Forest industry in January-March 2013: Economic downturn weakens demand in main market areas

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“Europe’s weak economic situation is eroding the future prospects of the Finnish forest industry. Finland should now focus on the rapid implementation of measures that ease the industry’s cost burden,” says Timo Jaatinen, Director General of the Finnish Forest Industries Federation.

“It is essential to maintain the competitiveness of the Finnish forest industry at a higher level than that of our rival nations,” Timo Jaatinen points out. “For example, the windfall tax should be repealed entirely, and not just reduced as has been decided.” 
“The Sulphur Directive compensation package, which was agreed to in the budgetary framework talks, contained hardly any measures that would immediately mitigate the raise in companies’ transport costs when the Directive enters into force at the beginning of 2015. The export industry can not wait much longer for these decisions. Among other things, Finland must introduce the State subsidies enabled by the Emissions Trading Directiveand the diesel tax refund system. Furthermore, waterway charges and the rail tax need to be abolished,” Jaatinen says. 
Structural change hits graphic papers hard, situation better for packaging materials
Paper and paperboard production came to 2.7 million tonnes in the first quarter of 2013, up 2.8% from the corresponding period of 2012. 
Some 750,000 tonnes of paperboard were produced in January-March, up almost 17% from the first quarter of 2012. This increase was due to an increase in Finnish paperboard production capacity as well as the low level of output recorded in the corresponding quarter of the previous year.
Graphic paper consumption fell 5.5% in Europe during the early part of the year. Finnish graphic paper production came to 1.6 million tonnes, down 3.4% from January-March 2012. Export prices have been falling since last autumn. The situation remains extremely difficult in the market for printing and writing papers as the structural change continues. 
January-March pulp production came to 1.8 million tonnes, up 3.7% from the corresponding period of 2012. More pulp was processed domestically than in the previous year, and the volume of export deliveries fell 20.5% compared to 2012. The market price of pulp has been increasing since last autumn. 
Economic downturn punishing building activity and demand for sawn timber
The recession is weakening demand for sawn timber in Europe. Furthermore, harsh winter weather in Central Europe held off the start of the construction season and this has caused sawn timber deliveries to be postponed beyond their usual dates.
Some 2.5 million cubic metres of sawn timber were produced in the first quarter of 2013, up about 10% from the previous year. Around 270,000 cubic metres of plywood were produced; this is 8% more than in the corresponding period of 2012. Plywood demand has been showing signs of recovery and plywood mills have been calling off layoffs.
A recent report on the construction industry of Finland estimates that Finnish building activity will continue to decline by 3% in the current year. Growth is not expected before 2014.

Timber sales activity reasonable in the early part of the year – costs high
The forest industry purchased 6.7 million cubic metres of timber in January-March, up about 7% from the corresponding period of 2012. Sawlog purchase volumes increased to 2.9 million cubic metres and pulpwood procurements to 3.6 million cubic metres. Stumpage prices rose. 
Finland cannot retain a competitive forest industry unless the cost of wood raw material remains reasonable relative to the prices fetched by end products. The competitive ability of sawmills in particular is under strain because of high raw material costs.

Further information:
Timo Jaatinen, Director General, Finnish Forest Industries Federation, tel. +358 9 132 6600