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(English) PTT’S FORECAST FOR THE FINNISH FOREST SECTOR 2007-2008, Autumn 2007

  • PRESS RELEASE:      DATE OF RELEASE: 2 October 2007, AT 9.00 CET

     

    PTT’S FORECAST FOR THE FINNISH FOREST SECTOR 2007-2008

    Finnish forest industry increases the use of domestic timber – all-time high fellings provide record breaking stumpage earnings and offer additional job opportunities in forestry

    The boom in the sawmilling and pulp industry will slightly cool down during the last months of this year concludes Pellervo Economic Research Institute (PTT) in its fresh forecast. However, uncertainty related to the availability of Russian roundwood may improve the market conditions already at the end of year 2008. The export duties of Russian timber decrease the import of roundwood and hence, add the use of Finnish timber to a record-breaking level. Roundwood price development has been identical with the sawn timber price development in 2007 increasing the volume of Finnish  roundwood trade to  one third higher than in 2006. Following the trend in the sawn timber market, roundwood prices will also slightly decline next year. All-time high commercial fellings offer both additional job opportunities in forestry and gross stumpage earnings of approximately €2bn in Finland.

    Still overcapacity in the European paper industry

    Despite the increase in demand, average annual price of paper will not improve this year. Ever-weakening dollar burdens better price development. Even though over three million tons of European graphic paper capacity has been closed during the last years, there should be additional restructuring measures in the pipeline. Otherwise the prices will not turn upwards. In comparison to year 2006, PTT expects production and export of Finnish paper to increase only slightly this and next year. Similarly, export price of Finnish paper is expected to develop moderately during the years 2007 and 2008. There are, however, significant differences in price development between various paper grades.

    There has been a boom in the pulp industry for over two years. The average export price of Finnish pulp has gone up by one fifth in 2006 and 2007. PTT forecasts that the price development will slightly slow down during the next winter after the new pulp production facilities in South-America and Asia have been introduced. Despite this, the market situation from the pulp producer’s perspective remains positive.

    The overall profitability of pulp and paper industry improves slightly from the previous years. The main reason for better profitability is efficiency measures carried out by paper industry. Instead, market conditions i.e. oversupply still hampers quicker price development. Therefore, additional capacity closures can be expected before the profitability of pulp and paper industry more clearly rises.

    Slight decline in the sawn timber markets – a new recovery already in sight?

    Nordic sawmilling industry has experienced a record-breaking boom at the beginning of this year. Good demand and, due to mild winter, limited availability of sawlogs especially in the North-Europe were the key drivers for a good development. PTT forecasts that the market conditions will slightly weaken during the coming winter. The main reasons for the weakening market conditions are diminishing construction activity in Europe and especially in the USA. Simultaneously, sawn timber output has grown briskly above all in Germany. In addition, weak dollar hinders the price competitiveness of European sawmilling industry on the non-European markets.

    PTT, however, estimates that the drop in sawn timber prices is modest, if availability of Russian roundwood runs out in the beginning of 2009 due to the very high export prices. This may lead to an increasing demand for roundwood and sawn timber at the end of 2008 if Asian and European sawmills and the consumers of sawn timber start to fill their warehouses. Finnish woodworking industry is also supported by the very strong domestic demand. In Finland, despite the increasing sawn timber production, the export volume is expected to remain on the last year’s level. Almost half of the produced 12.8 million m3 is consumed domestically.

    Commercial fellings to a new record - despite zero growth in production

    In 2007 and 2008, the consumption of roundwood in the Finnish forest industry is expected to grow only modestly. Demand for Finnish roundwood, however, increases considerably i.e. by 10-12 million m3 in comparison to 2006. One of the key reasons for this growth are the weak harvesting conditions last winter, which hampered the import of roundwood from Russia particularly in the beginning of 2007. In addition, Finnish forest industry has started to get prepared for the diminishing and more expensive Russian roundwood imports by adding domestic roundwood procurement.

    In Finland, strong demand and favourable sawn timber market in 2007 have raised both roundwood prices and volume of trade by tens of percents from 2006. In 2008, following the trend in the sawn timber markets PTT, however, forecasts that both prices and quantities in the roundwood markets remain slightly below this year’s figures. A complete standstill in the import of Russian coniferous roundwood at the beginning of 2009 would further increase the demand for Finnish roundwood. The growth would be a few million cubic metres presuming that the Finnish forest industry will not reduce its production capacity.

    KEY FORECAST VARIABLES IN THE FINNISH FOREST SECTOR:

     

     

    2006

    2007 change (%) in

    2008 change (%) in

    EXPORT MARKETS:

    Volume

    Average price

    Volume

    Price

    Volume

    Price

    Export of paper and paperboard

    12.9 million t

    €609/t (FOB)

    0 ‑ 1

    0

    1 ‑ 2

    2 ‑ 3

    Export of pulp

    2.96 million t

    €421/t (FOB)

    -3

    7 ‑ 10

    2

    -5 ‑ -3

    Export of sawn timber

    7.7 m m3

    €188/m3 (FOB)

    0 ‑ 1

    23 ‑ 25

    -2 ‑ 0

    -5

     

     

     

     

    ROUNDWOOD MARKETS:

    2006

    2007 change (%)

    2008 change (%)

    Volume of roundwood import (overbark)

    19.8 m m3

     -10

    -15 ‑ -10 

    Volume of commercial fellings (overbark)

    50.8 m m3

    15

    5 – 7 

    Volume of roundwood trade (overbark)

    40.1 m m3

    35 – 40

    -15 ‑ -5

    Stumpage prices

     +7.7% (nominal)

    30 

    -4 ‑ -2

    Gross stumpage earnings (private forest owners)

    €1.369bn (nominal)

    45 – 50 

    4 – 6

     

     

     

     

    Sources: Finnish Forest Research Institute and PTT’s forecast

    For further information please contact:

    Research director Ms. Ritva Toivonen
    Tel. +358 9 34 888 412, e-mail: ritva.toivonen@ptt.fi

    The whole release as a pdf file.