Introduction
Finland, often called the “land of a thousand lakes,” is equally renowned for its vast forests, which cover over 70% of its land area, making it Europe’s most forested country. The timber industry has long been a cornerstone of Finland’s economy, contributing significantly to exports, employment, and national wealth. However, in recent years, a timber shortage has emerged as a critical challenge, reshaping the industry in profound ways. Triggered by geopolitical shifts, environmental regulations, and competing uses for wood, this shortage has forced Finland’s timber sector to adapt through innovation, diversification, and a focus on high-value products. This article explores the causes, impacts, and future directions of the timber shortage in Finland, drawing on recent developments in 2024 and projections for 2025.
The Roots of the Timber Shortage
The timber shortage in Finland is a multifaceted issue, driven by a combination of external and internal factors. Below are the primary contributors:
1. Ban on Russian Timber Imports
Before Russia’s invasion of Ukraine in February 2022, Finland imported 7–10% of its raw wood from Russia, with southeastern regions relying on up to 20% Russian timber. The EU’s subsequent ban on Russian wood imports, coupled with sanctions, halted this supply abruptly. In 2022, wood imports to Finland dropped by 56% to 5.5 million cubic meters, with Russia’s share falling from 75% to 27%. This loss was not easily offset, as alternative suppliers like Sweden, Estonia, and Latvia could not fully compensate due to their own supply constraints. The closure of Stora Enso’s Sunila pulp mill in Kotka in 2023, cited as unprofitable due to the lack of Russian timber, was a direct casualty of this disruption.
2. Increased Domestic Wood Demand
The shift to alternative energy sources in Finland has intensified competition for wood. With thermal power plants moving away from peat and coal, wood chips and pellets have become critical for bioenergy production. In 2022, roundwood used for energy production rose by 3% to 13.4 million cubic meters, further straining supplies for traditional timber processing. This trend is expected to continue, with bioenergy demands projected to grow in 2025.
3. Environmental Regulations and Carbon Sink Obligations
The European Union’s carbon sink policies, aimed at achieving carbon neutrality by 2050, have limited forest harvesting in Finland. Forests act as carbon sinks, absorbing CO2, and excessive logging could turn the land-use sector into a net emitter. According to the Natural Resources Institute Finland (LUKE), if domestic harvesting increases as projected, the land-use sector could emit 0.5 million tons of CO2 equivalents by 2035. In 2023, roundwood removals totaled 58.6 million cubic meters, 5.4 million less than the previous year, reflecting cautious harvesting to meet EU obligations.
4. Declining Forest Growth
Forest growth in Finland has slowed in recent years, with annual growth estimated at 110 million cubic meters. Factors such as climate change, aging forests, and reduced soil fertility are contributing to this decline. Harvesting levels, which reached 69–73 million cubic meters in 2023 (86–91% of the maximum allowable), are nearing sustainable limits, leaving little room to replace lost imports.
5. Economic and Market Pressures
The Finnish timber industry faced a market downturn in 2022–2023, with sawmill production falling nearly 10% in the first four months of 2024 compared to 2023. High inflation, reduced construction activity, and a sluggish global economy have dampened demand for wood products, while rising log prices—reaching a 15-year high—have squeezed profit margins. The Association of the Sawmill Industry reported a drop in production from 12 million to 10 million cubic meters, signaling an acute shortage.
Impacts on the Timber Industry
The timber shortage has had far-reaching effects on Finland’s forest products sector, from sawmills to pulp and paper industries, prompting structural changes and operational challenges.
1. Mill Closures and Job Losses
The shortage has led to mill closures, particularly in southeastern Finland, where reliance on Russian timber was highest. The Sunila pulp mill closure eliminated jobs and disrupted local economies. The broader industry, which employs 160,000 people directly and indirectly, faces rising unemployment, with long-term unemployment expected to peak by the end of 2024. The economic downturn has hit construction hardest, with employment at a 25-year low, indirectly affecting timber demand.
2. Soaring Timber Prices
Log prices have surged to a 15-year high, with pulpwood prices in 2022 averaging €64–71 per cubic meter, a 19–62% increase from the previous year. This has made raw materials nearly as costly as finished lumber, eroding profitability. Jacob Donner-Amnell from the University of Eastern Finland predicts a prolonged period of high prices, warning that “wood may not be enough for everyone.”
3. Shift to Alternative Suppliers
To mitigate the loss of Russian timber, Finland has increased imports from Sweden (18%), Estonia (21%), and Latvia (21%), with smaller batches from Latin America and Africa. However, these sources are insufficient to meet demand, and rising import prices add further strain. For 2025, Finland is expected to ramp up pulpwood imports from Nordic neighbors, though Sweden’s planned harvest reductions may complicate this strategy.
4. Reduced Export Value
In 2023, forest industry exports totaled €12 billion, down 8% in real terms from the previous year due to high inflation and reduced volumes. While paperboard (27%), paper (20%), pulp (20%), and sawn goods (15%) remain key exports, the wood-products sector saw a 12% decline in export earnings to €4.1 billion. The timber shortage has constrained production capacity, limiting Finland’s ability to capitalize on global demand.
5. Strain on Private Forest Owners
Private forest owners, who control 60% of Finland’s forests and supply 80% of industrial wood, face challenges in meeting demand. The high proportion of household-owned forests (about 700,000 owners) complicates procurement, as many lack the resources or incentive to increase harvesting. This bottleneck has forced companies to pay premium prices, further driving up costs.
