With exports falling and uncertainty surrounding the domestic market, Finnish sawmills are unable to raise prices and, over coming months, they will be fighting with forest owners over log prices. However, the main challenge will be to rationalise production in order to reduce costs, which will not be easy: Finland’s timber industry is perhaps one of the most efficient in Europe.
Finland’s economy has been growing faster than the Euro zone average and the forest products industry has invested in replacing and expanding capacity both in Finland and abroad. A shortage of skilled labour dogs the industry and part of the investment is aimed at making the industry a more attractive proposition, especially for younger people.
Structural changes
The structure of the industry also continues to change and Finnforest‘s bid for Moelven (TTJ May 19) did not come as a surprise.
Co-operation has been a theme in the timber industry for some time, largely because of the need for a better control of saw log prices and of the roundwood market as a whole. The sawmills need to co-operate more closely in marketing timber, not least because their customers are merging.
Forest certification is another issue which calls for better co-operation between the Nordic forest owners and the sawmills.
Taking the initiative
Having talked about co-operation for some time, the Finnish forest owners’ association Metsäliitto, which is a shareholder of Finnforest and the Metsä group of companies, took the initiative, backing Finnforest’s bid for the Norwegian Moelven business.
Meanwhile the Norwegian industry does not seem so keen on consolidation, with the country’s Forest Owners’ Association remaining unwilling to sell its Moelven shares, despite the fact that Finnforest controls more than 50%.
This reaction may seem strange, but can be understood. After having ‘lost’ their position in Norske Skog, the Norwegian forest owners’ hoped to retain a measure of control over the country’s sawmilling through its stake in Moelven.
Finnforest is also involved in more merger speculation in Sweden, rumoured to be in discussions with Södra. The discussion must take place at top management level as the managing director of Södra has taken over the position as managing director of the timber division.
Finnforest has already stated its aim is to form a Nordic timber business and it plans to be a market leader in the sector by 2005.
Finnforest’s move may be only the beginning of a new era in the Finnish – and Nordic – timber industry.
Also, AssiDomän, SCA and Graninge are looking for ways to establish a profitable sawmilling industry. So far, SCA and Graninge have formed the Scaninge company in Sweden.
Acute problem
In the meantime, the acute problem is to establish an efficient and profitable timber industry that can pay for roundwood. However, capacity is too high and there is only limited growth in consumption in Europe.
The next step for the industry and the forest owners is to concentrate on certification. The industry seems to be more interested in the Forest Stewardship Council while the Nordic forest owners favour Pan European Forest Certification. There is a need for agreement on the use of one system.
The merber moves triggered by the Finnish timber industry have started something and could prove an interesting step in the development of a ‘new’ and more profitable timber industry – not only in Finland but in Norway and Sweden too. For the main buyers, this could have a positive influence on the market and the promotion of timber.