Posts Economy, Forestry

If all the planned biorefineries will be built, the demand for roundwood will soar. The Forest Sector Economic Outook by the Natural Resources Institute Finland (Luke) predicts developments in the forest sector for the 25th time in a row.

New biorefineries. A growing China. An unstable Russia. Brexit. These are just some of the factors with a direct or indirect impact on the demand for Finnish roundwood.

“The affecting factors are quite a constellation”, laughs Jari Viitanen, principal research scientist at Luke, and he knows what he is talking about.

tukki, Erkki Oksanen

Viitanen is the editor of the Forest Sector Economic Outlook published by the Luke in October. It makes observations on the current year and forecasts the next. The Outlook, published annually, is the 25th of its kind.

“The entire forest sector looks to the future. What is the value of roundwood and how will it develop? This concerns companies, ministries, various interest groups and forest owners alike”, says Viitanen.

Forest owners should make good use of Luke’s annual Outlook, which is the most extensive analysis of the prospects of the Finnish forest sector – and costs nothing.

The latest Outlook has a largely positive message.

“Exports are up, production is good and more wood is needed. On a less positive note, export prices are stable or even on the decline”, Viitanen says.

Competition in the global market keeps prices low. Even so, the income of forest owners will increase thanks to growing production volumes.

Biorefineries are hungry for wood

New biorefineries are being planned in Kemi, Kemijärvi, Kajaani and Kuopio. The bio-product mill by the Metsä Group in Äänekoski will be completed soon. The Metsä Group has already started buying more wood.

Photo: Erkki Oksanen

“If all the planned biorefineries will be built, wood purchases will turn into a race. In that case, wood purchases would increase by between 10 and 15 million cubic metres. But all the projects may not be realised”, Viitanen says.

Growing pulp production in UPM’s Kymi mill and cardboard manufacturing by Kotkamills also contribute to increasing wood consumption.

Luke’s Outlook indicates that the exports of sawn goods will reach record levels this year and the next. The demand is particularly strong in China.

“Unfortunately, paper exports will continue to decline”, says Viitanen.

Nevertheless, paper accounted for a total of 39 percent of the income from foreign trade of forest industry products.

Anticipating market developments is far from easy, and the shift of one element of the constellation can turn everything upside-down.

However, the impact of Brexit seems to be mostly limited only to Britain. Freezing of all Eurozone economies is, therefore, not likely to take place, but changes in currency exchange rates do affect timber markets. The UK market is an important one for Finland, because it accounts for almost 10 per cent of the total value of Finnish forest exports. A weakening pound would hamper exports.

With respect to Russia, there is never a dull day. The Duma may prohibit the export of round softwood, which would mean that the approximately one million cubic metres of softwood currently imported from Russia would be replaced by Finnish wood. And if the Russian economy started to recover, the Finnish cardboard exports to the East could gain momentum.

Text: Kari Ahokas, photos: Erkki oksanen

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