High production, increased exports and good results – the Swedish forest industry is booming.
Figures issued by the Swedish Forest Agency (Skogsstyrelsen) show 84 million m3 of forest was harvested in 2003, 87 million m3 in 2004 and preliminary figures for 2005, taking into account the havoc wreaked by the January storm, show approximately 122 million m3 was harvested.
Furthermore, between 2000-2005, exports of forest products, which account for as much as 85% of production, increased by 6%. Europe is the biggest export market: for example, 25% of roof trusses used in the UK are of timber from VIDA’s sawmill in Borgstena.
Company after company is reporting excellent interim results and forecasting a bright future, after many years of low profitability.
“Our industry is doing well and this is certainly true of my own company,” said Södra president Leif Brodén. “Our results for the last quarter are better than they have been for six years and we expect the improved market conditions to continue for the rest of the year.”
Another company performing well is Norrskog, as its finance director Per-Olof Nenzelius pointed out: “Norrskog’s results for the first eight months are the best I have experienced since joining in 1988. Above all, Norrskog Wood Products has shown excellent results, with the trading conditions for sawn and planed timber having been very favourable.”
Setra is also showing a positive trend. In fact, president and CEO Kent Torwald said that this year’s second quarter was the best since Setra’s formation in 2003. “The market is very favourable, with a positive price trend for both redwood and whitewood,” he said.
Profits rise
SCA is also showing excellent results, with a 31% increase in operating profits for its pulp, timber and solid wood products for the first half of 2006 compared with the previous year. This was mainly as a result of the sawmill operations and positive currency effects.
The reason for this improved market can be found in a booming European building industry, not least in the Nordic region, with wood and fibre products having strengthened their position in relation to steel and aluminium products, which have increased in price rapidly.
Furthermore the previous oversupply from Russia and the Baltic states has largely disappeared, partly due to domestic demand having increased and partly due to sawmills in Russia increasingly targeting Asia.
Another factor is that many sawmills in central Europe have had major problems with their raw material supply, allowing Swedish mills to improve their market positions. In Europe there is an acute demand for whitewood, although the market for redwood is oversupplied.
“Developments in North America are something of a key here,” said Santhe Dahl, head of Vida, Sweden’s largest privately-owned sawmill group. He pointed out that timber prices in Europe are on average SKr400 per m3 higher than in the US, even when the effects of the weakened dollar are taken into account.
“The price difference has now had the consequence that timber is being delivered from some sawmills in eastern Canada – the first time since the beginning of the 1990s that Canadian sawmills have sent timber to Europe,” he said.
Harvest warning
The Swedish Forest Agency also strikes a cautionary note for the future by warning that if the high level of harvesting continues at the same rate there is a risk that it would have to be reduced in five to ten years’ time in order to prevent the tenability of forestry being jeopardised. It proposes that by increasing measures such as better rejuvenation, increased clearance and fertilisation on suitable land, the balance between harvesting and growth can be improved in the long term.
There is also uncertainty regarding the future ownership of some of the largest sawmill groups in Scandinavia. The new four-party alliance that won the election in September has indicated that shares that state-owned Sveaskog holds in Setra, the largest sawmill group in Sweden, may be sold to private buyers. Added to this, the fact that Metsäliitto is exploring the possibility of selling its Norwegian subsidiary Moelven and that Stora Enso, Europe’s largest sawmill owner, is reviewing its sawmill operations, means that major changes in ownership could well be made.
