Teak Investments and Market Outlook in Latin America
It is estimated that teak accounts for more than 70% of the world’s high-value tropical hardwoods currently planted, making it the most important and traded species of its kind. Another major tropical hardwood species is rosewood, which represents little over 20% within the same market. At the same time, the deficit in supply of high-quality tropical hardwoods is expected to reach 100 million cubic meters by 2050, which equates to 10 million hectares of hardwoods trees growing at a rate of 10 cubic meters by hectare annually.
Teak forests and plantations are divided into those that are natural, which are found throughout South Asia, and those that were planted exclusively for commercial purposes, some over 100 years ago, which are found in Asia, Africa, and Latin America. However, in spite of continued growth in the global demand for teak, the vast majority of teak sources today, over 80%, are natural forests or plantations from the early 1900s, which means that supply is using up most of the available teak stock without replanting at a fast enough pace. Simultaneously, major suppliers of teak in South Asia, such as Laos, Thailand, and parts of India, have completely banned the exploitation of natural teak forests in recent decades and created reserve areas due to the threat of mass deforestation. Meanwhile, these new legislative measures have led to a substantial increase in the amount of teak being imported into these countries, given that the popular demand for teak products has not subsided.
Teak Investments and Market Outlook in Latin America
Even though it is hard to calculate with precision, due to the nature of the countries and the terrain in which they are found, natural teak forests and commercial teak plantations worldwide currently account for approximately 30 million hectares of land. Simultaneously, teak trees make up about 1.1% of the world’s commercial timber plantations. Nevertheless, in the case of Latin America, teak makes up some 1.7% of commercial wood plantations in region, which is slightly higher than the global average. Furthermore, in recent years, Latin America has experienced substantial growth and investment in terms of teak plantations, particularly in Colombia, Nicaragua, Panama, Costa Rica, Salvador, Guatemala, Ecuador, and Brazil. As of today, India is the main Asian destination for teak produced in Latin America, particularly in Ecuador, Panama, and Costa Rica.
Some of the key elements to keep in mind when investing in or managing a teak plantation are making sure that strong winds do not affect the trees because they must grow straight up for maximum returns as well as regularly thinning the trunks. A well-located and well-maintained teak operation will be a profitable investment for decades as the sales of small wood from the periodic thinning yield regular income and the final harvest brings in large returns. Finally, some interesting facts about teak is that the trees are both fire resistant and immune to most kinds of insects or environmental diseases. Therefore, teak is a very safe investment within the agribusiness sector.
(Read more about The Environment and Teak Markets in Latin America)