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Estimating supply and demand elasticities of dissolving pulp, lignocellulose-based chemical derivatives and textile fibres in an emerging forest-based bioeconomy

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In a growing bioeconomy, traditional forest products markets change and diversify. Fossil-based inputs in the chemical, textile, apparel and downstream industries can be replaced by lignocellulose-based products such as dissolving… Click to show full abstract

In a growing bioeconomy, traditional forest products markets change and diversify. Fossil-based inputs in the chemical, textile, apparel and downstream industries can be replaced by lignocellulose-based products such as dissolving pulp, cellulose-based chemical derivatives and textile fibres. When looking ahead, these previous niche products are likely to gain in economic importance. So far, little attention has been paid to the characteristics of macroeconomic relations of emerging lignocellulose-based materials on macroeconomic level. Key economic parameters for such materials are not available neither at regional nor at global level. This work aims to contribute to a better understanding of the market behavior of emerging forest products that are not yet covered by forest products market analysis. Therefore, this paper investigates how lignocellulose-based products respond to changes of main economic drivers and compute global market elasticities for dissolving pulp, cellulose-based chemical derivatives and textile fibres. To conduct our evaluation, we first test historical input data for non-constancy in time series due to structural changes using change-point estimator (MOSUM test). We subsequently carry out a global econometric analysis of demand and supply elasticities with income (GDP) and real import and export prices as explanatory variables. By doing so, we deliver key information for the adaptation of forest-product market analysis and modelling to an upcoming bioeconomy. The results show several structural changes especially in price data between 1992 and 2015, thus supporting the use of time series cuts to divide the time line from 1992 to 2015 into three different sub-periods. Elasticities are subsequently estimated for each of the sub-periods. The results from this econometric analysis provide import demand and export supply elasticities of dissolving pulp, cellulose chemical derivatives and cellulose textile fibres. In addition, we present elasticity estimation for the apparent consumption of dissolving pulp. Our findings outline the significant relationship between both export supply and import demand volumes and relative changes in prices and income. Across time periods, elasticities of cellulose-based derivatives and textile fibres do not show a clear trend towards more elastic or inelastic coefficients. However, the price elasticities of dissolving pulp fluctuate strongly from inelastic to highly elastic over time. Elasticity estimates of export supply indicate that it is sensitive to international competitiveness which in turn is governed by international demand. Finally, we statistically show that the estimated price and income elasticities of import demand can be analogously interpreted as the demand elasticity of apparent consumption. This is of great importance for economic equilibrium models, such as GFPM or EFI- GTM, in order to simulate and analyze forest sector developments and scenarios.

Keywords: chemical derivatives; textile fibres; dissolving pulp; lignocellulose based; demand

Journal Title: Forest Policy and Economics
Year Published: 2021

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