Industry Adaptation and Innovation
Faced with these challenges, Finland’s timber industry is undergoing a transformation, focusing on efficiency, sustainability, and high-value products to navigate the shortage.
1. Diversification of Raw Materials
Companies like Fiber-X-Finland are exploring alternative fiber sources, such as agricultural waste (straw, hemp) and recycled materials, to reduce reliance on wood. These materials are gaining traction globally, particularly in the fast-fashion industry, where demand for sustainable textiles is rising. CEO Mikko Ruuska notes that “there is a clear world demand for products made from alternative raw materials.” This shift could alleviate pressure on timber supplies by 2025.
2. High-Value Products
The industry is pivoting toward higher-value, processed products to maximize returns from limited raw materials. Research professor Ari Harlin emphasizes that “creating added value by increasing volume is no longer possible.” Innovations include cross-laminated timber (CLT) and glulam for sustainable construction, as well as wood-based fabrics, biofuels, and chemicals. These products command premium prices and align with global trends toward eco-friendly materials.
3. Technological Advancements
Automation and precision forestry are enhancing efficiency. Metsä Group’s “stem pricing” system, introduced in April 2024, prices trees based on average volume rather than fixed assortments, simplifying transactions and encouraging harvesting. Investments in greenfield sawmills, like Metsägroup’s, aim to boost production capacity to 10 million cubic meters by 2025, despite price dips of up to 25% for sawn softwood.
4. Sustainable Forestry Practices
Finland’s forest management, governed by strict legislation, ensures sustainability. For every tree felled, at least four seedlings are planted, maintaining a growth-to-harvest ratio where annual felling is 20% less than growth. In 2023, 2.9 million hectares of forests were protected, representing 13% of Finland’s forest area—the highest in Europe. These practices support long-term timber availability while meeting EU carbon goals.
5. Global Market Opportunities
Despite domestic challenges, global demand for timber products is projected to grow at a 4.7% CAGR from 2025 to 2030, driven by urbanization and construction in Asia-Pacific. Finland’s expertise in sustainable forestry positions it to capture this market, particularly for high-value products like CLT and paperboard, which is expected to drive export growth in 2025.
Challenges Ahead for 2025
While the industry is adapting, several obstacles remain:
1. Economic Recovery
The sluggish global economy and weak construction sector, with employment at a 25-year low, will continue to suppress timber demand in 2025. A projected workforce surge of 16,000 in 2025 and 29,000 in 2026, driven by immigration, may alleviate labor shortages but won’t fully offset market constraints.
2. Energy Costs
Finland’s cold January 2024, with temperatures dropping to -40°C in Lapland, spiked electricity prices to €200/MWh, halting sawmill operations. Similar weather events in 2025 could disrupt production and increase costs.
3. Supply Chain Volatility
Reliance on Nordic imports is risky, as Sweden plans to reduce harvests due to sustainability concerns. Global supply chain disruptions, like Russia’s log export ban, could further inflate prices.
4. Balancing Bioenergy and Timber Needs
The growing use of wood for bioenergy conflicts with timber processing needs. Policymakers must align state, business, and community interests to prioritize sustainable resource allocation.
Future Outlook
The timber shortage is a wake-up call for Finland’s timber industry, but it also presents opportunities. By 2025, the sector is expected to see modest recovery, with cardboard and lumber exports driving growth as European construction stabilizes. Innovations in alternative fibers and high-value products will reduce dependence on raw timber, while sustainable practices ensure long-term forest health. Private sawmill investments, like those by Versowood, which produces 4 million pallets annually, signal confidence in the industry’s resilience.
Collaboration will be key. The Finnish Forest Industries Federation and LUKE are working to balance harvesting with carbon goals, while companies like Stora Enso, UPM, and Metsä Group expand globally to diversify supply chains. Public-private partnerships, such as the Wood from Finland program, will promote Finnish timber’s sustainability credentials, targeting markets in Asia and North America.
Conclusion
The timber shortage has fundamentally reshaped Finland’s timber industry, challenging its traditional reliance on abundant wood supplies. The loss of Russian imports, coupled with environmental regulations and competing wood uses, has driven prices to record highs and forced mill closures. Yet, the industry is responding with ingenuity, embracing alternative materials, high-value products, and sustainable practices. As Finland navigates these challenges in 2025, its ability to innovate and adapt will determine its place in the global timber market. By leveraging its “green gold” responsibly, Finland can transform this crisis into an opportunity for a more resilient, sustainable future.
References
- Yle News. (2023). Timber Shortage Forcing Change in Finland’s Wood Industry.
- ResourceWise. (2024). Recent Developments in Finland’s Forest Products Sector.
- Oreanda-News. (2024). Timber Industry Crisis in Finland Due to Ban on Wood from Russia.
- Natural Resources Institute Finland. (2023). Wood Imports and Exports Value of Forest Industry Decreased in 2022.
- Timber Media. (2024). Timber Industry Crisis in Finland Due to Ban on Wood from Russia.
- Finnish Forest Industries Federation. (2023). Forest Industry Statistics.
- ResourceWise. (2024). Factors Impacting the Finnish Forest Products Industry.