The economic slowdown in various industrial sectors in the inter-national economy is having an increasingly pronounced effect on Swedish forest industry companies, in particular in the fields of pulpwood and packaging.

Despite this, companies such as SCA and Holmen have shown an increase in turnover and profits for the first half of this year.

Södra has been particularly badly hit by the slump in the price of pulp, which has dropped from US$710 tonnes at the start of the year to below US$500.

One bright area on the industrial front is the construction industry in the Nordic countries. The Swedish Construction Federation forecasts growth in the coming year in all four Nordic countries with total construction investments rising from SKr4.75bn this year to close on SKr5bn next year.

Oversupply situation

The market for sawn timber is still characterised by oversupply and low prices, with the position for Swedish sawmills deteriorating drastically over the past six months.

‘Despite consumption of wood products never having been larger in recent years, profitability for the Swedish sawmills has not kept up.

The reason is that the production of wood products has risen, not just in Sweden but also in the rest of Europe, in particular in eastern Europe,’ says Sture Karlsson, president of the Swedish Sawmill Association.

Lower costs

‘In some countries producing wood products the costs for both raw materials and personnel are much lower than in Sweden. Furthermore, production in eastern Europe including Russia, which at the beginning of the 1990s was at a very low level, has increased markedly.

‘Now that the trading conditions for wood products are deteriorating, a large reduction in sawmills’ costs is needed, across all ranges and qualities. Otherwise sawmills will have major problems with unforeseen consequences,’ Mr Karlsson concludes.

Commenting on this, Lars-Olof Österström, president of the Swedish Forestry Association, points out that the Swedish forest industry needs to undergo a comprehensive restructuring. ‘Reforms are urgently needed,’ he says. ‘Competitors abroad have already gained a big lead and the Swedish sawmill industry must react to prevent falling further behind.’

AssiDomän is one company that intends to play an active role in making the Swedish sawmill industry more profitable and market oriented in order to improve development potential and solvency. AssiDomän intends to contribute to consolidation by forming a new timber processing company, together with one or more partners.

A company under the name of the Billerud Group was formed in February this year through a merger of AssiDomän’s Skärblacka and Karlsborg paper mills with Stora Enso‘s Gruvön paper mill. This has created a new company in the field of packaging paper. Billerud is 50% owned by AssiDomän and 50% by Stora Enso but a stock market listing will lead to ownership shares being distributed at the end of 2001.

Sawmill co-operation

Nordic sawmill organisations met in Sweden recently to discuss increased co-operation between the Nordic independent sawmills.

Since both large and small participants in this field now operate more over national borders, it is important for sawmill owners to follow closely and adapt to the ever quicker changes.

The independent sawmills of the Nordic countries have many common interests, such as raw material costs, chips revenues and other financially determined areas.

The belief is that by acting together, the independent sawmills of the three countries can also react stronger globally, both within the EU and the world as a whole.

Fungal attack

Weather conditions have hit the industry very hard. Last year’s wet summer and the mild winter has resulted in a record number of pine trees in Sweden being attacked by fungus (Gremmeniella abietina).

It has been estimated that 300,000ha of the country’s pine forests have been affected and that the cost for forest owners will be over SKr1bn. Worst hit has been Stora Enso with 900,000m³ of forest which will have to be compulsorily felled.

To add to this, heavy rain has caused chaos for the forest industry’s timber transport.

In some areas of central Sweden, stocks are beginning to come to an end and it is virtually impossible to get timber out of the forest. It is difficult for forestry machines to move into position and timber trucks are often completely at a standstill. Worst affected have been the smaller sawmills.