Output from the Finnish forest industry for January-September was down an average of 12% on the same period last year, declining in all the main product groups except for plywood, which remained at last year’s level.

The biggest change was in the production of sawn goods, which was still showing growth in the first half of the year, but has taken a sharp downturn over the past few months. From January to September, 9.5 million m³ of sawn goods were produced, only 3% less than last year. However, this figure disguises the fact that a sharp fall has occurred in the production of sawn goods in the third quarter, resulting in around 16% less than in the same period in 2000.

In the third quarter the sector faced problems of reduced demand, poor profitability and poor log availability. The lack of demand resulted from the downturn in growth of the global economy, the poor profitability was the result of an unfavourable balance between the price of the raw material and the price the sawmills can obtain for their products, while the log shortage resulted from forest owners being unwilling to sell logs at current prices.

‘In Finland quite a dramatic change has taken place this year in profitability,’ points out Matti Sihvonen, vice-president, Wood Products Unit, Finnish Forest Industries Federation. ‘No-one is making any profit with the present cost structure and world market prices, and there is a definite need for the price of logs to fall still further in order to achieve profitability. However, the forest owners find current prices unacceptable and believe there is no demand for timber on the world market. Both these ideas are based on a misconception since although log prices have dropped 5% from the highest level in 2000, if you compare prices today with those of the 1990s then they are still higher than at any period during that time.’

At the beginning of October it was estimated that the production of sawn wood for this year would be 12.6 million m³, compared with 13.3 million m³ in 2000. Softwood stocks at the end of September this year were one million m³ (a reduction of 10% compared with September 2000). A complicating factor is that the pulp and paper industry is also facing a crisis and, instead of sawing logs, companies are sending them to pulp and paper because profitability there is better.

‘The result is that in the worst scenario, if stocks of logs do not increase, it will mean that sawmills in Finland will be forced to shut down for three to four months next year,’ says Matti Sihvonen. ‘One of the solutions would be to increase imports of logs. If this were a normal year our total consumption of logs would be around 30 million m³ with 10% being imported, mainly from Russia – that would mean 3 million m³ of logs being imported. In the long term, imports could probably be increased to 5 million m³ but not any higher than that. Basically we have enough logs in our own forests but our forest owners are at present reluctant to sell their timber.’

However, despite the current difficult position and poor profitability, investment in new production continues. For example, Finnforest has made several investments, including the second phase of the Kaskinen production unit, which was completed, as scheduled, in October. This unit will manufacture building-system components for the Japanese market and window components. The production of heat-treated Finnforest ThermoWood will also commence and a new I-joist production line in the UK is due for completion at the beginning of 2002. The line’s annual output capacity will be 5 million linear metres and products will be sold on the UK and central European markets.

Finnforest’s aim is to become number one in the European mechanical wood products market and it intends to achieve this not only through its own production and acquisitions but also by forming alliances with other companies and marketing their products.

‘We approach small and medium-sized companies with the aim of marketing products that fit in with our own range,’ says Markko Ihamuotila, vice-president, business development and marketing, Engineered Wood Division, Finnforest Corporation. ‘We can offer them our sales facilities, an export market and our logistics. In return we get new products to add to our existing ranges.’ As an example, he cites the summerhouses and garden chalets manufactured by the Finnish company Luoman Puutuote that have been incorporated in the Finnforest range.