Finland looks for alternative supplies

Summary

• Finland is looking for alternative supplies, main around the Baltic Sea basin.
• Family forest owners are being encouraged to harvest timber.
• Stora Enso has closed its Sauga mill in Estonia because of supply problems.
• UPM and Finnforest are investing in plywood production.

Finnish forest industry companies are experiencing strong demand for both plywood and sawn timber, and prices are at a record high. However, reduced imports from abroad have led to a reduction in the supply of timber and reduced stocks. To counteract this, the industry is looking for alternative sources of supply, primarily around the Baltic Sea basin.

The main reason for decreasing imports is Russia's plan to increase its timber export duties. The initial increase will not be high enough to stop imports to Finland but, if the plan to increase the duties to €50/m³ is realised in 2009, Finland will face a deficit of 10-15 million m³ of raw timber.

Calculations made by the Finnish Forest Research Institute, based on the 10th National Forest Inventory, show that between 2006-2015 the highest sustainable annual harvesting rate will be 72 million m³ whereas in 2002-2006 the actual annual harvesting rate was 56 million m³. So, in volume terms, it would be possible to increase logging in Finland by an amount equal to current imports of wood. What is less certain is whether or not the harvesting potential will match the industry needs in terms of timber grades, overall supply and demand in the regional timber market.

Family forestry

Furthermore, whether logging is increased to this extent is up to family forest owners. There are many plans to encourage them to do so, the most important incentive no doubt being the fact that the price of timber has already risen substantially.

In order to secure the supply of wood raw material competitively, Metsäliitto is streamlining its wood supply organisation in Finland. While in Russia, Metsä-Botnia's (a subsidiary of Metsäliitto Cooperative) Russian subsidiary Svir Timber has acquired two Russian harvesting companies to enhance both the wood supply for the Svir Timber sawmill and Metsä-Botnia's long-term strategy in Russia.

Stora Enso CEO Jouko Karvinen said cost inflation remained an issue, particularly for raw material. “The additional export duties on roundwood announced by Russia, the European Union's drive to increase the utilisation of wood fibre as biofuel and the pressure from NGOs with environmental concerns about wood harvesting in certain areas are all contributing to concerns over wood supply,” he said.

In fact Stora Enso has closed its Sauga sawmill in Estonia because of the continuing shortage of raw material, which has led to higher costs and unprofitable operations. The closure is not anticipated to have a material impact on Stora Enso's annual sales, but it is expected to have a slightly positive impact on the group's operating profits.

On the other hand, investments are being made in plywood production. UPM is to modernise and expand birch plywood production at its Otepää plywood mill in Estonia. The investment, which is worth almost €10m, will increase the mill's production capacity by 10,000m³ and enable the manufacturing of further processed products. The project will be complete in the autumn of 2008.

Furthermore, Finnforest, is investing €15m in its Suolahti plywood mill in Finland. It is to build a plywood upgrading unit that will be ready for production by the beginning of 2008. The intention is to develop innovative birch plywood solutions for its industrial customers. Construction work has already begun and is progressing on schedule.

Finnforest has supplied Kerto LVL as part of a project to refurbish the Mariinsky Theatre in St Petersburg. Working closely with the world-leading acoustic planner, Yasuahisa Toyota of Nagata Acoustics, Finnforest designed and supplied 600m² of Kerto for the inner walls and ceiling of the concrete structure. The challenge facing Finnforest was to produce an inner cladding that would enhance, not compromise, the acoustic performance of the hall, with no gaps or open joints.

In the field of distribution, although Metsäliitto sold its shareholding in Moelven to a Norwegian consortium in December 2006, Metsäliitto Co-operative and Moelven Industrier ASA have agreed that Finnforest products and services will continue to be sold by the Moelven sales network in Denmark, Sweden and Norway.

New products

Finnforest UK has introduced several garden products and is also providing a Garden Inspirations range comprising three main elements (themed gardens, decking and log cabins) that incorporate a range of different timbers and complementary materials. The idea is to provide homeowners with individually designed collections of decorative screening, garden seating, decking and structures.

UPM has been selling its wood products as PEFC labelled since 2000 but from April this year WISA-Birch plywood has been available in the UK and French markets as FSC labelled. FSC-labelled WISA-Birch plywood is manufactured at UPM's Estonian mill.