Wood-Processing Industries

Finland Table of Contents

Wood processing has long been the mainstay of the Finnish economy. Facilitated by extensive timber supplies, convenient transportation, and abundant water power, lumbering and papermaking developed rapidly after 1860 to meet growing European demand for paper products and lumber. Production and export patterns established before 1900 lasted until the second half of the twentieth century; in the 1950s, wood and paper products accounted for some 80 percent of total exports. By the 1980s, however, although the sector had continued to expand in absolute terms, its share of exports had fallen to about 40 percent as a result of the rapid growth of the metalworking sector, which had surpassed woodworking in both value added and employment in 1969.

Despite this relative decline, forest products were still the country's most important earner of foreign exchange in the late 1980s. Roughly four-fifths of wood and paper production was sold abroad, while most raw materials--including energy--were produced at home; and, although the sector contributed only about onefifth of industrial value added, it still accounted for about one-quarter of industrial employment.

Analysts conventionally divided the woodworking industries into two branches, mechanical and chemical, depending on the primary means of processing in each branch. The mechanical branch comprised milling, manufacturing of plywood and particle board, and fabrication of furniture and building components. In 1986 the branch included some 200 large sawmills that produced most exports and some 6,000 small mills that met local needs. Products of the chemical branch included pulp and paper, cardboard, and packaging materials. In 1986 the chemical branch encompassed twenty-four pulp mills, thirty paper plants, and sixteen cardboard factories. The division between the two branches was somewhat artificial, however, as many leading firms operated integrated plants in which sawdust, waste wood, and chemical byproducts of mechanical processes served as raw materials for such chemical products as pulp and turpentine. Industrial waste also supplied a large share of the industry's needed energy, making the chemical branch self-sufficient and reducing the energy demands of the mechanical branch.

Finnish manufacturers had long been leaders in developing new wood-processing technologies. Several firms had developed their own shops for machine building, and their highly efficient papermaking equipment had captured an important share of world markets.

In the 1980s, Finland's wood industries experienced increasing difficulties in exporting, largely as a result of rising input costs. Wages and stumpage (value of standing timber) rates were traditionally higher in Finland than they were in many competitor countries. Moreover, by the early 1990s analysts believed that the mechanical branch, which consumed about onethird of Finland's electricity, might face an energy shortage because of the 1986 decision not to build a fifth nuclear plant. In response, firms modernized their plants and shifted to higher-value-added products.

In the mid-1980s, interfirm cooperation and a wave of mergers resulted in concentration of production at a smaller number of centers, and observers expected that industry restructuring would continue into the 1990s. An increasing tendency to build plants overseas, which improved access to Finland's main markets, complemented the merger drive. The government had stepped in with the Forest 2000 program and with a system of tax incentives for logging, both of which were designed to allow wood harvests to increase by about 3 percent per year until the end of the century. By 1986, moreover, representatives for workers and landowners, apparently recognizing some of the difficulties faced by the industry, had negotiated decreases in both wages and stumpage prices.

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Source: U.S. Library of Congress