In the first quarter, the calendar-adjusted forest industry production in Finland was about 5% higher than the year before, according to figures issued by the Finnish Forest Industries Federation. Sawn wood production stayed the same at 3.4 million m3 in January-March, while plywood production rose by 3% to 350,000m3.

The volume of Finland’s forest exports rose by about 2.5% in 2003, however, the weak market was clearly reflected in prices, which fell for the third straight year. The prices of the forest products in Finland’s export basket fell by about 7% on average in 2003.

Owing to the drop in prices, export income also fell. Forest exports brought in €11.4bn – a drop of more than €500m or over 4% compared with the year before. They accounted for 24.8% of Finland’s total exports, which was half a percentage point lower than the year before.

Finnish forest companies’ turnover totalled €33.5bn in 2003, more than 5% lower than the year before. Despite growth in production and deliveries, turnover fell as a result of the distinct drop in prices.

Profitability in the wood products sector was weaker than in the rest of the industry. The operating result was only slightly positive and the net loss amounted to about 4% of turnover.

High costs

The industry’s profitability and competitiveness are also burdened by the high cost of key production factors and to some extent the rapid rise in their price. The price of wood in Finland is among the highest in the world, if not the highest. The price of energy is also threatening to rise as a result of EU emissions trading.

In 2003 Finnish forest companies’ investments totalled €2.3bn or about 7% of turnover. This included nearly €800m in Finland and about €1.5bn abroad. One of the key areas for investment is Russia. An example is Stora Enso Timber’s second sawmill in Russia which was inaugurated in April. The new sawmill is part of Stora Enso’s strategy to increase industrial operations and enhance wood procurement in Russia. A total of €10.3m was invested and the full production capacity of 100,000m3 will be reached by the end of 2005. The products will serve Europe’s building products industries.

“Successful local production is crucial to our goal of developing wood procurement and the marketing of wood products in Russia,” said Arno Pelkonen, senior executive vice-president, Stora Enso Forest Products.

Nebolchi is Stora Enso Timber’s second greenfield sawmill in Russia. The first started up in August 2003 at Impilahti, in Karelia.

The growth potential for forestry in north-western Russia is highlighted in a report entitled “Advantage Northwest Russia – The new growth centre of Europe”, issued by a Russian/Finnish research team and financed by the Finnish jubilee foundation Sitra. The report points out that current legislation limits access to the raw material and that the Finnish forest industry has addressed this by first investing in the sawmill industry in order to see how production progresses.

However, forest felling rights are being offered as a way of attracting international investors in a new railway which is being planned to run through central and northern Russia, up to Murmansk and on to Finland. The route will enable large areas of forest to become accessible for harvesting.

Stora Enso Timber is also building a glulam beam plant at Imavere in Estonia. The €13.2m is part of the investment programme announced in August 2002 after the acquisition of Sylvester and meets the company’s strategy to supply a complete range for traditional Japanese houses built of uprights and beams. Together with a processing unit for construction timber that will be built in Ybbs, Austria, and some other investments, the Imavere plant will establish Stora Enso Timber as a main supplier of glulam products to Japan.

The Imavere plant is expected to come on stream in the first half of 2005 and full capacity of 80,000m3 should be reached during 2006. On completion, Imavere will comprise a large-scale sawmill, a planing and finger-jointing line, a component line and a beam line.

New mill

Stora Enso Timber has also opened a new planing mill at Varkaus Sawmill in Finland. The product portfolio will cover both sawn and S4S-planed products for European construction markets, and also the US and Japan. The saw line capacity is 345,000m3 per year, of which 100,000m3 will be planed products from the new mill.

Finnforest bought the German company Merk GmbH on February 1 and in doing so acquired one of the leading suppliers of wood-based systems in Central Europe. This will strengthen the Building Systems product group significantly and boost Finnforest’s position as a supplier of solutions and systems products in the region. Finnforest Merk specialises in designing and constructing one-off wooden building projects, as well as providing subcontract services, and manufacturing and marketing custom-made wood components.

In March the Moelven Building Group, part of Finnforest, acquired the Swedish company Mobilarum, a manufacturer of construction modules. The group now has two new production facilities in Sweden.