Ajankohtaista

(English) PTT's forecast for the Finnish forest sector, spring 2008

  • PTT’S FORECAST FOR THE FINNISH FOREST SECTOR 2008-2009:

    Weak US dollar and Russian export duties on roundwood darken the outlook

    The unstable economic situation and strongly weakened US dollar will keep paper prices on a downward trend this year, anticipates Pellervo Economic Research Institute (PTT) in its latest forecast. However, brisk demand and worldwide production problems will maintain pulp prices at a high level. Russian export duties on roundwood and the poor price development of paper will reduce pulp and paper production in Finland. Russian roundwood will be replaced in Finland by increased domestic purchases and by imports from other countries of the Baltic Sea area. In the sawmilling industry, Russian export duties may result in a new upswing in 2009. Increased domestic roundwood purchases mean high stumpage earnings for private forest owners.

    Growing paper supply in Europe due to weakening dollar

    The strengthened value of the euro against the US dollar will increase the paper supply in Europe: Paper producers will sell paper tonnes in Europe that were previously exported outside Europe. Furthermore, the strong euro will attract users to import paper from the dollar area to Europe. PTT expects that the threat of imports alone will make European paper producers take the weakening dollar into consideration in their pricing.

    The export prices of paper will further decline this year. PTT forecasts that the prices will fall, even though about 4.7 million tonnes of paper capacity have been closed in Europe between 2006 and 2008. Paper prices will not begin to increase until the end of this year at the earliest.

    According to PTT’s expectations, the poor price development of paper and Russian roundwood duties will reduce paper production in Finland both this year and in 2009. Pulp production will also be reduced, although the worldwide market situation of pulp is good. The reductions in Finnish pulp production are caused by Russian roundwood duties and the increased price of imported wood.

    PTT does not anticipate that the profitability of the Finnish pulp and paper industry will improve this year. Consequently, it is likely that due to unsatisfactory profitability, the weak dollar and Russian roundwood duties, the sector will experience further restructuring measures.  

     

    The boom in the sawmilling industry is over – a new rise possible next year

    The weakened economic situation turned sawn timber markets to a downward trend at the end of last year. PTT expects that the lowered demand for sawn goods will continue at least until the autumn of this year. Fortunately, according to expectations, the supply of sawn goods is not going to increase in Europe this year, either.

    PTT anticipates that after having increased to €50 /m3, the Russian export duty on roundwood will cause a new upswing in the sawmilling industry at the end of this year and early next year. Russia is a significant exporter of roundwood worldwide and the termination of exports will consequently reduce sawn timber production, especially in Asia, where substitute raw material is difficult to find. PTT expects that in the short term Russia will be unable to increase its own production to compensate for the decrease in production. This may mean a growing demand for European sawnwood in Asia.

     

    Russian wood can be successfully replaced by domestic wood

    Demand for roundwood in the Finnish forest industry will decrease by approximately four million cubic metres due to declining production, particularly in 2008 but also in 2009. The use of both imported and domestic roundwood will be reduced, causing a decline especially in the nominal prices of Finnish coniferous logs.

    PTT expects that after the rise to €50 /m3 in 2009, the Russian export duty will cause imports of roundwood from Russia to Finland to completely cease. Consequently, imported roundwood volumes will be halved from the 2008 figures. PTT forecasts that in 2009 Finland will import about 8 million cubic metres of roundwood, mainly from Baltic countries and Sweden. However, wood chips, which are not subject to the export duty, will continue to be imported from Russia.

    PTT estimates that the roundwood shortage caused by decreased imports could be replaced by domestic roundwood. The increased demand will raise commercial fellings in Finland by more than 10 per cent in 2009. This will result in an increase of 5 to 7 per cent in average wood prices.

     

    KEY FORECAST VARIABLES IN THE FINNISH FOREST SECTOR:

     

    2007

    2008 change (%) in

    2009 change (%) in

    EXPORT MARKETS:

    Volume

    Average price

    Volume

    Price

    Volume

    Price

    Export of paper and paperboard

    12.7 million t

    €599/t (FOB)

    -5

    -2

    -3

    1 ­- 2

    Export of pulp

    2.60 million t

    €458/t (FOB)

    -2

     5

    -3

    5 - 10

    Export of sawn timber

    7.0 m m3

    €231/m3 (FOB)

    -5

    -6 ­­-  -4

     2

    3 - 5

     

     

     

     

    ROUNDWOOD MARKETS:

    2007

    2008 change (%)

    2009 change (%)

    Volume of roundwood import (overbark)

    18.0 m m3

    -16

    -45 

    Volume of commercial fellings (overbark)

    57.9 m m3

    -2

    11 

    Volume of roundwood trade (overbark)

    49.4 m m3

    -10 - -5

    5 - 10

    Stumpage prices

     +27% (f) (nominal)

    -8 - -4 

    5 - 7

    Gross stumpage earnings (private forest owners)

    €2.012bn (f) (nominal)

    -11 - -7 

    17 - 19

     

     

     

     

    Sources: Finnish Forest Research Institute and PTT’s forecast

    THE PRODUCTION OF FINNISH FOREST INDUSTRY

     

    Paper

    Pulp

    Paper-board

    Sawn timber*

    Ply-wood

     

    million t.

    million t.

    million t.

    m m3

    m m3

    00

    10.76

    11.92

    2.75

    13.32

    1.17

    01

    9.90

    11.17

    2.60

    12.67

    1.14

    02

    10.04

    11.73

    2.74

    13.28

    1.24

    03

    10.35

    11.95

    2.71

    13.65

    1.30

    04

    11.18

    12.62

    2.86

    13.47

    1.35

    05

    9.84

    11.13

    2.55

    12.20

    1.31

    06

    11.17

    13.07

    2.98

    12.15

    1.42

    07

    11.28

    12.81

    3.08

    12.49

    1.40

     

    %

    %

    %

    %

    %

    08f

    -5