Uutiset

(English) Forest forecast, spring 2007

3.huhtikuu 2007

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

    Boom in the sawn timber and roundwood markets – no clear improvement in the paper markets

    According to Pellervo Economic Research Institute (PTT), the boom in the sawmilling industry will slacken slightly during the latter part of this year. Pulled by the high demand in the sawn timber market also the roundwood prices have increased clearly. This will encourage forest owners to sell record breaking amounts of roundwood. In the paper industry clear market improvement can not yet be seen. As a result of higher capacity utilisation rates PTT, however, forecasts that in 2008 the Finnish export price of paper will grow by two to three per cents from this year. The biggest uncertainties in the forecast are related to the development of USA’s economy and the implementation of export taxes on Russian roundwood.

    Supply and demand slowly rebalancing in the paper market

    The capacity utilisation rates of the paper industry will be 93-95 per cents during the years 2007-2008. Resulting from this PTT expects paper prices to increase slightly. Strong euro partly burdens quicker rise in the price development. Capacity closures in the European printing and writing paper sector have mainly improved supply-demand balance. Around three million tons of graphic paper capacity has been closed down during the last two to three years. The demand for paper is enhancing only slightly in Europe. PTT expects production and export of Finnish paper to grow by two per cents this and next year. In the export price of Finnish paper there is not to be expected any significant changes in both years.

    Contrary to the paper industry there is a boom in the pulp industry. Last year, the export price of the Finnish pulp was ten per cent higher than in 2005. PTT forecasts similar price hike also for the year 2007. At the end of this year upward price development will, however, become stable after the introduction of new capacity in South America. Therefore the price of pulp will drop by some per cents in 2008.

    Higher capacity utilisation rates and a slightly higher price will somewhat enhance also the profitability of the paper industry next year. In all, profitability still remains poor compared with the targets of the companies. Therefore the portfolio measures, which aim at better profitability, are very likely. Furthermore, the number of employees needed in the paper industry further decreases.

    Boom in the sawmilling industry in 2007

    The demand for sawn timber improved last year in Europe, Japan and North Africa. The production of sawn timber grew a bit slower. In Russia and Europe sawmills suffered from a shortage of logs. As a result of mild weather the harvesting conditions were weak in the most European countries. Higher demand and decreased supply raised significantly the average export price of Finnish sawn timber. Last year, sawn timber was exported on average at ten per cent higher price than in 2005. For this year, PTT expects similar size of mark-up.

    According to PTT’s forecast the sawn timber market will slightly calm down during the latter part of this year. Compared with the year 2006 the growth in the European construction sector is expected to be slower this year. In addition, in the USA the housing construction will clearly decrease. At the same time sawn timber production will grow especially in Germany, where the capacity will be expanded roughly by 1.5 million cubic metres this year. In Germany, sawn timber prices have already been under pressure during the first months of this year. PTT, however, expects that the reduction in the sawn timber prices remains minor also next year, while sawn timber market is characterised by uncertainty due to the availability of saw logs from Russia.

    More domestic roundwood will be used in Finland

    The consumption of roundwood in the Finnish forest industry is expected to grow by two per cent this and next year. This has a strong impact on the Finnish roundwood fellings and on the demand of timber from the private forests. PTT forecasts that due to higher export duties the import of roundwood from Russia will diminish. The higher export duties hamper particularly the price competitiveness of conifer pulpwood imported from Russia.

    Increasing roundwood demand and favourable sawn timber market will raise also roundwood prices significantly. This is expected to accelerate roundwood trade as well. PTT forecasts that this year the amount of roundwood trade may be even one fifth higher than in 2006. Accordingly, PTT expects that next year roundwood trade will diminish following the development in the sawn timber markets. However, next year’s commercial fellings are assumed to approach 60 million cubic metres, which is the highest amount ever.

    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)

    2

    0 ‑ 1

    2

    2 ‑ 3

    Export of pulp

    2.96 million t

    €421/t (FOB)

    2

    7 ‑ 10

    2

    -5 ‑ -3

    Export of sawn timber

    7.7 m m 3

    €188/m 3 (FOB)

    0 ‑ 2

    8 ‑ 12

    -2 ‑ 0

    -5 ‑ -3

    ROUNDWOOD MARKETS:

    2006

    2007 change (%)

    2008 change (%)

    Volume of roundwood import (overbark)

    19.8 m m 3

    -5

    -15 ‑ -10

    Volume of commercial fellings (overbark)

    50.8 m m 3

    10

    5 – 7

    Volume of roundwood trade (overbark)

    40.1 m m 3

    20 – 30

    -15 ‑ -10

    Stumpage prices

    +7.7% (nominal)

    10 – 15

    -4 ‑ -1

    Gross stumpage earnings (private forest owners)

    €1.364bn (nominal), estimate

    25 – 30

    4 – 7

    Sources: Finnish Forest Research Institute and PTT’s forecast

    For further information please contact:

    Research director Ritva Toivonen
    Tel. +358 9 34 888 412, e-mail: ritva.toivonen@ptt.fi
    Forest economist Erno Järvinen
    Tel. +358 9 34 888 403, e-mail: erno.jarvinen@ptt.fi

    Release with charts