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PTT forest sector forecast – Forestry, autumn/2019
Extreme weather phenomena, insect damage and forest fires in Central Europe and Sweden have increased due to a warming climate. This has resulted in an influx of wood to the market, reducing prices in these regions. As a consequence, the competitive position of the Finnish forest industries has suffered. At the same time, weak economic development in key export countries is reducing both the global demand for forest industry products and also the domestic demand for wood by the industry. Additionally, the demand for new domestic removals is being undermined by the use of imported wood and by stock accumulated during the past year. As a result, wood harvesting and the wood market in Finland will slow down and the price of wood will fall from last year.
The year 2018 saw an exceptional rate of harvesting and roundwood trade, which generated a spike in overall forestry activity. Both harvesting and trade are therefore expected to return to a more moderate level. The factors of demand and competition will nevertheless result in a dip this year, says PTT Research Director Paula Horne.
Standing sales will increasingly focus on thinning stands so as to secure the supply of pulpwood for the industry, which will push up the price of pulpwood this year. Weaker export prospects and larger stocks in the sawmill industry will reduce sawlog demand, and there will be a clear drop in prices from last year’s record levels. Forest owners’ earnings will fall significantly from last year’s record figures due to decreasing harvest and trade volumes and the predominance of softwood, as well as a decrease in sawlog prices.
Wood consumption and harvesting levelling off after last year’s spike
Wood consumption in the industry peaked in 2018 due to investments and a high capacity utilisation. Consumption will decrease this year and next due to the slowdown of demand in wood products and pulp industries as well as capacity closures. The consumption volume will nevertheless clearly remain above the average figure for the current decade. The consumption share of imported roundwood will continue to rise slightly in 2019. Removals in Finland will decrease slightly from 2018 and the downward trend will continue in 2020. The largest decrease in removals will be in spruce stands.
Focus in sales will be on thinnings this year and the next
During the forecast period, roundwood sales will increasingly focus on thinning stands, which primarily yield pulpwood for the pulp industry. This year’s volume of standing sales will come down nearly a quarter from last year’s record figure and next year is expected to remain at almost the same volume. Fluctuation in the volume of delivery sales volume will not be very great.
Sawlog prices coming down, slight upward trend in pulpwood prices
The falling price of sawn goods on the export market is reflected in sawlog prices, and the nominal price of pine sawlogs is expected to fall by a few percent from last year’s average figure. The demand for pulpwood will be kept up by the pulp market, and pulpwood prices are expected to rise on par with inflation this year and the next. Sawlog prices in delivery sales will remain at the average price for last year. The price increase of pulpwood will be more robust in delivery sales than in standing sales.
Gross stumpage earnings from private forests will decrease this year. The fall in the price of roundwood and decrease in the volumes of sales and harvesting, as well as the predominance of thinning stands in removals, will reduce the total earnings from private forests to two billion euros. Next year’s income from private forests is expected to decrease a few percent from this year as the volume of removals falls while prices remain stable.
Paula Horne, Research Director, tel. +358 40 592 6820, email: paula.horne(at)ptt.fi