Demand for forest industry products is growing except for paper − the structural change is intensifying

With the exception of printing and writing paper, the production and export volumes of forest industry products are growing, the export prices of several products are rising considerably, and the high demand for industrial wood is increasing stumpage prices this year, according to the Finnish Forest Sector Economic Bulletin published by the Natural Resources Institute Finland (Luke). The positive development is based on the progress of the coronavirus vaccination programmes, the gradual removal of restrictions imposed due to the pandemic, and global economic growth.

The sawnwood market is moving toward a peak of the economic cycle. This year, the production of sawn in Finland is estimated to increase to 12 million cubic metres. The average export price of sawnwood is anticipated to be over 20 per cent higher than last year.

The impact of the coronavirus pandemic on construction was smaller than feared, and the popularity of DIY construction has increased the demand for sawnwood in several market areas. The stimulus packages in different countries support the growing demand for sawnwood through projects related to the construction of infrastructure, among other things.

The supply of sawnwood has been unable to meet the growing demand, and the price level of softwood sawnwood has increased globally during this year. In the United States, the record-high price level has already reduced construction to some extent. In Europe, the price of sawnwood is on the rise, and the trend is expected to continue through the summer. In North America, the price development has been weaker, and exports of Finnish sawnwood to Egypt, for example, have decreased. At the same time, exports to the Middle East have increased.

The demand for softwood plywood has strengthened in Europe during this year, and the price level has risen. The market situation for birch plywood has also improved, with demand recovering in industrial uses. The production and export volumes of plywood are expected to grow this year by more than 10 per cent from the previous year.

Paperboard production will grow by 12 per cent in Finland during this year from last year’s level. Production will be boosted especially by the launch in Oulu of Stora Enso’s kraftliner machine for the manufacture of paperboard packaging material.

For the first time, paperboard production will become more important than paper production in Finland, measured in terms of the value of exports and production. However, the average export price of paperboard will be slightly lower than last year, because the share of kraftliner, which is cheaper than folding boxboard, is increasing in exports.

The outlook for the paper industry will be affected this year by the downward trend in the demand for paper, further intensified by the coronavirus pandemic, as well as the implemented or announced capacity reductions in Oulu, Jämsä and Kemi, which will significantly decrease production. Paper production and exports will be down from last year by nearly a fifth, but the export price is expected to remain nearly unchanged.

The demand for pulp will grow due to the improving global demand for paperboard and tissue paper. Pulp exports from Finland will grow by 5 per cent after last year’s drop, but the amount will remain below that of 2019. The average export price of pulp is expected to rise this year to a level 18 per cent higher than last year. Despite the growth of pulp exports, overall production of pulp will decrease in Finland, as the production of printing and writing paper is shrinking rapidly.

Industrial roundwood fellings will increase in 2021 by 6 per cent to 62 million cubic metres. The wood products industry’s fine demand situation is directly reflected in the fellings of logs, which will increase by 15 per cent this year, to 28.4 million cubic metres.

However, the growing demand for pulp and paperboard cannot yet fully compensate for the decreasing demand for paper, so the fellings of pulpwood will remain at last year’s level. Wood imports will still grow from last year before the stricter Russian customs policies take effect at the turn of the year.

The strengthening export prices and growing production of sawnwood will increase the stumpage prices of softwood logs by 12–14 per cent this year. With the demand for pulp also growing, and the demand for roundwood focusing on final fellings, for which the harvesting costs are lower, the stumpage prices of pulpwood are expected to increase by 7–10 per cent. The consumption of forest chips will increase by 4–5 per cent from last year, and their average price at power plants is anticipated to increase by a few per cent in 2021.

The 2022 outlook for the forest sector will be assessed in the Finnish Forest Sector Economic Outlook to be published in October.

More information:

Economic development: Jari Viitanen
Wood products industries: Antti Mutanen
Pulp and paper industries: Matleena Kniivilä
Roundwood markets: Jussi Leppänen
Bioenergy markets: Johanna Routa