Finnish roundwood sales in November: shortage of year-round felling stands

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Roundwood sales slowed in November. The fall is primarily due to strong sales activity earlier this year and the industry’s rapidly rising cost of wood raw materials. However, there’s a constant shortage of felling stands that are suitable for logging all year round in all weathers.

In November, the forest industry purchased 2.1 million cubic metres of roundwood from privately owned forests which is 60% less than in November 2006. The purchased amount fell by half from October’s figures. However, the 39.3 million cubic metres purchased in January-November exceeds the procurements made in the corresponding period of 2006 by 30%.

Some stands marked for cutting in winter have still not been logged because of last winter’s poor harvesting weather. There will be shortages of fresh spruce pulpwood if warm weather continues to hamper harvesting efforts.

Record year for roundwood sales

The figures for January-November alone indicate that 2007 will be a record year for roundwood sales in Finland. The purchase volumes of logs increased the most in January-November; almost 50% more pine logs were purchased than in the corresponding period of 2006. Spruce and birch log purchases increased by almost 30%. Pulpwood purchases increased by around 25% from January-November 2006.

The stumpage prices of pine and spruce logs have increased by over 20% from November 2006, while the price of birch logs has risen by almost 10%, spruce pulpwood prices by 4% and pine and birch pulpwood prices by around 20%. In October, the average stumpage price per cubic metre was €64 for pine logs, €65 for spruce logs and €48 for birch logs. The average stumpage price for a cubic metre of pine and birch pulpwood was €16-17 and €23 for spruce pulpwood.

Finland’s forest industry production is based on the domestic supply of a renewable raw material. Up to 80 per cent of all domestic wood raw material comes from private forests. The industry’s wood supply relies to a significant extent on the active management of privately owned forests. There are more than 900,000 private forest owners in Finland (including ownership through deceased estates).

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Private forest owners in key position

The forest industry has, on average, purchased about 45 million cubic metres of roundwood from private forest owners annually in Finland. The present level, however, leaves over 15 million cubic metres of felling potential untapped. According to calculations by the Finnish Forest Research Institute (METLA), Finland’s forest reserves are sufficient to sustain a felling increase in privately owned forests to over 60 million cubic metres a year.

 

About 150,000 roundwood sales are concluded in Finland each year. The vast majority are stumpage sales, in which the seller hands over to the buyer a right to fell a certain amount of timber or to a specified logging area. In a stumpage sale, i.e. in a logging contract, the purchasing organisation assumes responsibility for the harvesting of trees as specified in the contract’s terms and conditions. The seller is paid the stumpage price mentioned in the contract for the measured amount of felled timber.

In delivery sales, the seller agrees to deliver a certain amount of timber to a mutually-agreed location within the contract deadline. The seller is paid the delivery price mentioned in the contract for the measured amount of timber.

Timing is important in selling

Roundwood sales should be carried out once a tree stand has stopped growing because the value of its growing stock will not increase substantially after this point. Thinning promotes the growth of the trees that are left standing and thus increases the returns earned by the forest owner.

The correct timing for this can be determined from the height of the tree stand’s growing crowns. If a crown contracts too much, the tree’s growth rate slows and the risk of snow and storm damage increases. Insects are also more likely to damage trees if their growth has weakened.

Roundwood sales bring capital income

Roundwood sales revenues are capital income from which forest owners are allowed to make certain deductions. Each year, for example, owners can deduct costs associated with forest management and the selling of roundwood from their sales revenues.

At the moment, the Finnish capital income tax rate stands at 28%, but the actual rate is in fact lower once deductions have been factored in. The tax withheld at source, which is paid by the buyer of timber, anticipates the effect of deductions: its rate is 19% for stumpage sales and 13% for delivery sales. Depending on the actual costs of forest management, forest owners either receive returns for some of the withheld tax or are required to pay more. 

Finland has enough forests for all purposes

Conservation and the recreational and commercial utilisation of forests are not mutually exclusive forms of use. Finland’s abundant and diverse forest reserves provide a good opportunity to look after both biodiversity and the supply of wood raw material for industrial use.

Over 90% of Finland’s forests are in commercial use. The management of commercial forests thus plays a key role in the conservation of a diverse forest environment.

Research findings have demonstrated that the means employed in the nature management of commercial forests are of a high standard – and they are being developed further all the time. Valuable habitats identified in commercial forests are protected and the structural characteristics typical of natural-state forests are also promoted in this conjunction; the means employed include species selection, controlled burning and leaving retention trees to increase the amount of sturdy hosts for trunk rot.

Finland is the number one in forest conservation

In addition, there are almost two million hectares of forest under strict conservation in Finland. This means that 8.3% of our forest area is already under strict conservation – this is Europe’s biggest proportion by far.

The most valuable natural habitats have been comprehensively included in national conservation programmes and the EU’s Natura 2000 network. There is, however, a need to improve the conservation of biodiversity in Southern Finland. This should be implemented by way of voluntary nature management methods in commercial forests as well as through the voluntary conservation means that achieved such good results in the METSO Programme.