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Finland: the distress of the wood processing industry will have consequences also for forestry

12 June 2009

Finland: the distress of the wood processing industry will have consequences also for forestry

The Pellervo Economic Research Institute PTT estimates that this year production reductions of historical magnitude will take place in the Finnish wood processing industry. This means that also forestry will be faced with difficult times. According to the Institute's business cycle survey the economic prospects for the wood processing industry and thus also for forestry are very dark both this and next year.
Mr Tapio Tilli, the Institute's forest economist, foresees that this year the Finnish wood processing industry will suffer historically unprecedented production decreases. He estimates that paper production will go down 10 - 15 %, the pulp production 15 - 20 % and sawn timber also 15 - 20 %. As a consequence these reductions will result in a decreased demand for timber of 12 million cubic metres.

- The wood processing industry's annual timber demand this year will amount to only 53 - 54 million cubic metres. Last year the corresponding figure was 65 million cubic metres and in 2007 it was 75 million cubic metres, says Tilli.
The reason is the global economic crisis. When there is a strong reduction of demand for paper and sawn wood on global level, Finnish industry must also reduce its production in Finland.
The reduced demand also results in lower timber prices. Tilli estimates that average prices for saw timber will go down by 25 - 30 % and the price of pulpwood by 15 - 20 %. As a consequence the stumpage earnings will go down from last year's 1.5 billion euro to less than 800 million euro.
Tilli also estimates that next year will not bring any noticeable improvements of the economic prospects for forestry. There will be an increased demand for timber next year when the industry's stocks are depleted. Nevertheless, the increase of felling will be very modest and entrepreneurs in this branch will most likely be temporarily laid off also next year. According to Tilli it is possible that even new production plants will have to be closed down.
As regards private forests, Tilli foresees an increased felling volume of 10 - 15 % next year. Average wood prices will probably go up by 1 - 5 %.