Forest market outlook 2025

 

The cyclical outlook for the forest industry is expected to improve gradually in 2025. Growth drivers are anticipated to include the export of pulp and paperboard, with capacity expansions in Finland contributing to this in part.

Kari Kangas, Portfolio Manager

The year 2024 was a mixed one for the Finnish forestry sector. While the recovery of the forest industry’s cycle remained elusive, timber trading saw increasing activity and rising prices. The strong momentum in the timber market positively impacted the returns of UB’s forestry funds.

At the beginning of the year, there was moderate recovery in the demand for many key forest industry products, but the improving market sentiment was dampened particularly by the rapid decline in the price of pulp in the autumn. The construction market continued to shrink. Despite inflation and interest rates decreasing over the course of the year, the uncertain economic situation still led to lower-than-usual consumer spending.

Activity in the Finnish timber market remained lively throughout the year, with strong demand and rising prices for all timber assortments, despite the challenging market situation for end products. In the forest property market, the transaction volumes increased after two years of decline, and the general price level for forest real estate rose modestly.

 

Competition for raw timber in the domestic market remains tight, and timber prices are expected to stay above long-term average levels. This development supports the outlook for forestry investors this year.

Jyri Hietala, Fund Manager

Outlook for Forestry Investors Remains Positive in 2025

The cyclical outlook for the forest industry is expected to improve gradually in 2025. Falling interest rates, improved consumer confidence and purchasing power, and the normalization of buyer inventory levels are expected to support the end-product market. Growth drivers are anticipated to include the export of pulp and paperboard, with capacity expansions in Finland contributing to this in part. The construction sector’s recovery will be delayed but is expected to turn toward moderate growth in the second half of the year at the latest.

Uncertainty remains prevalent this year as industries prepare for various adjustments in response to market movements. Higher-than-average timber costs seem to have become the new normal, and markets are seeking balance in a situation where production capacity has sharply increased due to investments, while the amount of imported timber has simultaneously decreased. Geopolitical risks may also have sudden effects on various end-product markets and trade flows. Despite these uncertainties, market sentiment is gradually turning more positive.

Competition for raw timber in the domestic market remains tight, and timber prices are expected to stay above long-term average levels. This development supports the outlook for forestry investors this year. In the forest property market, there are indications of a turning point, with professional investors increasing their purchases as the expected real returns on acquisitions have risen to attractive levels. The trend of impact investing is becoming an increasingly important factor in forestry investment, and this is expected to further increase demand for forest properties, especially among institutional investors.

United Bankers' forest fund:

UB Timberland Fund (AIF) »

The UB Timberland Fund (AIF) is a special investment fund that offers an effortless and cost-effective way to invest in forest real estate even with relatively modest amounts of capital. Through the fund, the investor receives a share of a well-diversified and professionally managed forest portfolio.

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The information presented is based on UB’s own estimates and sources considered reliable by UB. The information on which the conclusions are based may change quickly and UB Group may revise its market view without prior notice. No information obtained through this presentation should be construed as a solicitation to invest. When making investment decisions, readers should base their decisions on their own assessment of the investment and the risks involved, and to consider their personal goals and financial situation.

Investing in funds always involves financial risk. The value of an investment in a fund may go up or down and you may lose some or all of the capital invested. The past performance of a fund is not a guarantee of future performance and cannot be used to predict future returns. The target return set for a fund may not be achieved. The risks are set out in more detail in each fund’s key information document and in the fund prospectus. Before making an investment decision, investors should consult the fund’s key investor information document, fund prospectus, rules and price list, which are available on each fund’s website. The funds are managed by UB Fund Management Company Ltd. The portfolio management of the funds has been outsourced to UB Asset Management Ltd.