European spruce bark beetle. It has caused severe damage for the forests of Central Europe. Because of this, damaged spruce forests in particular have been felled hastily. “Storm and insect damage in Central Europe caused market disturbances last year, and the prices of low-quality sawn timber decreased considerably, especially in North Africa,” says Matti Valonen , Forest Economist at Pellervo Economic Research PTT. According to Auvinen, the volumes of insect damage in Central Europe are immense, and are expected to continue at the current level. Despite the oversupply of low-quality wood, there will be a shortage of sawn timber. Auvinen believes that the insect damage situation will affect the production structure of the entire sawmill in- dustry long term. When the raw material pool decreases, production will also decline. “Central European sawmills are currently very com- petitive in terms of prices. In the long run, however, the winners will be the areas with no insect damage, such as central and northern Sweden, the Baltic countries and Finland,” Auvinen predicts. According to Koskinen, the sawmill industry around the world has been modernised in recent years, and modern capacity has also been established in Eastern Europe and Russia. Koskinen sees Metsä Fibre’s new sawmill invest- ment in Rauma as a response to this competitive situation.
Exports of Nordic sawn timber to China and the 12-month average
THE CHINESE MARKET HAS DOUBLED In addition to the COVID-19 pandemic, two major long- term trends are affecting the sawn timber market: growth in China and climate change. The Chinese sawn timber market has doubled in ten years or so. Thanks to China, Asia’s share of the world market will soon be equal to that of North America or Europe, including Russia. China is a major export market for sawn timber, espe- cially for Russia. Higher-quality sawn timber is exported from European countries, such as Finland, to be used as a raw material in the furniture industry in particular. “China’s furniture exports have been severely affected by the COVID-19 pandemic,” says Anna Ni , Senior Advisor at the Shanghai office of Business Finland. “Now that China cannot rely on the development of ex- ports, they are trying to accelerate domestic consumption and start infrastructure construction projects,” says Ni. “It’s very difficult to say how long it will take to recover from the COVID-19 pandemic. This also depends on the trade agreement situation,” Ni points out. INSECT DAMAGE IS AFFECTING THE MARKET The effects of climate change are reflected in the sawn timber market in two ways. Increased insect damage has had the most acute impact. One of the main culprits is the
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“Finland has had something of an investment backlog in the sawmill industry, but now we will have new modern sawing capacity,” says Koskinen. A BOOST FOR WOOD FROM GREEN GROWTH IN THE EU? The increasing popularity of wood-based construction has been discussed for a long time. Climate change is acceler- ating the shift from talk to actual changes. Auvinen also sees signs of this in the EU’s green growth and recovery programmes. He points out that wood is the only renew- able and carbon-neutral raw material in the construction industry. Cross laminated timber (CLT) capacity has in- creased, and wood-based construction is trendy. “In construction, it is essential to consider emissions over the entire life cycle, from the production of building materials to the usage phase of the building and beyond. Increasing the use of sawn timber products is a significant opportunity to reduce emissions,” says Auvinen. Koskinen points out that CLT still plays a minor role in the sawn timber market in terms of size, but its role is more significant in terms of product value. “This is undoubtedly a growing market, particularly in Central Europe. CLT has a somewhat established position,
especially in countries where wood-based construction is popular in the first place. There has also been some hype in North America, where investments have been made and are being planned,” says Koskinen. Sustainability originally emerged as a theme in the sawn timber market through certification of the wood's origin. In other words, because of climate change, attention has also been drawn to the role of wood raw material, as well as the energy efficiency of production. “The emphasis is on sustainability, especially in Europe. The certification and origin of wood must be appropriately managed,” says Koskinen. “Responsibility and sustainable development are also emerging trends in China,” says Anna Ni. “Sustainability is important to the younger generation in particular. They have a better understanding of the im- portance of sustainability.” According to Ni, wood-based construction is increasing in China as well, but not as rapidly as other construction. There are some obstacles to growth, such like fire preven- tion standard and land property. “Wood-based construction has potential, but its mate- rialisation will take years, if not decades.” •
Global sawn timber demand by region (2019)
ASIA MIDDLE EAST AND NORTH AFRICA LATIN AMERICA RUSSIA OCEANIA EUROPE NORTH AMERICA
GLOBAL DEMAND TOTALLY 340 MILLION M 3
THE GROWTH OF TOTAL GLOBAL DEMAND 7.6 MILLION M 3
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Matti Valonen Forest economist at Pellervo Economic Research PTT. PTT is an independent app- lied economics research institute and a registered non-profit organization.
Sampsa Auvinen President of the European Organisation of Sawmill Industries (EOS).
Anna Ni Serves as an expert at the Shanghai office of Business Finland in China.
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