More and more people are competing for the forest raw material. The ongoing war in Ukraine has sharply reduced Russia's export volumes to Europe. This creates a shortage of supply and leads to a strong price development that benefits Swedish forest owners. At the same time, the risk of shortage of wood raw material is growing. The Swedish forest industry is also facing challenges, such as biodiversity and increased regulation from the EU. This is stated in Handelsbanken's latest report on the Swedish forest sector.<\/p>\n
''We ask ourselves if the forest raw material is enough. There is a shortage of supply of wood products, as well as paper, cardboard and pulp, while demand continues to develop strongly. This, together with higher energy prices and other costs, means that prices are now rising,'' says Christian Kopfer, equities analyst forest and raw materials at Handelsbanken.<\/p>\n
Strong price development on forest land<\/strong><\/p>\n According to Handelsbanken, there are several explanations for the extra strong price development on forest land over the past year. There is still great interest in owning forests, it is partly about forest land attracting capital from extra volatile capital markets and that there are new types of buyers, especially in northern Sweden.<\/p>\n The future prospects for forest land prices are good. In the report, Handelsbanken assesses that previous value drivers such as increased interest in settlement abroad and climate awareness will lead to a continued stable rise in prices. However, there are also factors that risk affecting prices negatively in the long run.<\/p>\n ''We assess that increased restrictions on the forest owner's right to decide on felling plans and increased attacks from, for example, bark beetles, but also rising Swedish long-term interest rates may affect the value negatively,'' says Ola Josefsson, segment manager forest at Handelsbanken.<\/p>\n The Swedish timber market is facing strong upswings<\/strong><\/p>\n Timber prices have developed well over the past two years and continue to strengthen. The market for sawn timber products is likely to strengthen further in the coming quarters, as Russian export volumes to Europe fall sharply. Handelsbanken, on the other hand, sees more sensible price levels into next year, when they expect an increased supply to gradually reach the market, while demand will probably continue to develop in cyclical patterns.<\/p>\n Many have a good knowledge of their local timber market, but the fact is that there are large price differences in the country with prices up to 50 percent higher in southern than northern Sweden.<\/p>\n ''We assess that the relatively higher prices in the south have partly to do with the buyer side being more fragmented compared with the rest of the country. The price differences may lead to an increased export of timber from the central to the south of the country, but the economic incentives decrease in step with rising transport costs due to the sharp rise in fuel prices,'' says Ola Josefsson.<\/p>\n Pulpwood prices are expected to rise<\/strong><\/p>\n Swedish forest owners have reason to be optimistic about the price development for pulpwood in the future. The lack of imported Russian timber for the Finnish forest industry also affects supply in Sweden. At the same time, Swedish demand for pulpwood will also increase when SCA puts a new cardboard factory into use at the beginning of next year.<\/p>\n ''All-in-all, we expect that the prices of pulpwood are facing a clear rise throughout the country, but above all in the central and northern parts. We will not be surprised if pulpwood prices rise by SEK 50 to SEK 100 per cubic meter in some years' time,\u201d says Christian Kopfer.<\/p>\n The Species Protection Ordinance can lead to increased costs<\/strong><\/p>\n An example of regulations linked to biodiversity that have generated some headwinds for Swedish forestry is the stricter application of the Species Protection Ordinance presented by the Swedish Forest Agency in early February 2022. The Swedish Forest Agency's message created a heated debate, as new practice increase costs and the administrative burden for the individual forest owner.<\/p>\n Since then, the Swedish government has agreed to review the species protection ordinance in the light of the debate that arose. Although the final amendments to the Species Protection Ordinance are not yet known, it is expected that the bird protection will be reduced and that uncertainties about how the ordinance will be interpreted will be eliminated.<\/p>\n ''At the same time as it is positive for the forest sector to review the application of the Species Protection Ordinance again, we see that issues concerning biological diversity have an increasing impact on the forest sector,'' says Josefin Johansson.<\/p>","protected":false},"excerpt":{"rendered":" More and more people are competing for the forest raw material. The ongoing war in Ukraine has sharply reduced Russia’s export volumes to Europe. This creates a shortage of supply and leads to a strong price development that benefits Swedish … Continue reading