02.04.2009
PTT's forest sector forecast, spring 2009
Global recession impacts drastically on the export dependent forest industry in Finland
According to Pellervo Economic Research Institute (PTT), global economic recession has significant impacts on the Finnish forest industry, which is highly dependent on the export of its products. As a consequence of steep decline in global demand for paper and sawn goods, forest industry curtails production in Finland. Decline in production will also reduce demand for roundwood from privately owned forests. This will cause sharp decline in the price of roundwood and in gross stumpage earnings. Growth in the world economy is expected to turn slightly positive next year. As a consequence of this, also demand for the products of forest industry increases. Demand will, however, recover only slightly, and it has only minor impacts on forest industry’s production and use of roundwood in Finland. More significant recovery will take more time.
Demand for paper decreases significantly this year – some recovery next year
Global economic recession has remarkably reduced demand for paper. During the first weeks of the year paper deliveries were approximately one fourth smaller than during the same period last year. Weak demand in paper market has had significant impact on pulp market. Lag in the adaptation to decreased demand has further worsened the situation in the pulp market.
Due to decreased demand production has been curtailed in the Finnish paper and pulp mills. PTT estimates that paper production will decrease in Finland this year by 10–15 % compared to last year. Pulp production will decrease even more – 15–20 %. However, according to PTT, production will be somewhat higher next year due to moderate economic growth in the world.
In Finland approximately 10 per cent of the paper and paperboard production capacity has been permanently closed down during the last couple of years (2006-2008). Also pulp production capacity has been closed down in the same proportion. During the last months there have been no new announcements of closures. However, PTT estimates that capacity closings are possible. As increase in demand is only moderate next year, production will be still heavily curtailed then. When temporary production restrictions have lasted long, there is a risk that mill closures will occur.
Due to capacity closures paper markets in Europe were at the end of the year 2008 in a better balance than earlier. For example average export price of the Finnish paper increased during the last months of the year. PTT estimates that forest industry will manage to keep supply in balance with demand this and next year by using production curtailments. As a consequence export price of Finnish paper will not decrease in 2009-2010.
Sawn goods production is significantly decreasing in Finland but still only few mills have been closed
Construction activity and demand for sawn goods will significantly decrease this year both in Europe and outside Europe. In 2010 the deepest decline of construction is - according to several forecasts – ceasing, but significant increase in demand cannot be expected.
Decline in demand has evidently had an impact on the production volumes in the most important sawn goods producer countries. In Europe the production of sawn goods declined last year approximately by ten per cent. Despite decreased production volumes also the prices of sawn goods declined sharply. In Finland the average export price of sawn goods went down by 17 per cent.
Production of sawn goods was last year in Finland one fifth lower than a year before, approximately 9.2 million m3. According to PTT, production will further decline this year and approximately 8.3 million m3 will be produced. Despite some recovery in global economy, there will not be any significant change in sawn goods’ production volume in Finland next year. Even if there is a better balance in the market due to earlier curtailment in production, PTT estimates that the average export price of the Finnish sawn goods will further decline this year by 15 per cent.
In Finland there has been a remarkable change in production volumes in sawmilling industry during the last couple of years. In 2007 approximately 12.4 million m3 of sawn goods was produced in Finland. Despite significant decline in production, capacity has been permanently diminished only by a half a million m3. Reduction in production volume has been realized by reducing number of shifts. Because of this, in sawmilling industry utilization rate of capacity will be this year only just over 60 per cent.
Finnish forest industry’s demand for roundwood will decline considerably this year
Remarkable decline in production volumes of the Finnish forest industry will impact also on demand for roundwood. PTT estimates that Finnish forest industry will use this year app. 18 % (12 million m3) less wood than a year before. Despite some economic recovery, the volume of wood used will be only slightly higher in 2010. When compared to the year 2007, change in the volume will be remarkable. In 2007 Finnish forest industry needed approximately 75 million m3 of roundwood, but in 2009 and 2010 the need will be only about 55 million m3 per year. Decline in the use of roundwood will have significant impacts especially on domestic roundwood market. PTT estimates that in Finland the nominal price of roundwood will decrease approximately by 25 per cent this year. In 2010 situation in the forestry sector will not be much better. However, the industrial use of wood will increase moderately. This will raise harvesting volumes in Finland. The average nominal price of roundwood will be from 1 to 5 per cent higher than this year.
KEY FORECAST VARIABLES FOR THE FINNISH FOREST SECTOR:
|
|
2008 |
2009 change (%) in |
2010 change (%) in |
|||
|
EXPORT MARKETS: |
Volume |
Average price |
Volume |
Price |
Volume |
Price |
|
Export of paper and paperboard |
11.8 million t |
€596 /t (FOB) |
-15– -10 |
0-2 |
1-3 |
0-2 |
|
Export of pulp |
2.4 million t |
€452/t (FOB) |
-15– -10 |
-20– -25 |
2-4 |
2-5 |
|
Export of sawn timber |
6.0 m m3 |
€193/m3 (FOB) |
-15– -20 |
-17– -13 |
2-4 |
1-3 |
|
|
|
|
|
|||
|
ROUNDWOOD MARKETS: |
2008 |
2008 change (%) |
2009 change (%) |
|||
|
Volume of roundwood import (overbark) |
20 m m3 |
-60 |
10 |
|||
|
Volume of commercial fellings (overbark) |
54 m m3 |
-25 |
5 |
|||
|
Volume of roundwood trade (overbark) |
36 m m3 |
-20 |
15 |
|||
|
Stumpage prices |
-9% (nominal) |
-25 |
1-5 |
|||
|
Gross stumpage earnings (private forest owners) |
€ 1.6bn (nominal) |
-50 |
10 |
|||
|
|
|
|
|
|||
|
Sources: Finnish Forest Research Institute and PTT’s forecast |
||||||
For further information please contact:
Ms. Paula Horne, Research Director
Tel. +358 9 34 888 412, +358 40 592 6820 e-mail: paula.horne@ptt
Ms. Matleena Kniivilä, Forest Economist
Tel. +358 9 34 888 407, e-mail: matleena.kniivila@ptt.fi
Attached press release with charts
Liitteet:
« Takaisin
