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Keeping Pace with the Forest Products Market: A Close Look at Finland's Forestry Update

Keeping Pace with the Forest Products Market: A Close Look at Finland's Forestry Update

The forest products market worldwide is anything but stagnant. With various factors such as weather conditions, policy changes, and global demand constantly tipping the scale, anyone involved in this sector must stay current with the latest developments. Let's delve into the rich tapestry of Finland's forestry sector updates as of July 2024.

The Finnish Economy Contracted in 2023 and Isn't Expected to Grow in 2024

The combination of slowing inflation, falling interest rates, and positive trends in household income is set to boost disposable income and consumer spending. However, investment growth is not anticipated until 2025.

The projections for GDP growth are as follows:

  • 2025: 1.6%
  • 2026: 1.5%

Cuts to public spending and tax hikes are likely to dampen domestic demand and increase prices. Although employment saw a slight decline in 2024, it is projected to rise from 2025 onward, driven by growth in demand and government initiatives aimed at boosting employment. By 2026, the employment rate is expected to reach 73.9%, while the unemployment rate is anticipated to drop to 6.9%.

Sawmills are facing challenges due to the rising prices of logs. The primary factors driving these increases are the improved conditions within the pulp industry and a thriving energy wood market. In 2020, log stumpage prices (under bark) ranged from €55 to €60 per cubic meter, while current prices have risen to between €83 m and €85 and above per cubic meter.

In the autumn, private sawmills are likely to implement production cutbacks if further price increases are not achieved due to their substantial cost structures. In contrast, integrated mills are unlikely to reduce their sawmill output, given the strong demand for chips and pulpwood.

Output of Finnish Sawmills Declined

It is estimated that the output of Finnish softwood sawmills has declined by 6% during the first half of 2024 to 5.5 million m³ compared to the same period in 2023. Output of redwood declined by 5% and whitewood by 7%. However, at the end of June, the inventories of both redwood and whitewood were 10-15% below the levels at the same time in 2023.

The domestic market continues to struggle, primarily due to the sluggish construction sector. Over the past 12 months, cumulative domestic consumption has plummeted to a record low of 1.9 million m³. In contrast, nearly 6 million m³ were consumed before the financial crisis.

Export markets have been relatively quiet, though small price increases have been observed in select areas. Nevertheless, order books for the third quarter remain incomplete. Notably, Chinese imports of Finnish products fell by 27% in the first half of the year, totaling 370,000 m³ compared to the same period last year.

Government Submits the Annual Climate Report to Parliament

One of the highlights for June is the submission of the Annual Climate Report by the Finnish Government to Parliament. This comprehensive document delves into Finland's progress towards its climate targets and is structured around the emissions from different sectors, including land use, land use change, and forestry (LULUCF).

The report provides an alarming insight into the decreasing size of the forest carbon sink over the past few years due to various factors. Despite forests being traditionally a sink, the sector imitated a source of emissions in 2018, 2021, and 2022. The data also suggests a deficit in meeting the EU obligations for the land use sector for 2021–2025.

In response, the government is formulating measures revolving around the rotation periods of commercial forests, the intensity of thinning operations, and peatland management to recover the sinks of forests. Nevertheless, influencing the harvesting volumes may prove challenging due to the high percentage of private ownership of forests in Finland.

Finnish Roundwood Prices on the Rise

Finnish roundwood prices are on an upward trajectory despite the dull market for sawn softwood. Pulp, paper, and packaging markets are showing signs of recovery, meaning companies are eager to buy more wood. However, with log prices hitting record levels, these companies are feeling challenged by the price development.

Log prices in Central Europe seem to be eroding due to sawmills' thick reserves of roundwood and an increasing supply of damaged wood. There have also been tough logistical conditions that have presented a challenge to the wood supply. Roundwood prices in Sweden appear to mirror the trends observed in Finland, while there are also indications of rising log prices in the Baltic region.

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