The coronavirus pandemic has increased demand for certain forest industry products, such as tissue paper and packaging material. The Finnish Forest Sector Economic Bulletin of the Natural Resources Institute Finland (Luke) indicates, however, that lower demand for printing paper and early-year labour disputes have reduced the production and export volumes of forest industry products.
Key uncertainties in the forest industries’ end product markets are associated with how quickly the coronavirus pandemic can be controlled and the economic situation returns to normal. Uncertainties are also associated with the results of Brexit negotiations and global trade policies. In the long term, the pandemic may change consumption habits, which will both increase and reduce demand for different forest industry products.
Production volumes of sawnwood will decrease from the previous year
Exports of sawnwood to China are already recovering, while export volumes to North Africa and Europe have decreased. In Europe, there is a lack of demand in sawnwood markets, as construction is decelerating. Furthermore, sawnwood processed from damaged wood from Central Europe will keep the supply of sawnwood high and reduce market prices
The effects of the early-year strike in the mechanical forest industry will extend to full-year sawing volumes. This year, the production of sawnwood in Finland is estimated to decrease to 10.3 million cubic metres. The average export price of sawnwood is estimated to decrease by four per cent from the previous year.
Demand for birch and softwood plywood is already low in industrial applications in Europe. The coronavirus pandemic will reduce the already weak outlook for plywood even further. This year, Finland’s plywood production and export volumes will be significantly lower than in the year before.
The coronavirus crisis intensifies changes in the chemical forest industry
In the paper industry, this year’s production and export volumes are estimated to be 15 per cent lower than in the previous year. In addition to early-year strikes, previously announced machine shutdowns will have a significant impact on production volumes. The coronavirus crisis may have massive effects on the paper industry, as consumption habits are expected to change and digitalisation to accelerate, which will speed up the decrease in demand for printing paper.
In the cartonboard industry, the coronavirus crisis has mainly increased demand in Finland, while production and export volumes will decrease from the previous year as a result of the downward economic trend and the early-year strike. In the long term, the cartonboard industry’s future is looking bright, driven by increases in online sales.
The peak demand for tissue paper and cartonboard has temporarily increased demand for pulp, whereas the steep decline in demand for printing and writing paper has had an opposite effect. Demand for pulp is estimated to decrease from the previous year, and production in Finland is also expected to decrease clearly. The average export price of pulp will be much lower than in the year before. The long-term outlook for demand for pulp remains positive.
Industrial roundwood fellings will decrease significantly, stumpage prices of logs will decrease
The decreasing production volumes in the forest industries and the increasing import of roundwood will be reflected in industrial roundwood fellings, the volume of which will decrease this year by ten per cent to 56.5 million cubic metres.
Furthermore, the decreasing production volumes of sawnwood, combined with lower export prices, will be reflected in the stumpage prices of softwood logs, which are estimated to decrease by three to four per cent. This year, the stumpage prices of pulpwood are expected to remain roughly at the previous year’s level as a result of the relatively small decrease in pulp and cartonboard production and the decrease in demand for sawmill chips. The consumption of forest chips will remain at the previous year’s level, while their average production price is expected to increase slightly this year.
The 2020 outlook for the forest sector will be assessed in the Finnish Forest Sector Economic Outlook to be published in October.
Picture on top of the page: Metsä Group.