in 2019.
Canada was the key source market for forestry and wood investments into the US, with the country being responsible for five out of the ten recorded projects in 2021.
Of those projects, the company that initiated the most was Drax Biomass, with a total of three projects in 2021. The US-based manufacturer of compressed wood pellets produced from sustainably managed working forests, a subsidiary of UK-based Drax Group, announced plans to build biomass pellet plants in three locations in the state of Arkansas.
What are the top forestry and wood FDI operations?
Manufacturing continued to be the leading business operation for foreign investors in forestry and wood in 2021. A total of 20 projects were created within manufacturing, down 23.1% from 2020 and a decrease of 20% on 2019 levels.
Sales, administration and marketing ranked second in 2021 with 12 projects, while logistics and warehousing came in third with three projects.
Australia and the UK were the leading destinations for manufacturing in forestry and wood FDI in 2021, each with five projects, while Canada was second with four and the remaining seven destinations received one project each.
What are the top subsectors for forestry and wood FDI?
An area called 'other products of wood; manufacture of articles of cork, straw and plaiting materials' was the leading subsector in 2021, with a total of 13 projects, overtaking veneer sheets and wood-based panels, which ranked second with eight projects.
Meanwhile, wooden floors ranked third in 2021 with seven projects, the same number of projects it saw the year before.
Germany and the US were the leading destinations for 'other products of wood; manufacture of articles of cork, straw and plaiting materials' projects in forestry and wood FDI in 2021 with a total of three projects each, while Vietnam and Malaysia came next with two projects each.
Where are the leading forestry and wood investors located?
Canada, Australia and the UK became the leading source markets for outbound forestry and wood FDI in 2021, with each country proving six projects. In fact, the investment level in 2021 was higher in these countries than in 2019.
All of the top five source markets for outbound forestry and wood FDI in 2021 witnessed an increase in the number of projects in 2021 in comparison with 2020. Canada saw an increase of 200%, Australia by 500%, the UK by 50%, Sweden by 300%, and Switzerland by 100%.
Australia’s International Bio Fuels Marketing was the company with the largest number of projects in 2021, with four projects – two in Malaysia and two in Vietnam.
The UK’s Drax Group was the company with the second-largest number of projects in forestry and wood FDI in 2021 with a total of three projects.
What does the future hold for FDI in forestry and wood?
The recovery in the forestry and wood sector has been relatively weak across many regions, with some, such as western Europe and North America, attracting the bulk of projects and posting higher numbers than before the Covid-19 pandemic.
However, the likes of Asia-Pacific and central and eastern Europe and the Commonwealth of Independent States are still to see their investment flows increase to pre-Covid-19 levels.
The US continued to dominate inbound FDI in forestry and wood in 2021 and even saw a slight increase in project numbers.
As the cost of living crisis spreads across the globe and the compound effects of the crisis in Ukraine are felt, as well as an increased awareness of the climate crisis, it will remain to be seen how forestry and wood FDI is affected in 2022.