Forest Industry in January-June 2012: Difficult Market Conditions Led to Weaker Forest Industry Production

Finland, Aug 29, 2012 - Forest industry production volumes decreased or remained unchanged in a challenging operating environment during the first half of 2012. The industry's cost-competitiveness must be safeguarded in difficult economic times.

“The Government's end-of-August budget talks must come up with concrete measures that protect the competitiveness of Finland's forest-based sector. The cost impact of, for example, the Sulphur Directive, must be compensated in full. Other necessary fast-acting measures include the relinquishing of shipping lane charges and the introduction of a diesel tax refund system for heavy transports. The industry's cost burden could also be lightened with State subsidies allowed under the Emission Trading Directive,” says Timo Jaatinen, Director General of the Finnish Forest Industries Federation.

Finland produced 5.2 million tonnes of paper and paperboard in January-June 2012. Production volumes were down 10% from the previous year. Consumption of graphic paper grades remained low in the main market area of Europe because of the eurozone crisis, and this had an impact on Finnish production volumes. Paper export volumes decreased 12% in January-May, while paperboard exports were down 8.5%. Paper and paperboard prices remained stable in comparison to the corresponding period of 2011.

Finland's January-June pulp production volume was 3.4 million tonnes, about the same as in the corresponding period of 2011. Pulp exports rose to 1.3 million tonnes during the first half of 2012, up 19% from 2011.

January-June sawn timber production came to 5.0 million tonnes, down 3% from the previous year. Plywood production decreased 6% to 520,000 cubic metres. Sawn timber exports rose to 2.75 million cubic metres in January-May, up 5.5% from the corresponding period of 2011. Sawn timber export prices fell 3% from January-May 2011. Demand is weakened in particular by more subdued European construction activity.

Timber sales activity was lively in the first half of the year. The forest industry purchased 14.8 million cubic metres of wood in January-June, some 53% more than in the corresponding period of 2011.

The industry's raw timber expenses were high relative to the market prices of end products during the first half of the year; this factor contributed to the forest industry's weaker cost-competitiveness.