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China’s pick-up in demand shows in the forest industry's production figures – but recovery of competitiveness is still in the early stages

The forest industry notably increased its production of sawn softwood timber and plywood at the start of 2017, when construction in the main market areas picked up. Paperboard and pulp production also grew strongly, but disparities between product groups in the forestry industry remain high.

The increase in European demand, and especially demand in China, for the industry was visible in the early part of the year. Political risks cast a shadow over growth prospects, however.

“Businesses in the Eurozone have confidence in the future, but increasing protectionism and political risks are a real threat to world trade,” says the Finnish Forest Industries Federation’s Chief Economist Maarit Lindström.

China's economic growth in the early part of the year was due to retail, manufacturing and investment. Demand for forestry products in China comes from the packaging and construction industries, for example.

Production of sawn softwood in the first quarter of 2017 was 3.1 million cubic metres. This is an increase of 15.1 percent over the same period last year. Plywood production grew by 17 percent to 0.3 million cubic metres. Paperboard production was 0.9 million tonnes, or 6.1 percent more than in the same period last year. Pulp production grew by 2.6 percent to 1.9 million tonnes.

Paper production continued to decline, to 1.7 million tonnes. There are a number of reasons for this, such as reduced demand for paper. Paper production was therefore 5 percent below the amount for the first quarter of the previous year.

“Finland’s cost-competitiveness has not recovered from the financial crisis. In the forest industry, differences between product groups highlight the need for improved competitiveness, and for increased flexibility,” Lindström says. “Although the cyclical situation has contributed to raising production volumes, especially in the manufacturing sector, low cost-competitiveness poses a challenge.

Finland's economic growth will be sustainable only when exports are on the road to proper recovery. For this reason, political decision-makers must ensure that the operating environment enables improved investment and greater employment. International companies based in Finland need a level playing field compared to those of competing countries. For example, Germany promotes its industrial competitiveness through a wide range of methods,” continues Lindström.

In addition, the tax reforms planned by the United States put a renewed focus on corporate taxation. Indeed, there are signs of stiffer international tax competition. Finland’s corporate taxation remains competitive for now, but companies want to be sure that the operating environment is also attractive in terms of taxation.

More details: Director, Chief Economist Maarit Lindström, Finnish Forest Industries Federation, tel. +358 40 531 8262