High wood prices inspire forest owners to sell timber
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After a lull in timber sales during the spring, sales volume is back to normal in Finland, with forest owners doing brisk business with all grades of wood.
The wood processing industry is producing record amounts of paper, paperboard, and pulp. Sawn timber is also selling well.
Earlier in the year, forest owners were selling wood at a rate of about one third less than in the previous year. The slow start to the year was attributed to changes in taxation that took effect at the beginning of 2006, prompting sellers to keep an eye on the development of wood prices.
The change in taxation allowed all forest owners to shift to a taxation system based on actual sales and not just potential earnings based on forest ownership. In previous years, some forest owners were taxed on the basis of the surface area of their forest holdings, providing an incentive to cut and sell as much as possible.
Figures put out by the Finnish Forest Research Institute indicate that the industry tolerated the vacillation of forest owners for four months. By early May prices of pine and fir rose quickly.
There were also hidden price hikes; UPM began to pay for branches and treetops, which it had previously taken for free. Metsäliitto lowered its quality standards for logs, which means that it is buying lower quality wood at previous prices.
The key decision in the matter was made by the Union of Agricultural Producers and Forest Owners (MTK), which decided to urge its members to start selling timber again.
MTK's head of forest affairs, Antti Sahi, will not say if the current prices are good or bad, focusing instead on terms of sale and signals. Furthermore, the Finnish Competition Authority frowns upon interest groups such as the MTK making price recommendations, or urging forest owners not to sell wood.
Sahi says that the market situation is exceptional, in that all types of wood are selling well.
Matti Karjula of Stora Enso welcomes the resurgence of timber sales.
"The situation was worrisome in May, but in the summer, wood has been selling well. We have been able to make up for the shortfall in the early part of the year", Karjula says.
The Finnish processing plants of Stora Enso will need 27 million cubic metres of wood this year, which is more than a million more than the previous record years.
"Our factories are going at full capacity, as there is demand for our products."
Karjula says that the industry and MTK are now in agreement on the issue of wood sales.
UPM's Sixten Sunabacka says that forest owners seem to have a considerable need to sell their wood. "Prices are very high. I would be surprised if wood sales did not pick up. A new factor is that taxation no longer pushes wood onto the market.
Jukka-Pekka Ranta, managing director of Suomen Sahat - an organisation of Finnish independent sawmills - calculates that export prices for sawn timber had increased by ten euros a cubic metre, by the beginning of the summer, while production costs had increased by seven euros a cubic metre. About two cubic metres of raw material is needed for the production of one cubic metre of sawn timber.
Ranta says that the domestic market for sawmill products is doing well, while exports are at a normal level.
"Finland is our number-one market", he says.
Sawmills sell wood chips, which come as a by-product, to pulp and paper mills. "The price of chips has increased only slightly."
Helsingin Sanomat
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| 11.8.2006 - TODAY |
 High wood prices inspire forest owners to sell timber |
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