Finnish sawn timber production exceeded 10 million m³ in 2013, compared to 9.5 million m³ in 2012. This is still low compared with the figure 10 years ago, when annual production peaked at 13-14 million m³, but the industry is on an upward trajectory, with output increasing a further 5% in the first quarter of 2014.
A key factor behind recent improvement has been increasingly brisk demand in certain areas of the world, notably in Asia last year. But also key to sawmilling sector recovery has been improved log availability and overall competitiveness.
In Finland, wood is bought direct from hundreds of thousands of private forest owners. Therefore, balanced demand for all types of timber is necessary. The current boom in the pulp industry keeps wood purchases at a high level and the sawmilling industry gets the logs it needs. For forest owners, saw log prices are the crucial factor when deciding whether to sell or not.
While the current supply situation is satisfactory, however, there may be issues ahead due to the pattern of Finnish forest ownership. Most of our 600,000 private forest owners are from the older generation and their holdings represent their biggest life investments, financed decades ago and it’s their increasing tendency to hang on to them.
Finnish legislation supports this strategy, as inheriting forest is more advantageous than inheriting money. So forest properties are also increasingly held by people that don’t actively use them at all. This is a challenge that will need to be tackled for the future success of our industry.
In addition to wood availability, the competitiveness of the sector will be under increasing pressure. Transport costs are growing and the full effect of the EU sulphur directive on the shipping sector is not yet known. It affects Finland in particular, as it has such long sea routes to its main markets in the rest of Europe. Moreover, the Finnish government has further burdened the industry with higher fuel tax.
However, our sector is also experiencing exciting developments, notably in the increasingly broad spread of its export trade. For some years now countries outside Europe have seen the lion’s share of export growth. One reason has been the European economic slowdown, which compelled the industry to seek sales elsewhere, but it has also been down to the dynamic growth of these emerging new markets. For instance, while Japan has held on to its position as Finland’s biggest timber buyer by value, in the first quarter of 2014 Egypt overtook it as the biggest by volume.
Total sawn wood exports in 2013 amounted to 7.2 million m³, a rise of 11%. The biggest export destination then was Japan, which took 1.1 million m³ of sawn and planed softwood. Second was Egypt at 1 million m³, followed by our one of our oldest key markets, the UK at 700,000m³.
Interestingly, exports to China totalled 400,00m³ in 2013, more than double the 2012 figure and an all-time export peak for a market still relatively new to the sector. And it looks set to be the most interesting market for us in the future as we have little previous experience regarding their buying patterns.
Making the export trend clearer still, total timber sales to Europe last year grew just 2%, while to other countries they rose 17%.
Domestic consumption continued to shrink due to the low level of activity in the housing sector. In fact, demand from the construction sector was the weakest of all key markets.
The consensus is that the worst is probably now past for the Finnish economy, which used to account for 30% of timber sector sales, but it still needs dramatic improvement and support to get fully on track again.
The real positive on the domestic market is that we don’t have a problem with wood being chosen as construction material. About 80-90% of family houses are timber-framed, most of them prefabricated. We also have a political tailwind for increased use of wood in construction, with the current government setting it as one of its strategic objectives.
Furthermore, multi-storey housing is on the verge of a technical and competitive breakthrough.
Wood industry companies are also coming up with more focused development strategies. While some have spread their wings into timber construction, others have concentrated on further processing, or, alternatively, ultra-efficient bulk production. So we are becoming an increasingly varied and diverse industry.
By-products are also now a key focus, with a growing range of alternative uses being explored. The pulp sector’s raw material base is not yet being threatened, but new outlets for bark and sawdust are being examined with mounting interest. As the chipboard industry has shrunk to one mill, sawdust needs an outlet.
Against this background, bioethanol and other possible biofuels are looking increasingly attractive opportunities and, as these require specialist knowledge and resources, the trend is expected to trigger new industrial joint ventures.
Overall, it seems, the traditional forest industry is evolving, as an increasing share of companies’ turnover comes from sectors other than traditional forest industry products. But at the same time, wood products remain, as they’ve always been, an integral element in the bioeconomy.
UK in Finnish Focus
A special presentation on the Finnish forestry sector at the Finnish embassy in London illustrated the significance it attaches to the UK market.
The June event was jointly organised by the embassy and the Timber Trade Federation, and hosted by ambassador Pekka Huhtaniemi. Around 25 leading traders attended to hear Finnish Forest Industries Federation director-general Timo Jaatinen summarise current and emerging trends in the sector, and take part in a question and answer session.
The industry, said Mr Jaatinen, was developing as an increasingly broad ranging bio business, the aim to exploit its full potential in an international market set increasingly on a sustainable, low carbon development path.
At the same time, he stressed that timber and wood products remain a key focus. The sector was hit by recession, but is now recovering, both in production and exports.
Wood products output in the first quarter of 2014 was 5% higher at 2.7 million m³, while plywood output rose 15% to 310,000m³. Exports of sawn and planed softwood for the period were up 14% at 1.875 million m³.
The UK is Finland’s third biggest overseas timber market and second biggest overall forest products export destination, accounting, said Mr Jaatinen, for 15% of the €11.7bn total in 2013. First quarter 2014 sales of sawn and planed timber here were up 3% at 173,000m³, while those to its biggest and second biggest markets, Egypt and Japan rose 26% to 258,000m³ and fell 5% to 239,000m³ respectively. Exports to China, still a relatively under exploited market for the Finnish industry, also contracted 1% to 98,000m³, although it is believed the underlying long-term trend here can only be upwards.
Mr Jaatinen also highlighted the growth and increasing ambition of Finland’s timber construction sector, with high-rise wood building showing particular promise and the industry also looking increasingly to broaden its export horizons.
"The focus of the presentation was clearly that, while developing its broader bioeconomy base, timber remains a key component of Finland’s forestry sector," said industry adviser Clive Suckling, chair and moderator of the embassy event. "I think there was also recognition that the Finnish timber industry has not perhaps been as proactive in the UK as its Swedish neighbours, and that it has greater potential in the market."
