Finnish Forest Industries

Estonian Forest Industries Federation Annual Meeting9.6.2010Anu Islander

2

Forest industry in Finland

• Pulp, paper and wood products industries in Finland in 2009

– Production value € 15 billion– Exports value € 8.5 billion

• Annual domestic investments in the 2000’san average of € 900 million.

In 2009, paper and pboard 10.6 mill. mt (-19% 1) and sawn softwood 7.6 mill. cum (-22% 1)

Forest industry production volumes in Finland since 1960’s

mill. tonnes/cum

2

4

6

8

10

12

14

16

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Paper and paperboard Pulp

Sawn softwood Wood-based panels

0 500 1000 1500 2000 2500

Finland

Sweden

Austria

Canada

Norway

Germany

France

USA

Value (€) of forest industry exports per capita and its share of total exports

Understanding the magnitude of the forest industry in Finland compared to some other countries

Forest industry exports / totalexportsFinland 20 %

Sweden 13 %

Austria 8 %

Canada 10 %

Norway 2 %

Germany 3 %

France 2 %

USA 2 %

5

Forest industry in Finland

• The sector employs approx. 56,000 people domestically– In addition, the personnel of approx. 60,000 abroad

• Significant indirect effects for other sectors– Important customer of products and services of

other industries and transportation– Industrial core for business services

(maintenance etc.)• The entire cluster employs 200,000 people

6

Forest industry in Finland

• Forestry and forest industry is important to over 50 local communities– 50 pulp and paper mills – over 230 industrial sawmills, panel

factories or other wood products companies

• The industry purchases 60 million m3

of round wood in Finland in normal market situation– 90% of wood-sales revenues go to

private individuals

7

The Federation represents over 100 member companies in the forest industries

Lobbying organisation forcompanies engaged inthe forest industry and associated activities in

Finland

Paperproduction and processing

Furniture and Joinery Industry and other wood

products industry

Pulp production

Paperboardproduction

Sawmilling

Panelboard industry

8

The Federation acts as a common voice for the industry

• Promotes the building of competitive operating and investment environment

• Promotes industrial activities in accordance with the principles of sustainable development

• Represents the common interests of its members in labour market issues and concludes collective labour agreements for the industry

• Provides its members with expert advice on the legislation and regulations governing the practices of the forest industry

• Acts as an forum for information for its members • Promotes a positive public image of the industry

Focus on present and future at the same time

CostcompetitivenessStructures and strategiesOperating practicesDevelopment of existing products, processes and technologies

Current products

and business

operations Broad-basedcompetencesInvestments into new technologies, business functionsand productsGlobal productionnetworksR&D and innovations

New products

and business

operations

9

10

The Federation’s main objective

Finland is a competitive and innovative operating environment for the production, employment and investment of the forest industry

Issues

Organisationstrategy

Informationstrategy

Lobbyingstrategy

11

Decision making and committee structure

Annual MeetingsBoard of DirectorsExecutive Board

Energy Committee

ForestCommittee

Researchand

TechnologyCommittee

EnvironmentCommittee

Finnish Forest Industries – Operating model 1.2.2010

1.12.2008

Furniture and JoineryIndustry

Converting and Packaging Industry

New Business Areas

Paper and Pulp Industry

Biomass and BiofuelIndustry

Building with Wood

Sawmill Industry

Information and Administration Services Anu Karessuo

Communications Helena Aatinen

Wood-Based PanelIndustry

Board / Executive Board

Director General Timo Jaatinen

AndersPortin

Collective BargainingWood ProductsIndustry and ForestSector

Collective BargainingPaper Industry

Employees’ Collective Bargainingand Wellbeing at work

Skills

Jari Forss

Research,Development andInnovations

Competitiveness

Standardisation

Antro Säilä

Metry Oy DataManagement

Labour Market Business Environment and Innovation

SustainableDevelopment andResources

SustainableForestry

Infra-structure

Russia-Co-ordination

StefanSundmanEnergy

Environ-ment

EU-Co-ordination

13

55 experts of the Federation represent

• Labour market issues• Sustainable forestry• Energy issues• Transportation infrastructure• Environment• Education, research and development • Competitiveness• EU affairs• Russian affairs

The Federation is a member of the Confederation of Finnish Industries EK

• The objective is the creation of an improved, more competitive operating environment for business life and industry in Finland.

• 44 branch associations• 16,000 member companies with personnel of 920,000

14

15

The Federation’s participation in international organisations

• CEPI (Confederation of European PaperIndustries)– The interests of the European pulp, paper and

paperboard industries in the EU

• CEI-Bois (European Confederation of Woodworking Industries)– European wood products industry in EU

• ICFPA (International Council of Forest and PaperAssociations)– The organization of world’s forest and paper

industry associations

Raw material mainly from privately owned forests Private forest owners share is 65 % of forest land

Non-industrial private65%

State25%

Companies &

others10%

• The industry is very dependent on privately owned forests – 80% of domestic raw material– 440,000 forest properties– More than 150,000 timber sale

transactions annually

16

SOURCE: FFIF, Metla

Origin of the wood used by forest industry in 2009

Private forests 34 mill.m³

65 %State forests 5 mill. m³

10 %

Imported wood 8 mill. m³

15 %

Company forests 5 mill. m³

10 %

Total 52 million m3

(66 million m3 in 2008)

