Summary
• Production, profits and productivity in Sweden rose in 2007.
• Capital investment was up.
• Swedish timber technology providers enjoyed increased demand.
• Swedish exports to the UK were strong, but the market outlook is less certain.
• There is concern over the timber growth/harvesting balance with rising demand for forest products, including from the biofuel sector.
It has been an eventful year for the Swedish forest industry. Production, productivity and profits were up thanks to healthy demand for Swedish timber and wood products from the country’s main markets. There was also substantial investment in production facilities, with both Holmen and Rörvik, for example, deciding to site large new sawmills in Sweden, and major spending in new industry research projects. Martinsons has also inaugurated a new SKr55m saw line, which is intended to almost double production capacity.
Bergs Timber is another big investor, spending SKr50m on a new cleaving and planing line at its plant in Mörlunda. The line, which was inaugurated in November, is designed to increase efficiency and almost double capacity at the plant.
Sweden’s own forestry and timber machinery sector clearly benefited from the upbeat mood in the domestic market. For example, Catech AB, which specialises in high tech edger optimiser systems for sawmills, reported a record level of orders in October and November last year. Totalling approximately SKr30m, orders for these two months equalled those of the previous nine.
Another company that benefited from the sector’s buoyant year was Cartesia with its GPS Timber system. This is a “decision support and quality assurance system” for timber handling in outdoor storage areas. Among the companies using this system are now Martinsons and Stora Enso, and most recently SCA at their Rundvik and Bollsta plants.
In common with the Swedish timber sector overall, the UK is Bergs’ biggest export market, accounting for 39% of the company’s output in 2007. In its recent annual report, it predicts that UK consumption levels will continue at around last year’s level of 10 million m3 of sawn and planed timber. But it also warns that a downturn in the overheated UK housing market could lead to a harsher climate in the future. In the light of this, Bergs president Åke Bergh believes that the company’s investment in its own distribution warehouse in Shoreham was sound and will stand it in good stead in leaner times.
VIDA, another major exporter to the UK, has announced that it has signed a new agreement with India’s largest building contractor. The company will supply the latter with material for use in producing structural beams. “It is important to find new markets now that, following a few golden years, prices have dropped substantially, first in the US and then in Europe,” said Vida Wood president Måns Johansson. “In the US alone the consumption of wood products has dropped by an amount equal to Swedish annual production.”
Turning to the finished products sectors, Swedish furniture exports increased substantially in 2007. TMF, the wood processing sector trade body, reports an increase of 9% in the first nine months to more than SKr11.4bn, with 89% of the total sold in Europe.
However, TMF has also issued a note of caution that the increasing demand from the energy sector will continue pushing up furniture makers’ raw material prices. The tripling in price of sawdust since 1999, for example, is inevitably having a knock-on for manufacturers of wood-based panels and their customers in both the furniture and construction sectors.
Having said that, certain parts of the forestry and timber sector are more positive about the development of biofuel demand.
For instance, Stefan Wirtén, forest director with the Swedish Forest Industries Federation bills it as an opportunity for the industry to make a major contribution to improving the environment and tackling climate change. While the year as a whole seemed to be generally positive, there were problems in 2007, notably the January storms, which resulted in extensive windthrows leading to excess supplies of sawn timber on European markets and a build up of stocks at producers. This, in turn, led to a clear weakening of demand in certain ranges of sawn timber in the autumn, particularly in the construction industry. As a consequence some Swedish sawmills have announced production restrictions. Another serious issue is the level of insect damage in Swedish forests. The Swedish Forest Agency has estimated that approximately 780,000m3 of standing timber has been affected.
Looking forward, the Swedish industry is focusing particularly on how growing demand for forest products in a range of markets can be matched with supply. Even now, some believe, more timber is being extracted from the forests than is considered sustainable in the long term.
The annual felling limit, in order not to disrupt the growth/harvesting balance, is considered to be 80 million m3, but this has been exceeded every year since 2001. Skogsstyrelsen estimates that last year 92 million m3 were harvested. There is a growing feeling that this issue will have to be addressed.
