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Review of the forest industry and CTL method

Hannu Kivelä
Director, Strategy and Customer Cooperation
Ponsse Oyj

In 2007, the profitability of the wood product industry improved and the building sector in Europe reached an all time record. However, the building sector continued to slow in North America and its rate also slowed down in Europe towards the end of the year. The pulp and fine paper market, in turn, developed favourably throughout the year. All in all, the profitability of the paper and pulp industry improved despite the fact that price trends were unfavourable, due to the oversupply of magazine paper. The prices of magazine paper, too, have increased slightly at the beginning of this year. Forest industry raw material prices rose considerably in 2007, though the cost trend is expected to calm down in 2008. Timber costs, too, rose markedly throughout the year. Although the year 2007 was all in all still difficult for the forest industry, the demand for cut-to-length forest machines rose considerably, worldwide. The competitive market, high costs and high timber prices in particular reduced the profitability of the forest industry and directed investments at improving wood procurement and at costeffective cut-to-length machines. In the beginning of 2008, it is difficult to predict the direction that the forest industry will take. The fall of demand in the building sector in North America has led to oversupply, which is currently looking for new targets. Owing to the fall in building volumes, the demand for wood products has been falling, particularly in North America but also in Europe since mid-2007, and the trend is not expected to show any growth until the year 2009. Demand for forest industry products in new markets, such as China, Russia, South America and India, will continue to grow despite the threat of recession. Strong growth will continue in the Russian market in particular. Of the single markets, felling volumes are expected to rise in Finland and partly in Germany, as compared with the previous year.