A TPDEARR Article
Trans-Pacific Dynamic Equity Allocation Research Report
Ah, here, now, again, at the end of the month, and the beginning of the future, contemplating the ends of things and unable to avoid a dip into existential nihilism and how it is such a fragile natural world that we humans share with the rest of life here on Earth. The entirety of our global commercial apparatus is founded on the extraction, refinement, and processing of natural resources into “things” that we buy and sell for various reasons. Like all life, we consume resources available to us. Whether those natural resources are replenishable, so that we can continue to exploit them, varies widely. For many critical materials, like fossil fuels, replenishment is not an option; one way or another, things can’t go on this way.
But we are not here to belabor the necessities of fundamental upgrades to our energy infrastructure (which should be self-evident,) we are here to point at how the layout of society plays out in the logic of natural resource quantities. Yes, the raw elements themselves have identities that are universally agreed upon, but the value that we human animals impose upon these elements does not go unchanged; it is socially-constructed, highly volatile, and subjective, even with market pricing mechanisms. The human demand for them ebbs and flows, sometimes disappearing almost altogether, resulting in the collapse of any industries that fed a former commercial need… until viability returns.
Bit O’ Resources
We humans are plentiful; our extraction efforts are massive in scale. Operations sufficient to satisfy market demands for “new” products, such as lithium to supply one arm of the current EV/battery boom, must ultimately unearth thousands or millions of tons of raw “ground” in order to accumulate financially viable quantities of desired substances. Outright, all extraction efforts are environmentally “harmful” in that they disrupt and overturn whatever natural habitat formerly occupied the space that has been transformed into an eco-industrial node, straddling and making possible capitalist transaction across different species of the natural world. That omelets are destructive to eggs isn’t existentially different from salads being destructive to plants; both are damaging to a vital component within its own interconnected ecosystem.
As a single-planet species, we should be mindful of the fact that virtually all of the solids, and most of the liquids, that we physically dig out of the ground are non-replenishable within our lifetimes. Hopefully, we can find eco-sustainable synthetic alternatives to many of them in our march of progress, so we don’t continue to deplete non-re-plete-able resources, but the very extraction of those resources (many of which populate a group known as Rare Earth Oxides/REO, as we focused on in the DEC.22 TPDEARR) is required to advance the eco-sustainable pursuit itself; to the best of our current scientific knowledge, we need REOs to make the current generation of advanced technologies, which are required1 to evolve out of our eco-destructive ways. For our own good, we cannot stop extracting them, and we need to try to minimize the damage we do until we can find better alternatives. Perhaps even more so, we might benefit from previously unforeseen opportunities after they’ve been revealed to us by “artificial” processing machines, and how those opportunities might guide us in the infrastructural migration to a sustainable form of civilization.
Whether it’s one resource or another, it certainly cannot be nothing. People cannot eat nothing just like they cannot fly on nothing to get over the ocean and cannot sell nothing to their customer. And now that the population of our species is ballooning up towards 10 billion over the coming century, the only way that we can possibly redistribute what the Earth provides so unevenly distributed, is via continually-advanced industrial techniques that can provide life-supporting services at scale. A few bags of imported rice will not save a community; all communities must evolve or perish in time. It’s certainly possible that we do not sufficiently achieve this goal, and that painful population contraction will occur. Reforestation efforts will surely appreciate such an event.
Investing-wise, this all goes to underlie the foundation that we are a materially consuming species, even in a hypothetically-ideal form, and the trade of the raw natural materials supporting our existence is global, growing, and deepening. Even in less-than-ideal forms, (hell, even in a post-catastrophe situation!) there will always be those of us who refuse to lay down, and instead step forward, and declare, “Onwards!” You can rest assured that you will find among that group of the relentlessly optimistic a healthy proportion of capitalists. Whatever “money” is in the future, and whatever the mix of sought-after resources happens to be, there will always be something to invest in as long as there are humans around2.
So, from a material perspective, and if not critical minerals3, which resources even are replenishable?
Since you thought of paper and trees, that’s exactly where we turn to now.
Paper Trees
Getting right into, we find it difficult to go further without understanding “the forest” containing the trees, so let’s zoom out and get the planetary view, with the help of the UN Food and Agriculture Organization 2020 Forest Resource Assessment. Right off the bat, we cannot comprehend the trans-Pacific regions in isolation; we must view the global whole. Since numbers and quantities (say, of deforestation rates) for a single, specific year do not give helpful context, we focus on the trends and adjustments taking place across longer 5-10 year periods in different global regions to quickly grasp fundamental aspects of the industry of the tree:
- Earth’s total land surface is about 13 billion ha and forests cover nearly 1/3 of it: about 4 billion hectares (ha) -> 1 ha = 100x100m
- >54% of all forests are in the US, the PRC, Brazil, Russia and Canada
- 45% of all forests are tropical; the rest are boreal (27%), temperate (16%) and subtropical (11%)
- 97% of forests are naturally regenerating, the rest are planted (=industry)
- >1.1 billion ha of primary forest remain untouched and undeveloped
- Naturally regenerating forest now shrinks at about ~8 million ha/year an amount which is itself falling, that’s roughly 0.73% of the total primary forest area, or ~0.18% of the total forest on Earth
- Asia and Europe have total forest areas which have increased each decade (from +0.2 – +2.4 million ha/year) over the past 30 years; Africa and South America struggle with net losses (from -2.6 – -5.2 million ha/year)
- Over the past 30 years, the rate of forest expansion (natural + planted) has been roughly ~8 million ha/year
- In 2015 alone, ~98 million ha of forest was damaged by fire, and ~40 million ha damaged by insects, disease and weather; human deforestation was roughly 10-12 million ha—about 8% compared to the total natural loss
- Over the past decade, total net global forest loss = -4.7 million ha/year: about 0.1% of the total forest area on Earth annually
- ~30% of all forest is used for production: ~1.1 billion ha for wood and forest products plus about 750 million ha which is designated as “multiple use”, and frequently exploited for production
Add it all up, and what do you get? Enough wood and lumber for an enormous pulp and paper market that touches about 10% of the entire Earth’s land surface and is approaching USD$400 Billion in total market value4. Yes, brute deforestation is devastating to local wildlife, but we, as a collective society, are improving on this front, and we cannot remove the world’s forests from our economic modern life; wood and paper products are still non-negotiable in countless forms. Most people won’t change the way they use the bathroom. Deprivation of sanitary products, especially for babies and females, will continue to be viewed as inhumane. Responsible administration systems will not be able to abandon “hardcopy” data backup procedures, nor will society writ-large be able to safely rid itself of the enormous repositories of paper history it already holds, and covets, both publicly and privately. Wood, in many forms, is constantly being studied, innovated with, and utilized as a more-environmentally-friendly alternative to other more eco-destructive construction materials, like concrete. Yes, important, environmentally-sustainable operations must continue to be developed and implemented throughout the global forestry sector, but the industry sits on steady and optimistic footing, despite the growing level of public activism against the harmful corporate destruction of natural resources.
