The state government yesterday released part one of a review of Forestry Tasmania, an analysis of the global demand for native wood products.

The URS report release comes just days after the state's only open woodchip export facility told sawmillers it would not take any more wood residue due to lack of demand.

The report highlighted China would overtake Japan as the biggest importer of woodchips within two years, but the high Australian dollar and transport costs made it difficult for Australia to compete against cheaper competitors such as Vietnam.

URS forestry vice-president Andrew Morton predicted it would take between two and four years for China's buying price to increase.

``The Chinese expansion and demand mean they'll need to increase their price over time to be able to bring that demand in from places like Australia and other locations so we'd see uplift prices occurring,'' Mr Morton said.

Premier Lara Giddings said the URS market analysis would help the government prepare to capitalise on future opportunities.

But when asked how sawmillers, who rely on selling their wood residue, were expected to survive in the short term, Ms Giddings said that was a ``very good question''.

``That's exactly the question that is confronting the government right now and exactly the question Will Hodgman is ignoring when he says we can just go back to how we were.''

She said the forestry intergovernmental agreement was designed to help the industry adapt to the changing circumstances.

Liberals forestry spokesman Peter Gutwein said the report confirmed there were markets available for native wood forest products.

``Rather than working to shut the industry down over the last 12 months, the government should have accepted our offer to work with them to grow the industry as it is apparent from this report that short, medium and long-term markets exist,'' Mr Gutwein said.

Greens leader Nick McKim described the findings as the ``death knell'' for Forestry Tasmania.

``The forest industry is in the mess that it is in because Forestry Tasmania, cheered on by Labor and Liberal, have been interfering in the market, over-cutting the resource and spending taxpayers' money to prop up an unsustainable business model,'' Mr McKim said.

The next stage of the review will assess restructure options for Forestry Tasmania.