Demand for most forest products stayed slack in Finland’s main market areas as a result of sluggish growth in western industrial countries during the third quarter of 2003, with growth being particularly slow in the EU. Total production in the forest industry in Finland for the third quarter was just 1% higher than the year before and 2% up over January-September, according to the Finnish Forest Industries Federation.

The weak market meant that further downtime was necessary in the paper industry in Finland during the third quarter, but sawn wood production remained high throughout the year.

Sawn wood production for January-September totalled nearly 10 million m3, which was 2% higher than last year. As a result of seasonal factors, production in the third quarter at 2.9 million m3 was lower than in the first two quarters but was still up 3.5% on the year before.

Plywood production has increased even more and, at almost one million m3 for the first nine months of this year, was up nearly 10% on the previous year. Despite seasonal factors affecting plywood production in the third quarter it was still 3% higher than last year, totalling 290,000m3. However, competition has intensified, especially in the case of plywood, with a resultant fall in prices, points out UPM-Kymmene.

Market balance

Finnforest says that demand for Nordic softwood timber and its supply are close to equilibrium, with a slight oversupply in spruce timber. It points out that supply/ demand is at a normal level in Europe overall and recovering in North America and Japan. Finnforest UK‘s profitability has weakened slightly but still showed a positive result for the third quarter.

However, Stora Enso reports that despite good demand, the market balance has been undermined by high production volumes in Europe and increasing supplies from Russia. But it says that demand for wood products is expected to remain relatively stable, supported by steady housing markets in the US and Japan and repair and maintenance activities in all market areas.

During the third quarter, Stora Enso announced an investment of €50m for the construction of a new sawmill at Krustpils in Latvia, in line with its previously announced Baltic area development plan. The annual capacity of the new sawmill will be 350,000m3 and it will start up in November 2004. In addition, the company opened a new component line at the end of October at its Viljandi component mill in Estonia, doubling component production to 11,000m3 per year.

Russian venture

Site work on UPM-Kymmene’s Pestovo sawmill in Russia is close to completion. Test runs on the production lines started at the end of October and will continue in stages as the lines are completed. The sawmill will start up gradually, with full production being reached in March next year. The main contractor for the work is YIT and the sub-contractors are mainly Russian companies. In addition, 60 suppliers from both Finland and Russia have contributed to the project.

Finnforest subsidiary Moelven Industrier ASA and the ARE Group signed a conditional agreement at the beginning of October for Moelven to purchase the ARE Group. The ARE Group has five plants in Sweden and one in Norway for sawmilling and further processing of timber, as well as a distribution network for their products. The sawmills have an annual capacity of 350,000m3 and the further processing capacity is 240,000m3. The goal of the acquisition is to achieve a wider and more comprehensive product portfolio for Moelven’s further processing and distribution business. The transaction is to be finalised on January 1.

Finnforest announced last spring that it would start modular building production in Finland and has now decided to produce timber housing modules at a new plant at Hartola (TTJ November 1/8). Work on the site should begin this year and production will start up in autumn 2004. Production capacity at the 20,000m2 factory will gradually increase to about 1,000 houses a year.

The new factory will be adjacent to Finnforest’s Kuningaspalkki glulam factory and the modular building production will make use of Kuningaspalkki products and know-how, such as glulam beams and their applications. Benefits will also be obtained from sharing resources such as personnel, energy production, maintenance and use of storage space.