Sawmilling in Sweden is going through a period of radical change. The smaller Swedish companies lack the capital for investment and product development. There have been closures and, as in other Nordic countries, some companies have been unable to find buyers for their production units. Even among the bigger players, ownership changes are not unknown.
Many in Swedish industry see this trend continuing for the foreseeable future, with the next three to five years expected to be particularly eventful.
Lars-Göran Olsson, head of statistical analysis at Svenskt Trå (the Swedish Wood Association), thinks trends may improve. ‘We are living in very tough times. So far just this year, bankruptcies and closures have amounted to the loss of at least 800,000m³ of production. However, with the increasing share of the construction market being reclaimed by timber in countries like Germany and the UK, there is some light at the end of the tunnel. I am optimistic for the future of the industry in Sweden.’ Some Swedish companies believe that co-operation and partnerships are the way forward. One such co-operation began when SCA acquired the majority of Scaninge Timber, creating Sweden’s largest sawmilling group.
‘We are attempting to “work smarter”,’ says marketing director of the expanded SCA sawmilling group, Anders Ek. ‘Bringing the two companies together creates an entity with the size and capacity to support customer product development. The two companies have valuable expertise in different fields. SCA’s sawmills have concentrated on adapted timber for industrial end-users, whereas Scaninge focused on value-added products sold to distributors.
If we cannot take one and one and make it more than two then we shouldn’t be in business.’ Sweden is also faced by competition from low cost producers such as Russia, from more direct competitors in western European – particularly Finland and, in spruce production, from Austria and Germany – and from non-wood materials in its major European markets.
‘Competition from man-made materials is the most serious problem we face. Suppliers of PVCu and steel can afford to spend much more on promoting their products and have a history of doing so,’ says Mr Ek. ‘The timber sector has traditionally not seen a need to spend on education and promotion. But now this attitude is hitting our markets.
‘For Sweden, the UK has always been a major timber export market. Here PVCu windows have presented a significant challenge – their advocates have been quick to point out that “no trees have been cut down” in the making of their product. As an industry we have been slow to respond with our sustainability message. However, with the British Woodworking Federation‘s efforts and the resurgence of timber frame housing in the UK, timber is beginning to come back into the picture. This will bring benefits to the Swedish sawmills.’ Swedish producers such as SCA are also trying to boost profitability by working with customers to develop value-added products and services. ‘Our Scandinavian customers have been working with us to develop our product portfolio to suit their needs. Providing adapted products reduces waste and can cut production processes at customers’ plants. About a third of the production at our Munksund mill in northern Sweden is devoted to adapted raw materials. We are just beginning to see the dawn of similar co-operation with customers in the UK. Rob Simpson and his team are instrumental in bringing about a greater emphasis on profitability throughout the timber value chain,’ says Mr Ek.
To create profitable businesses that can weather economic storms and competition, Swedish sawmilling is re-grouping around this value-added concept. Mr Ek is certain which way the competitive future for Swedish sawmilling is heading. ‘We cannot hope to compete with the Russians on price, but we can score in terms of flexibility, adapting to customer needs, in reliability and service, in addition to the quality of slow-growing northern Swedish fibre.’
But structuring an organisation fit for the challenges that face the Swedish industry is not easy. SCA’s Bollsta sawmill has operated at a loss for several years, and measures to secure long-term profitability are now being implemented. The company plans to invest in an improved timber sorting capacity and an increased drying capacity. At the same time, production at Bollsta is being cut by 20% and operations at the nearby Lugnvik sawmill will be reduced. In April, production volume will be cut by 60,000m³ per year to 310,000m³ of sawn product. In all, 51 of the total 154 employees at the two mills are being laid-off.
‘We must concentrate efforts on turning round the losses originating from the Bollsta and Lugnvik operations,’ explains Ulf Larsson, president of Scaninge Timber. ‘We have now developed an extensive programme of measures that should enable us to change the loss trend and provide conditions for favourable development. Reduced production will allow us to focus our resources on producing more profitable products.’ Anders Ek feels the Swedish sawmilling industry has come a long way from the perception of it being a necessary adjunct to pulp and paper supply. ‘Within SCA, the forest products sector now generates a large proportion of the group’s cash flow, which it then redeploys in acquisitions worldwide.
‘SCA demands that its sawmills’ annual results must be comparable to, if not better than, our competitors. Recent years have seen our results improve substantially compared to the competition. We see ourselves as a vital part of the bigger corporate picture. At the same time SCA sees its future in the timber sector in terms of profitable partnerships with customers, solidly focusing on their needs.’ Kenneth Eriksson, president of SCA Forest Products, agrees. ‘A significant proportion of Swedish forest owners’ income comes from the sawmills. Sawn timber receives high prices in Sweden and generates close to 70% of a forest owner’s earnings. The pulp and paper industry cannot bear the cost of felling and forestry alone without having a significant impact on competitiveness.
‘A competitive sawmilling industry, capable of paying for its raw materials through profitability, is the central engine driving the value chain from forest to wood product consumer.’
