The impact of the COVID-19 pandemic on the Finnish forest industry

Juha Palokangas,
Manager, Russian Affairs, M.Sc. (For.),
Finnish Forest Industries Federation

So far, the Finnish economy has survived the COVID-19 crisis well compared to countries focused on the production or export of services. The coronavirus pandemic hit different industries with varying degrees of intensity. According to the International Labour Organization’s (ILO) estimation, the COVID-19 pandemic is affecting public health and causing unprecedented disruptions to economies and labour markets, including workers and enterprises in the forest sector. It has exacerbated existing challenges, with many enterprises and workers suffering consequently. In the first months of the pandemic, the situation looked bad. Surprisingly, the production of the Finnish forest industry was mainly affected by labour market strikes at the beginning of 2020 and the decline in demand for products on the world market, which had begun before the pandemic

Coronavirus infections as such have not affected Finnish forest industry production facilities in the big picture. Following the onset of the crisis, companies resolutely began to take measures such as the isolation of production facilities. Between shifts, the premises were disinfected, and shift workers no longer met the people of the next shift at the end of their own shift. At the headquarters of some companies, employees can get tested for the virus on site if symptoms occur, free of charge.

However, there are some things the crisis has changed, perhaps permanently. The strengthening of certain global megatrends has been noteworthy. Moreover, the demand of forest-based products has diminished. Megatrends have the same effect everywhere, but different countries have different capacities to adapt to change. Digitalisation, for example, has accelerated further, as a significant proportion of workers have stayed away from their usual workplaces and their dependence on various electronic services and platforms has been highlighted. The closing of shops or restricting their opening hours has also reduced advertising in newspapers, which in turn has reduced newspaper editions and demand for printing paper. The digitalisation of the media has accelerated.

On the other hand, the pandemic has also had positive effects on the forest industry. Working from home and spending more time there, people have started fixing up their homes, which has created an unprecedented household construction boom. Wooden patio boards have been taken out of hand and landscaping has flourished. As a result of the restrictive measures, online sales have grown and various types of packaging, including those that consider the personal hygiene aspect, have become more important for people. This phenomenon has increased the demand for paperboard and packaging papers. In particular, the need for pharmaceutical packaging and food packaging has increased. Preparing for an uncertain tomorrow was also manifested globally as the hoarding of toilet paper.

What will come up after spring 2021 depends on the economic development in Finland and Europe. The situation is expected to improve according to the latest economic outlooks. However, assumptions behind the forecasts are heavily dependent on the COVID-19 vaccination delivery and distribution to citizens.

In terms of the forest industry, Finland is very self-sufficient. Wood is harvested and processed with domestic labour, most of the wood raw material (85%) is sourced domestically, and in many cases also the technology used is of domestic origin. However, Finland is dependent on imports of chemicals in the paper and board industry and the wood products industry.

Moreover, in terms of the market, we are not self-sufficient. Most forest industry products processed in Finland are exported, and although half of the pulp produced in Finland remains in Finland, it is also largely exported after further processing.

Due to the pandemic, logistics has suffered, and the availability of sea containers has been a difficulty for Finnish companies almost constantly during the crisis. In international trade, our remote location from main markets in Europe is a disadvantage, and the distance to Central Europe has not changed during the crisis.

In some countries, production in the forest industry has had to be halted due to the pandemic, but not in Finland. The stability or predictability of the operating environment in Finland has not been significantly affected by the crisis, but several industry players have expressed concerns about competitiveness. Product development and the launch of new innovations are not easy when interpersonal interactions are limited to conversations over the phone or through a computer screen. However, rather surprisingly, new openings have been seen in the forest industry. Only a resilient industry will be able to invest during a crisis. New investment plans such as Metsä Group’s decision to build a bioproduct factory in Kemi – the largest investment in Finnish industrial history – best reflect faith in the future.

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