Summary
• In 2007 Swedish sawn softwood production reached a record 18.6 million m³.
• Swedish exports have increased because of the low price of the country’s timber.
• SCA, Moelven and Setra are all making mill investments.
• Last year insect attack destroyed an estimated 780,000m³ of standing timber.

The Swedish forest industry enjoyed a very good year in 2007, with record production of sawn softwood of 18.6 million m³ and companies announcing good, and some even record, profits. Many companies achieved operating margins of 15-20%.

However, market conditions have now deteriorated and the slump in demand is causing companies to reduce production and anticipate a problematic year.

“It’s going to be a difficult year for Swedish sawmills,” said Eva Larsson who runs the timber agency Eva Export AB, which principally supplies construction timber to the UK and Ireland. “With large stocks of timber and weak demand, prices will continue downwards a little further on certain markets and I cannot say that we have reached the bottom yet.” She believes that it may be at least six months before the market recovers, but then it could improve quickly.

“A year ago no-one thought that the boom would come to an end so quickly,” said Johan Freij, head of the business area Forestry and Agriculture at Danske Bank. “It has been dramatic. Timber prices are falling and sawmills are being paid less for their products. In six months Swedish stocks have grown from record low levels to record high ones.”

However, he believes the effects will probably be limited in Sweden. “Instead the alarm bells are ringing for German, Finnish and Baltic sawmills that are forced to pay substantially higher prices for their timber. Sweden has the lowest timber prices in the north of Europe together with Russia,” said Mr Freij.

Increased exports

The low price of Swedish timber combined with the increase in Russian export tolls has also led to increased exports from Swedish forest owners to other timber-producing countries, in particular to Finland where in 2007 imports from Russia were reduced from 14 million m³ in 2006 to 8-9 million m³. The difference has to be made up and much of it will come from Sweden.

The difficulties faced by the industry have naturally led to a reduction in planned investments. However, despite this, companies are continuing to invest. For example, SCA is investing a total of SKr359m in three of its sawmills at Tunadal, Bollstabruk and Munksund, while Moelven plans to invest SKr150m in its Nössemark mill and Setra is investing SKr40m in its Nyby sawmill.

On the acquisition front, Svenska Fönster, one of Sweden’s leading window manufacturers, has consolidated its position in the UK by becoming part owner of Swedish Timber Products Ltd based at Easingwold, near York. Svenska Fönster already sells windows to a value of SKr40m on the British market but by means of this acquisition aims to expand its business still further.

Furthermore, Södra Timber and Martinssons Trä have become new part owners in Uni4 Marketing, the leading exporter of Swedish solid wood products to Morocco, Algeria, Egypt, Jordan, Saudi Arabia and Yemen. Both companies have acquired a minority interest in Uni4, in which SCA Timber and Holmen Timber are also owners.

The industry has had its share of natural disasters, with storms at the beginning of this year causing damage to 1.5-3 million m³ of forest, according to the Swedish Forest Agency (Skogsstyrelsen), which increases the risk of insect attack. Skogsstyrelsen believes that last year a total of 780,000m³ of standing forest was destroyed as a result of insect attack. This assessment was based on feedback obtained of the damaged areas which included a helicopter inventory.

An additional method of aerial assessment of fallen trees and insert attack being introduced in Sweden consists of small unmanned aerial vehicles controlled by autopilot and flying at around 200m above ground level. These aircraft weigh only about 1.1kg and carry a compact, calibrated camera. The company selling this system, SmartPlanes AB, points out that it complies with strict aviation safety requirements and thus is applicable for commercial use in countries such as Sweden, Finland, Germany and the UK.

Forestry bill

In March, the Swedish government presented a bill to parliament that emphasises the role of forests for the climate, the need for increased growth in forests and their improved general care and maintenance, as well as the importance of a strong forest authority. It has been welcomed by trade associations such as the Skogsindustrierna, TMF (the wood processing sector trade body) and LRF Skogsägarna (the forest owners association), particularly because it draws attention to the need for increased production. However, environmental groups have expressed reservations because they feel that it threatens biodiversity.