Finnish Forest Sector Economic Outlook 2013−2014
Forestry Sector Outlook Improving
Of the products of Finnish forest industry, the export value of timber, plywood, cardboard and pulp has increased during the early part of the year, improving the profitability of production at the same time. This development has also reflected positively elsewhere in the forestry sector. The rise in the demand for roundwood has increased fellings. Stumpage prices have risen and improved the financial profitability and result of private forestry from last year. However, the direction of the trend for next year for the forestry sector is unclear, as economic growth in Europe remains uncertain. The trend direction largely depends on the amount of exports outside Europe.
Wood products industry exports are in demand outside Europe
In the wood products industry, exports to Asia and the Middle East have increased notably during the first part of the year, counteracting the poor demand in Europe. While there will be no increase in European demand for wood products over the rest of the year, consumption outside Europe remains at a healthy level. In Finland, the downtrend in construction decreases the demand for wood products. The production of timber will still increase to 9.8 million cubic metres this year, as exports grow by five per cent. The production and exports of plywood will also increase.
In 2014, the demand for sawnwood in Asia is anticipated to slow down slightly. Correspondingly, construction will slowly recover in Europe and Finland. The production and exports of sawnwood and plywood will continue to grow slightly compared to the current year. Unit prices will also rise somewhat during this year and next.
Paperboard and pulp carry the pulp and paper industry
While demand and consumption of printing and writing paper in the European main market area continue to decrease, there is a corresponding increase in the global demand for packaging materials. The production and exports of Finnish paperboard will increase by five per cent and the unit price of exports by a few per cent for a full year. This year, paper production and exports are expected to decrease by five per cent over last year as electronic media replaces paper in the export markets. The production, exports and export unit prices of pulp will increase slightly.
The outlook for the global demand for pulp and paper industry products in 2014 appears very similar to this year. Paper production and exports in Finland will continue to shrink, but the production and exports of paperboard and pulp will increase. With the exception of paper prices, the export unit prices will increase slightly from the current year's level.
Improved profitability for the forest industry
The profitability of both the wood products and pulp and paper industries will increase in 2013 compared to last year. Profitability in the wood product industry will improve more rapidly by comparison as timber and plywood export quantities increase and export unit prices rise. Good demand for pulp and paperboard improves the profitability of the pulp and paper industry, although the poor situation regarding paper production hampers overall development.
Development of profitability will hit a plateau in 2014 as the growth of forestry product exports slow down. This will be particularly evident in the wood products industry, where the fall-off in growth of Asian demand and slowing price development will curb the overall development of profitability. Pulp and paper industry profitability will continue to improve, as demand for pulp and paperboard remains at a good level. The profitability of paper production will continue its downward slope, as export prices continue to fall. Employment in the forest industry will decrease slightly in 2013, with the reductions mainly targeted at paper production. In 2014, employment will remain at the level of the current year.
Busy times on the wood and bioenergy markets
Commercial fellings are anticipated to increase to over 53 million cubic metres this year, three per cent more than last year. The growth in the demand for domestic wood is reflected positively in the stumpage prices for coniferous sawlogs; these are anticipated to increase by two to four per cent compared to last year. Pulpwood stumpage prices will increase by one per cent. Around 11 million cubic metres of roundwood will be imported. Most of this will be birch pulpwood.
The growth in Finland's forestry industry production will continue in 2014. Sawlog fellings will increase by a few per cent, and stumpage prices by one to two per cent. However, overall commercial fellings will remain at the level of the current year, as additional pulpwood demand will be covered by imports. Roundwood imports will increase to 12 million cubic metres. The consumption of forest chips will continue to grow to 8.9 million cubic metres during the current year and 9.6 million next year. The average energy plant gate price of forest chips next year is estimated to be EUR 21.5 per megawatt hour. Employment in the forest industry will improve slightly due to increases in commercial fellings and energy wood harvesting.
Forestry operating profit improves
The slight rise in domestic commercial fellings and stumpage prices will increase the gross stumpage earnings to EUR 1.5 billion both this year and next. Investment in wood production this year is anticipated to remain at a level of EUR 213 million but to increase slightly next year. In 2013 and 2014, private forestry's operating profit will increase to almost EUR 90 per hectare. The return on investment for wood production will be two to four per cent this year and the next.
- Researcher Jari Viitanen, tel. +358 29 532 3033, jari.viitanen(a)metla.fi
- Researcher Riitta Hänninen, tel. +358 29 532 2232, riitta.hanninen(a)metla.fi
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