Demand for Forestry Machinery waning – Weakening of the Value Chain continues

This news on Ponsse’s announcement of possible lay-offs does not come as a surprise by itself.  The press release makes explicit mention of the weakening of the market situation. According to the company’s latest annual report, the majority of sales is still in Northern Europe, and its only factory is located in Finland. The extent of Finnish personnel is 629 people. The co-decision negotiations do not concern sales and maintenance personnel.
In the context of the Eurocrisis and the greater global economic weakening the cutting back of operations temporarily (max, 90 days)  is not so surprising – after all, if your products don’t sell well. But it is still significant in the context of the Finnish forest cluster. Trees are of course also used as timber for other wood-processing industries than the paper industry, but here I am concerned with the value chain of the (Finnish) paper industry.
The latest review of the Finnish Forest Industries sector by METLA indicates that in Europe the demand for wood/timber will remain weak – both as a  building material and a raw material for the paper industries (except for pine-based pulp for the Chinese and Eastern European markets). This is the background of the Ponsse announcement. For the Finnish paper industry, there is still the existing overcapacity, although this is getting smaller. As is well-known, especially in Finland production units have been closed.

 

So how does the announcement by Ponsse affect the Finnish paper industry? Probably not that much – although according to the METLA report the demand for pulp is still strong. This may be seen in the rising amount of pulp that is exported instead of used domestically. But timber is also imported to Finland for this purpose. Furthermore, the availability of harvesters etc. is unlikely to constitute a constraint on the paper industry.  It is more likely the other way around – that the weak situation of at least the (Western)  European paper markets reflects on the need of Ponsse’s products ‘lower’ in the value chain.
Harvesting timber is a small part of the value chain of producing paper, but also here the effects of changing markets are felt – rather than depending on a domestic market, also Ponsse has to adapt to markets that are increasingly in the East. From the company’s annual report and other information it appears that it has a functional network of global retailers. It would be interesting to study the position of Ponsse as a Finnish company in a a global market, when its traditional market is perhaps shrinking.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s