0

20

40

60

80

100

120

1990 1995 2000 2005 2010 2015 2020

milj. m3

Annual growth of forests

Annual allowable cut

The use of domestic wood can be increased

Industrial use of wood

Domestic wood Imported wood

18

19

There is enough wood – the challenge is to get in on the market

• Targeting at continuous and constant domestic timber trade at competitive cost level

• Political means to promote timber trade are essential:– Taxation– Forest data and management plans available

for all parties in forestry– Extensive and strengthened service and

information offering– Competitive transportation alternatives:

Roads and railroads

20

Forest certification extensively used in Finland

• Forest owner is obliged to give a forest use declaration to the forest authorities prior to felling– This procedure ensures legality

• In addition, 95% of the forests in Finland are certified according to PEFC.

• Ongoing discussions regarding standards for FSC in Finland

Pulp, paper and wood products industries use the wood efficiently for different purposes –Best preconditions to continue as renewable energy driver

21

• Experience and knowledge on – sustainable forestry– wood procurement and forest ownership– infrastructure and logistics to handle

massive amounts of biomass– combined heat and power production with

85-90% efficiency ratio• Second generation biorefinery

technology to produce – wood and paper products, – electricity, heat, biofuels for transportation – green chemicals

Increasing bio-energy needs efforts to increase wood mobilisation

In Europe, forest residues are not fully underutilisatedThe use of waste in energy production should be promoted

Forests

Forest management

Wood procurement

Transportation

Sorting and drying of timber

Logs

Pulp wood

Forest residues: branches, stumps

Bio-slurriesBy-products

Wood products

PulpPaperBoard

BiodieselHeatElectricity

Recycling

R&D and innovations – Sustainable solutions to the present and future consumer needs

22

Wood fibres and constituents

Green chemicals

Combinations of wood and other materials

Pharmaceuticals and wellbeing products

Packaging

Biopolymers and “bioplastics”

Energy and biofuels

Wood raw material

Next-generation wood and paper-based products

New technologies

Intelligent wooden structures

Forest industry is developing the Finnish innovationenvironment and common resources are aimed to common focus

Aalto University basic capital EUR 4 mill.:• To streghten the innovative environment for the forest

sector• Companies search top universities for their partners in

cooperation• Ensure sufficient financial operational preconditions for a

new unit

• Common research strategy for the Forest Cluster

• Research strategy for the wood product industry– Finnish Wood Research

• Forest-Based Sector Technology Platform as an European tool

23

24

Biorefineries diversifies forest industry

• New products, like biofuels and biochemicals, biocomposites and –plasticsand other biomaterials– Raw material – wood and other biomass

• Forest industry future potential growth areaswhere new competitive advantage is created– Pulp mill is already a biorefinery!

Sustainable development changes consumption – futureproducts of wood

By Nanotechnologywater resistant ultrathin paper

Medicine from wood

Biofuels

Intelligent packages

Intelligent, reactivewood construction

Xylitol from birch

Reactive papers and packages

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As a by-product of forest industry Finland reach the targets of renewable energy

Competitive forest industry• Export and tax incomes increase• More renewable energy from forest industry• Need for subsidies moderate• Biorefinery investments (enough chips)

38% target of renewable energy will be achievedFI FI

+

2009 2020

27,5 %

38 %

+

FI

2009

27,5 %

38 %

?

FI

++

Weak operational environment• Export and tax incomes decrease• Production of market based renewable energy decrease• Need for subsidies grows substantially• Biorefinery investments to other countries

38% target of renewable energy will break away2020

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27

Number of forest holdings (over 2 ha) in 1750-2005

0

100

200

300

400

500

1750

1770

1790

1810

1830

1850

1870

1890

1910

1930

1950

1970

1990

2010

1 000 kpl

Croft yard Independent Total• Number of forest holdings has

doubled from 1930• Forest land is inherited in family

– Heritage/gift 45 %– Purchase from family 40 %– Purchase from markets 15

%• The age of forest owners has

risen (2009 60 y, 1990 54 y)

Private forest ownership is fractured

0

20 000

40 000

60 000

80 000

100 000

120 000number

Number of forest holdings by size

30 %

13 %

4 %1 %

• 80 % owns forest below 50 ha• Number of forest owners 443 478

(medium size 24 ha)• 76 % family owned, 14 % association, 11

% heirship group• Decision making of heirship groups

28

25 % 27 %

29

Small size of forest holdings

• Causes loss in efficiency– Purchase (number of transactions)– Harvesting (borders)– Transportation of machines– Logistics

• No big meaning of incomes selling wood• Financial meaning of forest holdings is low to

owner – other values• Small holdings on roundwood markets only in

high boom

30

Development project

• Ministry of Agriculture and Forestry started a development project to improve the forestholding size and structure

• National Forest Program target is 50 ha by2050

• Legislation• Taxation• Reorganization of forest holdings• New ways to own land• Investment funds/Real estate funds

31

Forest industry targets

• Forest ownership as professional source of livelihood

• Active ja planned forestry• Reward active forestry and selling wood• Passive forestry unprofitable• Taxation• Prevent forest holdings fracturing• Speed up the change of ownership in lifetime• Only one owner per forest holding – Decision

making simple• More supply of forest holdings to increase the

size