Finnish Forest Sector Economic Outlook 2009–2010
Slow growth in demand for forest industry products
The economies of the Finnish forest sector’s export markets in Europe began to turn onto a more favourable track in early autumn 2009. The production cuts made in the paper and sawmilling industries brought an end to the decline in prices, and the price of sawnwood, which collapsed in 2008, has picked up since summer 2009. Demand growth in the markets has been slow, however, due principally to the replenishment of stocks. With domestic consumption and exports remaining weak, production in the sawmilling industry for the full year 2009 will be down by about one fifth on the 2008 figures. In paper production and exports, the drop has been even greater, as demand on the export markets has fallen and Finnish-based production units have been closed. On the roundwood market, the forest industry’s reduced roundwood need has led to a fall in roundwood sales, commercial fellings, stumpage prices and stumpage earnings. On the positive side, there has been a growth in the energy use of wood, which is expected to have increased the use of wood chips by about one tenth for 2009 as a whole compared with 2008. Roundwood imports are down in 2009 to about half of the previous year’s level.
In 2010, GDP growth will remain slow and is expected to boost the demand for forest industry products by only a small amount. Despite production cuts, the European paper market will still be experiencing overcapacity, and no increase is expected in the average prices in 2010. Finnish production and exports will grow as a result of the slightly improved demand, and profitability will improve following the business efficiency measures undertaken. In the sawmilling industry profitability will be improved by the strengthening export prices and growth in production. Despite the production growth, sawnwood production will remain close to the level of the early 1990s. As the forest industry’s need for wood rises, demand will focus more strongly on domestic roundwood, even if Russia abandons the planned increases in its export duties on roundwood. The increase in sawnwood production will push up the price of softwood sawlogs, but with pulpwood stocks remaining high, their prices will remain close to the 2009 level. The sales revenue tax relief on roundwood in force in 2009–2010 is expected to boost roundwood sales. Commercial fellings will be up in 2010, but the volume will be significantly below that prevailing before the current recession.
Although the economic outlook is improving in the European export markets, the situation is not about to return quickly to the pre-recession level. There is a real risk that the projections also for the Finnish forest sector will be worse than anticipated. The impact of the Governments' policy measures for stimulating an economic recovery in Europe could weaken and a continued increase in unemployment could result in a steep drop in consumer confidence. On the other hand, it is also possible that confidence in future growth could rise and the recovery could accelerate earlier than forecast here.