Peering a little closer, we find important capitalist connections underlying the industry’s product integration within society. Effects of urbanization, such as we’ve discussed in JUN.24 Demographic Trends, as well as many other TPDEARR articles, concentrate people into communities that adopt urban behavioral qualities, many of which promote increased usage of paper products. Retail shopping and dining out both support paper product consumption and both multiply in number with increased urbanization, especially as backlash to plastics has many businesses turning to eco-friendly alternatives to satisfy their customer bases. Increases in toilet paper usage also accompany urbanization, particularly for the globally-held idea that urbanization and cosmopolitanism go hand-in-hand, locking the growth of cities into feedback loops of perception that nudge urban developers to incorporate the quality-of-life demands of global travelers (i.e., business persons and tourists) into new construction projects.
Moreover than that, the fastest growing segment of the wood products industries is paper packaging—people today, especially in urban areas, love their online shopping. The globalization of modern society, especially aided by mobile access to the internet, has people everywhere ordering stuff from… well… everywhere. Anyone who has worked in a factory, or transportation or receiving, or even in common hourly-wage work like grocery, will surely understand how even one single product might experience several (or even dozens!) of paper or paperboard/cardboard-based packaging conditions among all its constituent parts and across its entire product lifetime, along with copious documentation and printouts detailing every step of the production journey, as well as all of the pricing implications, along the entire way. Uncountable trillions of individual items and components experience the same every year. The delivery of commercial items directly to users via postal transit is but the last link in a long chain of paper packaging micro-environments for each and every product sold, and the market continues to grow right along with urbanization, continuing to add to the global amount of paper used daily.
The good news for us is, paper doesn’t have to come from old growth primary forests, and some companies are excelling in finding routes to profitability through increased environmental stewardship. We highly recommend [JUN.24 Squad Asset #4] for its position and opportunities in the paper market over the intermediate term.
Additional Notes
We know there is a lot more to discuss about the world’s forests, and all their myriad implications for human existence, particularly the bottomless well of mysteries that is the biologically ultra-rich tropical biosphere, but we will leave you to ponder the paper tree, for now. According to the American Forest and Paper Association, 90% of the wood used by American consumers is sourced from sustainably managed forests, and only ~2% of the working forests are harvested every year. No, it’s not primary old growth forest, and the number is dwarfed by China’s massive and successful reforestation efforts, but >1 billion trees are planted every year in the US. Improving on these metrics could improve the forestry industry of North America such that it might tap further into the Asia-Pacific markets, which makeup the fastest growing segment of paper usage around the world. The forests of North America and the trans-Pacific commercial markets are interwoven; opportunities abound.
- Today, in 2024, humans are still largely calling the shots, at least in terms of deciding which technologies to pursue, and so which combinative recipes of synthetic and natural elements are most in demand and pursued for extraction. From here, A.I. integration into the decision hierarchy will likely alter the mix of materials sought after in ways that we mere humans cannot pre-determine or understand.
↩︎ - We look forward to the day when we can produce the TSDEARR (Trans-Stellar Dynamic Equity Allocation Research Report) and help guide capitalists in their deployment of capital action across galactic distances, harnessing the vast wealth of material resource available for astro-sustainable commerce across the Milky Way. You can, of course, choose to be a part of less, but you will not find us lowering our sights.
↩︎ - Yes, consider this footnote the proverbial dead horse-beating against the cruel current reality of not living among molecular matter replicators.
↩︎ - To the argument that this is a crass approach to environmentalism, and does not cherish Mother Earth properly, we reply, with the utmost conviction, that you fail to grasp the reality of the present moment: Eight. Billion. People.
Any sudden upheaval from the prevailing global supply chain of nutrition will result in the loss of millions of lives to famine and starvation, massive land use changes that will alter territories and borders, enormous ecological shifts and impacts on local ecosystems due to the significant scale of change to the agricultural enterprises facilitating the current system, global macroeconomic jolting due to the magnitude of subsidies involved and the incorporation of nation-state central governments in the current methods of food distribution, unpredictable shocks to unsteady regimes being propped up by critical sectors, and even worse, the unknowable consequences.
In brief, our society must grow into a new way of eco-conscious being: anything else is either impossible or catastrophic. If the solutions were easy, they’d be had already. The debate is important, but let’s be real here; we are investors, not gods, and the use of resources in modern society is reshaped by cash flows, not prayers. ↩︎
tkscm, limited 