Price of coniferous logs hits new record

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Stumpage prices of felled timber reached a record level in April, according to statistics kept by the Finnish Forest Research Institute (METLA). The stumpage price is the value of timber in the forest before it is felled.
     According to data collected by METLA, the price paid for pine and spruce logs was slightly over EUR 60 per cubic metre. In March the prices rose by four per cent. The price rise for coniferous logs from April last year was about one third.
     
Buyers have paid more than EUR 60 per cubic metre for high-quality stands of trees available for felling in the summer. There are reports of prices as high as EUR 73 per cubic metre in the west of Finland.
      Antti Sahi, head of forestry at the Central Union of Agricultural Producers and Forest Owners (MTK) says that the situation is unique.
     "Not even the oldest forestry professionals remember anything like this. It is also exceptional that demand remains strong for a long time", he says.
     Although a higher price for wood is in MTK's interest, Sahi says that some aspects of the situation are a cause for concern.
     "At some point the prices will even out, and let's hope that it will happen in a controlled manner. If the prices move in the opposite direction in the same way, the wood trade will be completely stuck."
     
Economists in the field were caught completely off guard by the price development of raw timber. In October last year METLA predicted that coniferous logs this year would cost EUR 49-50 a cubic metre, which is over EUR 10 less than what the price has turned out to be. Price forecasts for paper and pulp wood also went wrong.
     METLA Director General Hannu Raitio believes that the mistakes are the result of random factors. He does not know of any internal discussion within the institute about the accuracy of its forecasts.
     
The Pellervo Economic Research Institute (PTT) was no wiser than METLA. Last autumn the institute predicted that the price of wood would rise this year by 1-3 per cent.
      Ritva Toivonen, head of research at PTT, attributes the discrepancy to the weather. When the weather conditions were bad, it was not possible to harvest wood from remote forests.
     As a result, demand vastly outstripped supply, resulting in rising prices.
     
The high prices have inspired forest owners to sell their holdings. In April 2.4 million cubic metres of wood were bought from private forests. METLA says that this is significantly more than usual for April.
     Spring statistics indicate that large amounts of wood will be felled from private forests this year. Significantly more standing forest is generally sold in the autumn than in the spring.
     
Sahi is not especially worried about the export duties imposed by Russia for its raw timber. "This is a great opportunity for Finnish forest owners to establish a market for their own wood, if imports from the east decrease."
     In July Russia will impose a duty of EUR 10 per cubic metres for exports of wood, and next year the figure will rise to EUR 15.
      Sahi does not feel that these fees would be too much for industry to bear.
      "The industry's cost structure is such that the proportion of the wood duty is insignificant", Sahi says.


Previously in HS International Edition:
  Väyrynen demands discussion of wood tariff dispute at EU-Russia Summit (18.5.2007)
  UPM to start lay-off talks following shortage of birch logs (16.5.2007)
  Russian export tariff could end timber imports into Finland (12.2.2007)

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