Forest market outlook 2024

Despite the weakened business cycle in the industry, timber prices have remained above average.

Kari Kangas, Portfolio Manager

After a peak year in 2022, forest industry results plummeted in 2023. Prices of finished products have fallen, production volumes are low, customer inventories have been full and cost inflation has squeezed profitability. The forest industry has responded by adjusting production to meet demand. Despite the weakened business cycle in the industry, timber prices have remained above average. This is due to both the increase in demand for timber due to new investments and the end of timber imports from Russia as a result of the war in Ukraine. Trading in the forest property market has slowed down from previous years, with the proportion of transactions by professional forest investors in particular falling, as capital has increasingly moved to other investments due to rising interest rates.

The sustained positive demand trends for many wood-based products remain unchanged, and a turnaround may be imminent as the current weak economic situation eases.

Jyri Hietala, Fund Manager

In the forest sector, the outlook for 2024 is uncertain. There are already signs of improvement in the sector’s end-product market, as pulp prices, for example, are clearly up from their summer 2023 lows. In contrast, structural decline in demand continues in the paper industry, and weak consumer purchasing power, impacting consumer packaging products in particular, has had a negative effect on the demand for paperboard. Construction is only expected to recover from 2025 onwards. However, the sustained positive demand trends for many wood-based products remain unchanged, and a turnaround may be imminent as the current weak economic situation eases.

The scarcity of roundwood should maintain the stiff competition for timber in the market, and wood prices are expected to remain at a good level in 2024. However, increasing regional and timber-specific differences in price trends may occur. In particular, pulpwood prices are expected to remain above long-term averages. In terms of trading in the forest property market, no significant change from last year is expected, although passing the peak in interest rates and rising real yield expectations will increase the attractiveness of forest investment. Forest property prices are supported by the anticipated timber price trend and the longer-term positive demand outlook.

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.

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