Finnish forest industry production on the decrease in 2008

   Moscow. Dec 11, 2008. /Lesprom.com/. The demand for Finnish forest industry products in 2008 has been adversely affected by the slowdown in euro area GDP growth, the drop in housing construction, the high level of interest rates and the uncertainties on the financial markets, Finnish Forest Research Institute – Metla reported. Sawnwood production and sawnwood export volumes and prices are down in 2008 by about one fifth on the figures for 2007, which was a boom year in the sawmilling industry. Production and exports in the paper industry are also down in 2008.

Despite capacity closures, Europe’s paper market is still experiencing oversupply, which is evident in the weak price trend for end products and in poor profitability. With the drop in production volumes, the Finnish forest industry’s roundwood consumption in 2008 is down on the previous year’s total, which is also the case for the volume of domestic commercial fellings, the level of stumpage earnings and forest industry employment. Nominal stumpage prices of softwood sawlogs will also be lower than the record levels of 2007. Pine pulpwood stumpage prices have risen due to growth in demand as declining volumes of sawmill chips are partially replaced with pulpwood. Roundwood imports remain high in 2008, and preparations are being made for Russia’s roundwood export duty increases in 2009. The Finnish government’s decision to reduce the roundwood sales tax will boost the domestic supply of roundwood.

Forest industry production and exports in 2009 will be down further as GDP growth declines on the main export markets. Sawnwood prices are nevertheless expected to be up slightly in the latter half of the year as Russia’s export duties adversely affect the global availability of sawlogs. Paper prices are forecast to remain at their 2008 levels due to the capacity cuts, despite any decrease in demand in Europe. The industry’s consumption of roundwood will fall further as production decreases, but domestic commercial fellings will be up as roundwood imports shrink to almost half of their 2008 levels. If the economy was booming, such a reduction in imports would push up the price of domestic roundwood. However, with the forest industry’s market faltering, the nominal stumpage prices of softwood sawlogs will be down again slightly in 2009, and pine and birch pulpwood stumpage prices will be close to the 2008 average.

The principal uncertainty in the forecasts for the Finnish forest sector is the possibility that the state of the economy on export markets and domestically could deteriorate, which would reduce the demand for forest industry products and their prices and would also weaken the profitability of production.