Around the world industry

The Swedish Forest Industry: Fight or Flight?

The Swedish Forest Industry: Fight or Flight? 

The Swedish forest industry is continuing its booming level of growth.

Interest in wood products is the highest ever and the price of pulp has reached new record levels. Over the last two years, the price for timber and plank has risen globally, which set up a favourable situation for Swedish sawmills, which together constitute the third largest exporter of wood products in the world. The pulp industry also benefits from this where the price for barley sulphate pulp has reached similar record-breaking levels.
Multi-billion investments made by SCA B (-0.88%), that has opened a new facility in Östrand in the summer, means a considerably increased production of pulp in Sweden. This coincides with historically high pulp prices now reaching $1,130 per ton. Should the demand for timber continue to rise until Easter, it would mark the longest 30-year price increase. There is simply no room for scepticism. The industry itself is cyclical in nature, but unlike earlier times, the price spike for timber has been steadily and continuously rising this time around.
The reasons for the cyclical peaks are the lack of pulp and wood while the order books continue to be well-stocked. For the timber market, China is a key player – the country imported 24 million cubic meters of barrels in 2017. But with such a market impact there are also risks involved.
Should there be a settlement in China, it would affect the entire world market.

Even though the forest industry is in a golden position, there should be cause for concern.

Due to the cyclical nature of the industry, it is difficult to predict whether it will stay at such levels or whether a drop could happen in the future.
According to Professor Sten Nilsson, he has taken a more careful and vigilant approach.
“The market swallows everything” as it says in the newspapers. But the industry does not exude self-esteem and scepticism as it should. Mr. Nilsson has serious thoughts about where Swedish forestry is heading.
It is usually said that anything that can be produced from fossil oil, can today be produced from cellulose fibers. The forest industry has thus been very successful with BIO in the bioeconomy but worse with the economy as a whole. The forest’s green gold is still very volume-oriented and not value-oriented.
Without the forest industry’s exports, Sweden would have a negative trade balance of a total of approximately SEK 20 billion. This is often used as income for the forestry industry and of crucial importance for Sweden. But what’s interesting is how much per cubic meter of wood that contributes to the country\’s economy – An international comparison shows that Poland, Sweden and Finland are at the bottom of the line.
The forestry industry’s twin-brother is consequently, also affected by this volatility; the sawmill industry. Since 1900, the industry has kept relatively stable years under 30 percent of the years, while 70 percent have been difficult. This is remarkably untrue for a country that uses such high quality raw material as Swedish saw timber. The paper industry finds an interesting correlation.
Now there are positive issues from the paper industry: And indeed, in the period 2010-2016, demand for cardboard boxes increased. However, this increase has not yet, despite e-commerce, compensated for the loss of graphic paper production. The demand for tissue is certainly increasing – but it is mainly in developing economies while stagnating in developed economies.
The increase in market mass is mainly in developing economies. Most of the pale soluble foliage from the southern hemisphere increases with raw materials such as fast-growing eucalyptus and acacia. But the biggest threat to producers of barley comes from genetic engineering in the production of eucalyptus. Major investments are made in Brazil. How is this to be tackled? Answers are still unclear.
If the northern hemisphere forest industry is to survive, one must begin thinking about competitive systems. As the forest industry affects several different related ones, it will be of great interest to be both a spectator, and a player in such an influential field.
The question remains, does it trigger a fight or flight response?

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