Pulp investments planned in Finland are set to significantly increase demand for wood by 2018 – in fact so much that supply from private forests will have to increase by ten million cubic metres per year.
VP, Stakeholder Relations, UPM Energy and Public Affairs at UPM, Stefan Sundman, emphasises the importance of increasing wood supply from private forests to the successful rollout of forthcoming pulp investments.
“The wood market has been steady in recent years. As a result of new projects, the demand for pulpwood is increasing by six million cubic metres annually. To meet this demand, ten million cubicmetres of timber will have to be felled.”
Current supply is not enough to satisfy demand. More wood will have be sourced from somewhere, which presents tangible opportunities for growth. Finland could afford to increase its timber harvesting by one third without exceeding sustainable felling levels.
If the ever-growing demand for wood can be met through domestic supply, stumpage earnings for forest owners could climb as high as €350 million per year.
However, there is a challenge: Almost one third of Finland’s commercial forest area has not been managed or felled over the last 30 years. Increasing wood supply also requires committed efforts from the government.
“Currently, passive forest owners are not encouraged to trade their wood and manage their forests,” affirms Sundman.
“We should encourage the formation of larger forest properties rather than splitting them up,” he adds.
With forest properties shrinking in size, owners are less motivated to manage them. Measures promoting larger forest properties could include tax relief when land is passed to the next generation, or a fixed-term tax exemption in sales profit when smaller forest properties are integrated.
Another novel approach to increasing wood supply is the new type of jointly owned forest that UPM is promoting.
Efficient wood supply also requires an optimum infrastructure for transporting wood. The miles of paved road in need of repair will triple in ten years, and the financing gap for their repair will increase annually by €250 million.
“The forest industry has a notable impact on employment. The sector is also important in terms of export revenues. If Finland hopes to maintain its significant role in wood processing, we have to secure wood supply both for current mills and future investments. To promote economic growth, we must make sure that new investments will not simply directly replace smaller mills.”
A proactive approach to forestry is the best climate policy. The planned pulp investments are estimated to increase renewable energy production in Finland by approximately three percentage points.
“Pulp mills produce a vast amount of renewable energy. It is therefore crucial that we build a sound future for of our bio-refineries and pave the way for new investment,” concludes Sundman.