Figures issued by the Finnish Forest Industries Federation (FFIF) show that although the gross value of forest industries’ production in 2006 amounted to approximately €21bn, 6% more than in 2004 the previous record year, sawn wood production remained virtually unchanged. Demand for sawn wood products was good but production was limited by the availability and price of domestic wood.
In addition to the high prices and limited availability of domestic wood, the industry is now faced with Russia’s decision to increase duties on its exports of roundwood. This is naturally puts greater pressure on the need to improve the availability of Finnish timber. The Finnish Ministry of Agriculture and Forestry’s review of the forest sector, completed in November 2006, set the targets of increasing the current growth and ensuring the quality, health and diversity of Finland’s forest resources.
The FFIF points out that the current situation emphasises the need for these measures and the authorities’ need to initiate immediate action to improve the market entry of Finnish roundwood and to increase the production of wood.
Alternative sources
In the meantime other sources of timber are being used to increase raw material availability for the Finnish forest industry. One example is the purchase of Swedish timber, which is attractively priced. According to Mikael Zachrisson, timber manager of Skogssällskapet, a Swedish organisation that administers forests for both public and private clients, Finnish purchasers are forging long-term contacts for the future with raw material suppliers in Sweden.
Another matter relating to wood procurement is the fact that the Finnish Competition Authority (FCA) has found that three forest companies, UPM-Kymmene, Metsäliitto and Stora Enso, which together annually buy approximately four-fifths of all domestic timber, were involved in violating competition laws in the purchase of timber in Finland during 1997-2004. The FCA has proposed to the Finnish Market Court that it impose competition infringement fines on Stora Enso and Metsäliitto for their participation in the cartel. No infringement fine has been proposed for UPM-Kymmene since it informed the FCA of the restraint and withdrew from the collaboration, while a 30% reduction in the fine for Metsäliitto has been proposed since the company also assisted the FCA in the investigation. Stora Enso has stated that it considers the proposal to be groundless.
Investments
Stora Enso is investing in a cross-laminated component plant at its Bad St Leonhard Sawmill in Austria. The €16.8m investment will provide access to the rapidly expanding building component market in Central Europe. The plant, with annual capacity of 61,000m3, is expected to increase the annual sales of Stora Enso Wood Products by €28m when fully operational. Construction is due to begin in the first quarter of 2007 and is scheduled to be completed in the first quarter of 2008.
A new birch plywood production line at UPM’s Chudovo mill in Russia has now been inaugurated. The third rotary cutting line and the dryer which have been installed at the plant will increase annual birch plywood production by 20,000m3. The €5m investment takes Chudovo’s total capacity to 100,000m3 a year. The new line also strengthens UPM’s capability to deliver customised products to the vehicle and parquet industries in particular. Installation of the new equipment began in June 2006.
The UPM-owned company Tikhvinsky Lespromkhoz in Russia has successfully passed a Forest Stewardship Council forest management certificate audit for 184,000ha of forest leased by the company.
“The certification of our forest management practices in Russia is the first step towards making certified products available from UPM’s Russian mills. It also supports our aim of increasing the proportion of certified wood in our products across the group,” said Juri Orlov, general director of Tikhvinsky Lespromkhoz.
In our last Finnish report we pointed out that UPM was exploring the possibility of restructuring its forestry work to improve cost-efficiency. It has now announced the launch of a new company in Finland, Silvesta, which will focus on planning, implementation and marketing of “practical forestry work” and boosting forestry profitability. Once the company is in operation, it will provide services to other forestry companies and city-based forest owners, as well as to its own operations.
Restructuring implemented
UPM has agreed with its forestry workers that they will transfer as to Silvesta Oy, while retaining existing terms and conditions.
“This arrangement will achieve our stated initial [restructuring] objectives,” said Sixten Sunabacka, vice-president, UPM Forestry and wood sourcing in Finland. “UPM’s Finnish forestry department will focus on wood procurement and forest services, plus the management and sustainable utilisation of forest assets. We will purchase any forestry services we need from Silvesta and other service providers.”
