Finland’s forest industry looks to the future with optimism
The forest industry holds a uniquely significant position in Finland. In 2023, forest industry products were exported from Finland for over 12 billion euros, making up approximately 16 percent of the country’s total exports. The phrase “Finland lives from the forest” still holds true, and according to Paula Lehtomäki, CEO of the Finnish Forest Industries, who was a guest on Fimpec’s Kumppanit podcast, this will continue to be the case—provided Finland maintains its competitiveness.
At present, the future of the forest industry looks promising, as global market prospects are favorable. The global market for forest industry products is expected to grow in key areas such as hygiene products, packaging, fuels, and specialty materials – all segments except for graphic papers.
“This development is driven by global population growth, which increases demand for certain basic products. Similarly, rising living standards boost demand for hygiene products, while urbanization fuels the need for packaging materials. From this perspective, the global market outlook is very positive. The crucial factor is whether Finland’s forest industry can compete successfully in this market. If we don’t seize the growth opportunities, someone else will,” says Lehtomäki.
Lehtomäki, who previously served as Finland’s Minister for Foreign Trade and Development as well as Minister of the Environment, sees another positive factor in the industry’s new products. She finds it incredibly inspiring and motivating to see the various possibilities of wood-based fiber. Equally fascinating is how different by-products of the manufacturing process, such as biogenic carbon dioxide, can be utilized.
“The progress of the green transition presents us with significant opportunities. This transition is continuing in Europe and worldwide, regardless of political fluctuations, creating demand for renewable raw material-based solutions that the forest industry can provide”, she summarizes.
Finland’s forest industry competitiveness is built on multiple factors
Lehtomäki emphasizes that taking advantage of global market opportunities requires the Finnish forest industry to remain competitive. Currently, Finland’s position is strong, as evidenced by the billions of euros worth of forest industry exports each year. However, competition is fierce and continuously intensifying, meaning the industry must maintain the necessary conditions for competitiveness at all times.
“In public discussions, people tend to forget that the forest industry, like many other industrial sectors in Finland, competes in global markets. Competition is increasing across many product categories, especially from Latin America and Asia – particularly China. We must succeed in this competition; otherwise, we risk losing export revenue,” Lehtomäki explains.
According to Lehtomäki, maintaining Finland’s forest industry competitiveness requires a broad perspective. The entire value chain – from raw materials to transportation, processing, innovation, and the ability to produce new export products – must be considered.
“The availability of raw materials is a crucial issue for the forest industry. Cost competitiveness is also essential. In a country like Finland, logistics and its efficiency play a critical role. Moreover, skilled labor is needed at every stage of the value chain. Another factor currently affecting competitiveness is thatsome European countries strongly support the forestry industry, which distorts competition.”
“Forest industry companies continuously work on their competitiveness and take responsibility for it. However, we hope the government will continue using certain tools that help mitigate Finland’s logistical disadvantages. In some cases, these tools can be the decisive factor in determining whether a business remains competitive in Finland.”
New innovations are key
A critical aspect of competitiveness, especially in today’s rapidly changing environment, is the ability to develop operations and create innovations. Lehtomäki believes Finland’s forest industry is in a good position in this regard. However, she notes that innovation is often viewed too narrowly, overlooking the full extent of what is happening in the industry.
“For example, when it comes to patents related to the forest industry, we are among the world leaders. This demonstrates that innovation is happening. The innovation environment is complex and perhaps difficult to perceive, as Finland’s forest industry has a 150–200-year history on an industrial scale, resulting in a highly intricate ecosystem of large and small players. Consequently, innovations emerge across multiple areas and branches.”
“Innovations may involve fuel production or new material applications. They could relate to side streams or specialty fibers. And innovation isn’t always about creating new products; sometimes, it’s about producing an existing product in an entirely new way – more energy-efficiently, with fewer emissions, etc.,” Lehtomäki explains.
She adds that innovation can also mean the ability to compete and replace an existing production method or product with entirely new solution or product. This is particularly relevant in packaging, where wood-based materials can replace oil-based products. The same applies to bio-based fuels, mineral substitutes, and textile fibers that appeal to consumers.
Challenges to Success Exist Both Domestically and Internationally
Finland’s success in the global forest industry competition is not a given. Risks stem from both domestic issues and the international situation.
Domestically, the availability of wood raw materials is a key challenge, as consumption is already high in both the forest industry and energy production. Therefore, ensuring the health of forest ecosystems is a top priority for the industry. Sustainable usage levels must be maintained in the long run to secure operations. This includes addressing issues related to biodiversity and carbon sinks.
“The forest industry has made significant efforts to improve biodiversity considerations in everyday forestry. Our biodiversity roadmap shows that by implementing these improvements – leaving more deadwood and protecting the most valuable areas – we can enhance biodiversity even in commercial forests. This is an important task for us,” she says.
From a broader perspective, one of the biggest threats to an export-driven industry, according to Lehtomäki, is international trade restrictions and tariffs. Another risk is Europe turning inward, focusing too much on regulations and internal competition through subsidies instead of competing globally. Russia’s invasion of Ukraine has also had a significant impact, particularly on raw material sourcing.
“Before the war, about ten percent of the forest industry’s raw materials came from Russia. This import stopped almost immediately when the war began, causing a raw material shock in the Baltic Sea region. As a result, production lines had to be adjusted based on raw material availability. Although some imports now come from neighboring countries and domestic demand has risen, this has naturally increased raw material prices, which are now very high from forest industry’s perspective.”
Geopolitical developments pose additional risks but also opportunities. “What happens with the United States? How will EU-China relations evolve? All of these factors influence the global market. We certainly hope that, in time, Ukraine’s reconstruction will increase demand for wood-based building materials. Likewise, the end of the war would stimulate broader economic growth in Europe,” Lehtomäki notes.
At the end of the Kumppanit podcast episode, Lehtomäki reminds listeners of the vast opportunities that the forest industry offers.
“We have an incredible opportunity to utilize renewable domestic raw materials in numerous ways – including ways we have yet to discover. Let’s find those opportunities together and always remember to do things better across the entire value chain every day than we did the day before.”
Paula Lehtomäki was a guest on Fimpec’s Kumppanit podcast with hosts Maiju Aaltonen and Panu Rahikka.
Listen to Kumppanit podcast episode 18: What’s Happening in Finland’s Forest Industry? Please note that the podcast is available only in Finnish.
