Pellervo Economic Research PTT forecasts that recession in Europe will have clear impacts on the Finnish forest sector this year. In the paper industry there will be significant decreases both in production and export volumes. This is due to lower demand as well as capacity closures that have taken place in Finland late last year. Also production in the sawmilling industry will slightly decrease.
However, exports of softwood lumber outside the Euro zone will increase. Despite the recession, exports of pulp, paperboard and plywood will increase as well. Next year exports of all other products except pulp will be higher. Accordingly, the reduced demand for wood will also slow down commercial fellings in Finland this year. PTT estimates the price of roundwood to go down as demand for forest industry’s end products diminishes. However, next year commercial fellings, roundwood trade and private forest owners ́ stumpage earnings will increase.
Finnish paper production and exports will weaken significantly this year
PTT estimates Finnish paper production and export volumes to weaken significantly this year as compared to last year. The decrease of5–7 percent is due to negative economic growth and decreasing demand for paper in Europe as well as to the closure of several paper machines in Finland. Four paper machines, with a total production capacity of 0.8 million tons of paper, were shut down before the end of year 2011. Next year, due to recovering economic growth, the demand for paper will normalize to some extent. Also export volumes from Finland will be slightly higher than this year.
This year the average export price of Finnish paper will remain at the same level as last year or be slightly less. In general, the persistence of the price level in Europe is possible only if paper production is curtailed. Next year the average export price in Finland will rise again along with the recovering demand. However, more capacity closures will still be needed in Europe in order to reach increasing price development in the long run. There will be a slight increase in production and exports of Finnish paperboard this year and next year. This year the average export price will remain at about the same level as last year, but the price will rise again next year as demand picks up.
The average price of pulp (NBSK) in US dollar will clearly drop this year, but the price, however, will stay relatively high. In general pulp prices are supported by the demand for pulp in China. The weakening of the Euro against the US dollar flattens the development of the Finnish export price in Euro.
The Finnish export includes mainly NBSK pulp. The average export price will decrease 5–10 percent. At global level several new pulp mills will start their production next year or at the end of this year. Due to increased supply the price of pulp will significantly decline further next year. PTT forecasts the decrease in the average export price in Finland to be 5–10 percent.
Finnish sawmill industry’s profitability deteriorates this year
PTT predicts Finnish lumber production to decline this year by one percent to 10 million cubic meters. The demand outlook varies from market to market. Weakening demand in the domestic housing market decreases the need for sawn softwood this year. Construction will remain subdued in Europe, and exports to the region are projected not to increase significantly this year. In overseas markets, however, demand is expected to see a slight upswing from last year. Overall, PTT estimates exports to grow by 2–3 percent in 2012. The overall weak construction market in Europe, combined with continuing excess supply, is reflected as a 2–4 percent reduction in the average export price. Next year, softwood lumber production and exports are to experience a more rapid growth. The main factor behind this development is the expected turning point in Europe’s construction activity. The increased demand allows for export price mark-ups of up to two percent in 2013.
According to PTT estimates, plywood production and exports are to grow by 1–2 percent and the export price at most a few percent in 2012. This year’s prospects have been affected by the impact of the destroyed plywood mill in Chile at the beginning of the year. This increases demand for other softwood plywood in Europe this year and possibly next year. In general, the European market still remains somewhat bleak due to deteriorating construction activity. Demand in the heavy transport industry is to weaken slightly as well. Estimated growth of construction activity in Europe will give a subtle boost to Finnish plywood demand next year.
Commercial roundwood fellings and roundwood trade remain steady
PTT predicts the Finnish forest industry’s wood consumption to decrease to 62.7 million cubic meters this year due to recession. Next year, emerging economic growth will increase wood consumption by a million cubic meters. The amount of imported wood will stay at approximate- ly 10 million cubic meters during the predicted period. PTT forecasts domestic commercial timber fellings to decrease by five percent from last year. Next year’s loggings are predicted to increase by one to three percent as exports of final products and domestic construction both increase.
Roundwood trade will liven up clearly this year. PTT estimates roundwood trade in non- industrial private forests to increase by roughly twenty percent from last year. Next year roundwood trade will grow moderately. The nominal average price of logs will decrease by about two percent and that of pulpwood by about four percent from last year’s average prices. PTT estimates next year’s prices in real terms to stay at this year’s level. Private forests’ gross stumpage earnings and profitability will reduce by about a tenth this year as loggings and stumpage prices decrease slightly from last year. Despite the decrease in stumpage prices this year, the prices of forest estates in the Southern-Finland will increase due to high demand. In other parts of the country, the increased supply and decreasing stumpage prices will also reduce the prices of forest estates.
For further information, please contact:
Roundwood markets: Ms Paula Horne, Research Director, tel. +358 40592 6820, e-mail: paula.horne@ptt.fi
Paper and pulp industry: Dr Matleena Kniivilä, Forest Economist, tel. +358 9 3488 8407, e-mail: matleena.kniivila@ptt.fi
Sawmill industry: Mr Jyri Hietala, Forest Economist, tel. +358 9 3488 8410, e-mail: jyri.hietala@ptt.fi