PTT Forecast Expects Mixed Bag for Finland's Forest Products Sector in 2019

Some modest growth was finally seen in paper exports last year, as well as in the price of several paper products. However, prices as well as export volumes are expected to fall slightly this year, says PTT.

April 26, 2019 - Pellervo Economic Research Centre's (PTT) forecast for Finland's forest products sector shows weaker prospects for the forest industries this year. An upturn is expected next year as the global economy recovers. Pulp exports will grow slightly this year, although export prices will fall from last year's peak levels. Sawn good exports will fall slightly this year, due to the market in China and North Africa.

Export and Price of Paper Will Decline Again

Some modest growth was finally seen in paper exports last year, as well as in the price of several paper products. Prices as well as export volumes are expected to fall slightly this year as the growth of private consumption declines in key market areas. The mean price of paper is expected to decrease 1-2 percent this year and next. The shutting-down of Stora Enso's paper machines at the end of 2020 will not pose a significant impact on paper export figures for the forecast period. The declining trend in paper demand will continue in the long term. Paperboard exports will see steady growth, with both exports and production volumes bolstered by solid demand.

Pulp Price Has Fallen from Record Levels

The capacity of pulp production in Finland clearly increased last year, and the increase in production will be reflected in the current year. The price of pulp rose sharply through the end of last year, when a sharp decline began. The decline in the price of pulp on the Chinese market has already ended, but the decline in Europe has continued to this day. If threats to the global economy, such as US-China trade war, do not lead to a widespread crisis, the decline in pulp prices is expected to end soon in Europe as well. The demand for pulp in general is expected to continue to grow in the coming years, a move driven by China especially.

No significant increase in pulp production capacity is expected in the forecast period. The price of pulp is expected to fall by 6-8 percent from last year's peak prices this year, but to remain at a high level. The global economy is expected to pick up again in 2019, resulting in a slight increase in the average pulp price.

Sawn Goods Exports Expected Will Continue to Contract

The production volume of sawn goods will decline -1-0 percent in 2019. Exports of both pine and spruce timber will decrease. The decline is due to the slowdown in China's economic growth and the oversupply in the North African sawn goods market. European demand for sawn goods will be bolstered by favourable economic conditions and a broad increase in construction investment.

Export prices for sawn goods are expected to decline this year and next, driven by China and North Africa. The price difference between spruce and pine timber will widen as the export price of pine sawn goods fall by 3-4 percent this year; the fall in the spruce sawn goods price will be 2-3 percent. The operating result of the wood products industry will weaken from the previous year but will be supported by a healthy price level of by-products.

Pellervo Economic Research (PTT) is an independent applied economics research institute and a registered non-profit organization. To learn more, www.ptt.fi