Production Insights

The production of softwood lumber in Finland witnessed a modest growth of 1% in the first nine months of 2024, totaling 8.1 million cubic meters. Over the past year, cumulative production reached 10.5 million cubic meters. Despite this modest increase, the challenges faced by sawmill companies are significant, primarily due to the soaring raw material costs. In August, the stumpage price of logs surged by 18% compared to the same month in the previous year, placing considerable pressure on the financial health of sawmill operations.

Price Disparities

Historically, log prices have outpaced lumber prices significantly; since 2010, they have risen by 40% more than lumber prices. Tino Aalto, CEO of the Finnish Sawmill Industry Association, expressed concern over this trend, stating, "Log prices remain very high, even though end-product markets are weak." As the end of the year approaches, expectations for a turnaround in the market do not suggest any imminent relief for the sawmill sector.

Declining Domestic Use

Notably, the construction sector's sluggishness has triggered a decline in domestic wood consumption in Finland. In recent times, annual lumber sales plunged to 1.9 million cubic meters, down from over 5 million cubic meters two decades ago. This reduction reflects restricted construction activity and a waning preference for wood in building projects.

Export Challenges and Trends

Finnish lumber exports faced a 4% decline in the first eight months of 2024, compounding the struggles of domestic firms. However, a 5% increase in export prices has allowed the monetary value of timber exports to remain relatively stable. The most significant markets by volume include Egypt, Japan, the United Kingdom, Estonia, China, and Germany. While exports to countries like Egypt and Japan have shown positive trends, notable declines were observed in shipments to the EU, the UK, and Algeria.

Japan’s Growing Market

Japan has emerged as a vital market for Finnish wood products, with exports increasing by 21% year-on-year in the first three quarters of 2024. Concurrently, Russian lumber exports to Japan also increased, with a 33% rise in spruce lumber—a key element for Finnish exporters. In light of this growth, the Finnish Sawmill Industry Association has urged the EU to enforce robust measures to restrict wood product flows from Russia to Japan, advocating for proactive Finnish policies that align with joint sanctions.

Future Outlook

A cautious recovery in the market is anticipated, potentially materializing no sooner than the latter half of next year. The interplay of rising material costs, fluctuating export patterns, and shifts in domestic consumption presents a complex landscape for timber buyers and suppliers in both Europe and the U.S. Stakeholders must remain vigilant to adapt to these evolving conditions, ensuring sustainable profitability in the face of increasing competition and market challenges.