The change negotiations announced in October regarding the closure of the Suolahti plywood mill have been concluded.
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The same story continues. The coming years will show who runs out of patience first: UPM, SE, or Metsä?
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The Kemi pulp mill was specifically built to export pulp abroad. Pulp is, of course, a type of processed product, but its scarcity is more influenced by the fact that pulp is practically only produced in the Northern Hemisphere or South America. In the latter, the pulp is not as dense and durable.
As a forest owner, the forest’s life cycle is so long that wood should not be wasted on a cheap processed product that is exported to Asia for toilet paper production. Instead, products should be processed further – the forest industry’s profits are huge, but investments, to put it bluntly, only go into optimizing the factory process (I have worked in the forest industry for 20 years) and minimally into anything else. At least I don’t care to sell even at these prices…
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You probably haven’t sold before then?
Many beautiful words about how a forest owner could get a better price if timber were processed further. Perhaps, but such projects have been spun in labs and test facilities for decades, and nothing truly profitable has come out of the pipeline. Furniture isn’t really made here anymore either, so even birch isn’t suitable for processing anymore.
That just tells me that price competitiveness isn’t sufficient, for example, to replace products that use hydrocarbon-based materials. So it costs too much to produce, and customers are not willing to pay a premium. On top of that, the raw material is limited, so the return should preferably be at a better level than old businesses. Demands for even better timber prices than current ones don’t really fit the equation.
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As a forest owner and shareholder, my understanding is that the price of wood depends solely on the state of supply and demand, completely regardless of the wood’s end use. It’s unlikely UPM or Stora would pay any more per cubic meter, even if the final product fetched a higher price per cubic meter.
From a national economic perspective, processing would certainly bring additional euros, but not for the forest owner.
Yesterday, I put three hectares into final felling and a couple of hectares of 30-year-old spruce forest into thinning. Indeed, the closing of the eastern border is nicely reflected in stumpage prices 
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Even at the risk of excessive pedantry, it must be reminded that the Northern Hemisphere has approx. 68% of the Earth’s land area and 90% of the population, and an even larger share of pulp demand. 
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Of course I am. But in the current situation, I am by no means forced to sell, and I can set my own demands, regardless of whether the market responds to them at all.
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How do you manage your forest at all if you don’t thin it or sell timber from it?
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Don’t worry, you can do it yourself. And you don’t have to sell the wood immediately when the first three meters reach sawlog diameter. After that, the tree’s lifespan has 3-4 decades left.
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A bit of speculation on what would yield under what conditions, but the article below claims that by capturing CO2 emissions from the forest industry, a significant added value, up to 8.6 billion euros, could be achieved.
How this would then be distributed between the processor and the forest owner naturally depends on the price of the forest, but it would certainly create conditions to pay higher prices for wood.
Stumpage revenues were approximately 3.0 billion euros in 2023.
The capture of 20 million tons of biogenic carbon dioxide annually produced by the forest industry could generate an added value of up to 8.6 billion euros for the Finnish economy by 2040, says Professor Jani Lehto of the Natural Resources Institute Finland.
https://www.luke.fi/fi/tilastot/kantorahatulot/kantorahatulot-2023
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Sawn timber can be produced with reasonable efficiency anywhere with a tractor and a field sawmill. Pulp production requires a billion-euro facility. Cardboard production requires an even larger machine line.
So, what is the idea based on that pulp would be a product with less added value than lumber? Of course, even poorer raw material is sufficient for pulp production.
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The perspective is probably the forest owner’s, as much less is paid for pulp material.
Wrong. Forest owners love pulp mills because they generate a large (purchase) volume.
The forest owner does not decide the end use of the wood; the industry does.
From an economic perspective, it would be best if the annual timber growth were utilized in a way that maximizes the selling price per cubic meter at a Finnish port, whereby an economist would think that each cubic meter brings as much benefit as possible to the Finnish national economy, because timber growth is limited.
For so long, forest owners have sold pulpwood for boilers at such a negligible price that at least I feel no bad conscience about current prices.
Hopefully, the industry can raise its prices so that Finnish companies also benefit from it.
P.S. Forest owners also love sawmills, because without them, there would be no separate market for logs.
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The price of wood has risen, but it must be remembered that the price was determined by a cartel some time ago, not by the market. Now demand determines the price.
There are two different views on whether Finland can sustain this logging volume; it seems to depend on who you ask, but gaps have started to emerge, and it’s foolish not to make a logging plan now if the forest plot is in a suitable growth stage.
In my opinion, Finland made a mistake regarding peat; now wood is being burned instead, when it could be used more economically for the national economy.
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One could imagine that electric boilers will largely replace combustion-based district heating production in 5-10 years. This way, there would be more wood available for the needs of the forest industry. Of course, some combustion-based investments are only at the beginning of their lifespan, but development has been rapid.
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The forest industry in Finland had a cartel for a long time. They used to buy a small amount of wood from Russia “at a high price” to keep Finnish wood cheap. But that’s no longer possible. Pulp companies had also surely agreed on the maximum price that could be paid for pulpwood. And each company had its own territory where others wouldn’t easily tread. Fortunately, all this is over. Energy companies are keeping the price of pulpwood very high. And at least here in the strong MG area, Enso is making good offers for logging sites. Which hopefully will raise MG offers that are terribly bad.
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I don’t personally believe in the cartel theory, but it was a difficult and imbalanced market for the seller when there are only 3 large buyers for pulpwood, but tens of thousands of small sellers. And in addition, over 10% of wood could be imported from abroad. With such a setup, 20 E per cubic meter was enough for pulpwood.
Now is a good time to sell wood at a good price and invest the money elsewhere than in forests. Preferably, diversify the portfolio outside of Finland. I don’t believe that the current price level will still apply in 5-10 years. Older processing plants will likely be closed, and thus the demand for wood in Finland will decrease. Similarly, the consumption of energy wood will likely decrease within 10-15 years. With the current pulp price, the pain threshold for wood prices seems to have been reached, as pulp mills are being idled in Finland.
I just wonder where that long-fiber pulp will be made then, as pulp mills in North America have also apparently been closed due to forest damage. The same problem in Central Europe. Now even in the Nordic countries, there isn’t enough wood, but plastic products should be replaced with wood-based ones. Russia would certainly have wood, but not a sufficiently good forest road network to get the wood to the factories. Otherwise, Russia could export pulp to China.
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Forest company share prices have recently risen. But is the worst yet to come?
”Chilling news may come from the United States at the beginning of the new year, because the next president Donald Trump intends to, as his first actions, impose a 25 percent tariff on all products coming from Mexico and Canada. If additional tariffs are imposed on Europe, they could be fatal for the Finnish forest industry and, at worst, lead to factory closures.”
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It has been over 20 years since the cartel accusations; it was believed to have occurred (possibly) between 1997-2003. And it couldn’t be proven properly either, because no one received compensation in the damages lawsuits. Of course, only a few large players can inherently determine the cost level at least to some extent.
With a quick Google search for the cartel I’m referring to:
The last time forest companies were caught in a raw wood cartel. The Market Court sentenced Stora Enso and Metsäliitto to tens of millions in penalty payments in 2009. UPM revealed the cartel to competition authorities and thus avoided payments.
There were many forest owners involved in a class action lawsuit at that time, but they did not receive compensation. If the compensations had been paid with interest, the companies would have collapsed immediately.
At that time, if I recall correctly, UPM announced that for a finished product / purchased wood m3, there was still a profit of 170e per m3, meaning there would have been room to raise the wood purchase price. Now, of course, the margin on the final product is worse than during the golden age of paper.
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