• Swedish forecasters don’t foresee economic recovery until the end of 2010.
• Swedish sawn timber production fell by 7.5% last year.
• Companies are scaling back output, but Södra and SCA are still investing.
• A new project, Trästad 2012, is encouraging Swedish local authorities to back wood building.

Sweden’s Institute of Economic Research (NIER) has revised its forecast for the country’s economy in the light of the deepening global financial crisis. It previously expected some recovery in 2010, but now says the low point will not be passed until the end of that year.

Its forecast for the first half of this year is bleak: exports will decrease, consumption will virtually stagnate, investment will fall, the labour market will weaken, and GDP is expected to drop further in the first quarter. In the second half of the year GDP growth is expected to resume, but remain very weak.

Last year, despite the deteriorating market, the Swedish timber industry fared quite well. Sawn timber production was down 7.5% on 2007, at around 17.3 million m³, but exports from January to September proved resilient, said Magnus Niklasson, market analyst at Skogsindustrierna (Swedish Forest Industries Federation). Export profitability was lower than in 2007, but, while volumes to some markets were down – including the UK, which saw a 6.4% fall – the global total increased by 5.5%. Mr Niklasson attributed some of the export growth to the krona’s weakening against the euro.

This year, he added, will not be easy for the sector. “Production has not decreased that much in Sweden yet, but it will be tough for everyone,” he said. “I doubt that production will be as high as last year.”

Some Swedish forest products companies have already responded to the weakening market by cutting output and making redundancies.

The country’s largest wood products company, Setra, which recorded a third-quarter loss of SKr97m, has cut overall production by 20%. The latest move, announced just before Christmas, is to curb production of mouldings at its plant in Kvarnåsen.

At its Traryd sawmill, Södra Timber has reduced from three to two shifts, while at its subcontractor sawmill, Bennsäter, which supplies primarily the US and UK markets, the shift lengths and the working week have been reduced, cutting output by 35%.

Following last year’s decline in Swedish sawn production and the 10% contraction in Europe overall, SCA Timber AB marketing director Anders Ek expects there will be further reductions in the first quarter. “We haven’t seen the end of mills being taken out,” he said.

However, while acknowledging that trade overall is unlikely to show marked improvement until 2010, he said that the renovation business – the biggest market for many Scandinavian companies – is “less negative” than the new build sector.

He also expects some improvement in the supply/demand balance in the next few months when customers will look to restock.

“I think we will have a surprise in the spring,” he said.

He stressed that SCA Timber is also investing. One development will be a £2.25m upgrade at its Bollsta mill to improve efficiency and competitiveness. Work will begin in the summer and will include the installation of new packaging machinery in the grading mill, the addition of automatic sorting and cutting equipment improvements.

Södra president Peter Nilsson said earlier restructuring at its Mönsterås sawmill had resulted in improved productivity and that it was now investing SKr11.5m at the site to enable it to produce 6m lengths for export, notably to the UK. “It’s positive for the development of the mill,” Mr Nilsson told TTJ.

The Swedish industry as a whole is now assessing the success of its government’s four- year National Wood Construction Strategy, which ran to the end of 2008. The aim was to improve timber’s competitiveness as a construction material and increase its use in multi-storey residential building. Since the launch, the proportion of the latter built in timber frame in Sweden has risen to 15% and one in seven multi-storey buildings now uses wood in some capacity, against one in 50 in 2001.

This year marks the start of a new programme, Trästad 2012 (Wood City 2012) which aims to get Sweden’s 290 municipalities using modern wood-based construction technologies to develop a new generation of buildings. The Swedish Wood Building Council, a collaboration between Skogsindustrierna and Trä- och Möbelindustriförbundet, will co-ordinate the project.