Price dynamics in the Russian–Finnish roundwood trade

Abstract

This study examines price dynamics in roundwood exports from Russia to Finland, the largest international roundwood trade flow within Europe. The analysis covers six main timber assortments; sawlog and pulpwood dimensions of pine, spruce and birch. The study period, starting from the devaluation of the rouble in August 1998, was characterized by a drastic increase in the volumes of Russian roundwood imported into Finland, and a coinciding structural change in the timber assortment distribution of the Finnish roundwood imports. A basic hypothesis of economic theory, the law of one price, was tested by using quarterly time series and methods of cointegration analysis. According to the cointegration tests, the prices of Finnish and Russian spruce sawlogs have moved closely together. Furthermore, the changes in the prices of spruce sawlogs in the Finnish roundwood market are reflected in the Russian prices and not vice versa. Regarding other timber assortments, price co-movement and consequent market integration was not detected.     

Producing softwood of different quality: does this provide risk compensation?

This study analysed whether the production of high-quality assortments, saw timber and pulpwood in Norway spruce (Picea abies) and Scots pine (Pinus sylvestris) stands leads to effects of risk compensation. Mixtures of conventionally treated pruned and non-pruned stands, as well as mixtures of stands which had been optimized concerning the occurrence of assortments and financial criteria were considered. The price simulation was done by bootstrapping to avoid the assumption of a certain distribution of timber prices, and to preserve the correlations of the timber prices from different assortments. The financial valuation was carried out with annuities within a Monte Carlo simulation with 10,000 repetitions. To quantify the effect of natural hazards, the calculations were repeated with and without this factor. Minimum risk portfolios were determined and optimization performed using both a utility function as well as the value-at-risk approach. The mixtures with minimum risk were dominated by pine stands, as they are less affected by natural hazards and prices for pine timber have a lower volatility, although pine timber prices are generally lower compared to that of spruce timber. These pine dominated portfolios showed risk reductions up to 92% compared to the riskiest single stand, but the annuities were reduced even more. In contrast to this, the portfolios optimized with the utility function and the value-at-risk approach consisted of spruce stands. These spruce portfolios showed an efficient risk reduction of up to 60%. Additionally, higher annuities and larger diversification effects occurred in the portfolios containing the optimized stands. Integrating the risk of natural hazards, the annuities decreased, as did the correlation of the annuities of the different stands, while risk increased. Altogether these effects led to higher relative risk reductions when forming optimal portfolios. These results indicate that producing different assortments of spruce and pine leads to risk compensation, especially when considering portfolios consisting of optimized stands.     

Price integration for domestic and imported sawlogs and pulpwood in Finland: an update

This paper provides an analysis on the integration of prices for imported coniferous pulpwood and sawlogs, and respective domestic stumpage prices in the Finnish wood market. Eight real price series were investigated during 2002–2014 using monthly observations. The bounds testing approach by Pesaran et al. [(2001) Bounds testing approaches to the analysis of level relationships. J Appl Econom. 16: 289–326. doi:10.1002/jae.616], indicates there are long-run relationships between prices of domestic and imported wood. For more detailed information, the vector error correction model (VECM) approach was used. Estimation of a system with all eight prices with interpretable results did not succeed; therefore, we estimated models for prices of sawlogs and for pulpwood separately. For sawlogs, two co-integrating vectors, one for pine and one for spruce, were found. For pulpwood prices, one co-integrating vector was identified. The estimated VECMs confirm the results of bounds testing approach, suggesting that causation in the Finnish wood market runs from domestic prices to prices of imported wood. We conclude that prices of domestic and imported coniferous logs and pulpwood are closely connected. The question of full integration remains open, as border prices and stumpage prices by definition differ, at least, by logging and transportation costs.     

The global timber market: implications of changes in economic growth,timber supply,and technological trends

A partial equilibrium model was applied to the global forest sector in order to assess regional and global impacts of changes in economic growth, timber supply potentials, and technical trends. The model uses recursive price-endogenous linear programming and deals with eight geographical regions and 16 products. The base line projections of the model gave an average annual increase in global supply of industrial roundwood of 1.2% until the year 2010. The real price of sawlogs and sawnwood was found to remain approximately constant, whereas the prices of pulpwood and particles increased significantly during the first years, and then declined after the year 2000. The real prices of pulp and paper increased less than those of pulpwood and particles. The assumed variations in GDP growth rates had limited influence on quantities supplied and traded due to restricted timber supply potentials, but affected the real prices, especially of pulpwood and particles. Changes in the assumed timber supply potentials and technical change affected the real prices of pulpwood and particles significantly. Introduction of a price responsive timber supply also dampened the price peaks of pulpwood. Possible improvements of the methodology include empirical estimation of timber supply and of key parameters that determine capacity expansion, trade inertia, and technical changes.     

Modelling Birch Pulpwood Imports to Finland

Recent increases in pulpwood imports to Finland have raised an intense debate about their possible effects on the domestic wood markets. Since important institutional and structural changes in the market environment have taken place in the markets during the 1990s, it is important to take these into account in modelling imports. Our results consider three different time periods between 1986 and 1998, and indicate that market mechanisms in Finnish birch pulpwood imports have improved substantially in the latter part of the 1990s. Imports are found to be elastic with respect to changes in pulpwood import price, domestic pulpwood price and pulp export price. Furthermore, imports of birch pulpwood seem to have complemented the domestic market rather than to have been a substitute for it.     

中国木材进口需求材种结构数量关系分析

文中采用近乎理想的需求系统模型,分析中国木材进口需求的结构性特征及各材种之间的经济学关系。研究发现:进口针叶材的支出弹性明显高于阔叶材,说明进口木材消费规模的扩大将在更大程度上带动针叶材需求;针叶锯材进口需求富有弹性而其他商品进口需求缺乏弹性,尤其是阔叶原木进口需求曲线最为陡峭;不同材种之间的交叉价格弹性为负值,同一材种之间的交叉价格弹性为正值,说明不同材种之间为互补品,而同一材种之间为替代品;粗加工产品进口价格的上涨会引发深加工产品进口量的上升,如果再加上旺盛的进口需求,这一效果将更为明显。     

Product diversification in South Africa’s commercial timber plantations: a way to mitigate investment risk

We used the portfolio method to examine how a forest company can lower investment risk by producing a mix of timber products. We derived optimum combinations of pine (Pinus patula) saw timber production and eucalypt (Eucalyptus grandis) pulpwood production at landscape level. Our results indicate that producing a product mix rather than a single product improves aggregated financial returns and lowers investment risk over multiple rotation periods. The optimum mixture depended on past timber price correlations for pulpwood and sawn timber in South Africa between 1980 and 2011. This ideal mixture is comprised of areal ratios of about 45% saw timber and 55% pulpwood. Our example shows how economic risk of a forest investment can be reduced by creating a portfolio of a number of products. The risk that an investor has to accept for each monetary unit that is expected in return can be reduced by over 40% when comparing the risk–return combinations of a pure pine saw-timber stand with that of a portfolio of forest products. The risk associated with the production can be reduced by 20% when growing a portfolio of products rather than eucalypt pulpwood only.     

Structural changes in sawlog and pulpwood markets in Finland

This paper presents a short‐term econometric model for the sawlog and pulpwood markets in Finland. More specifically, the effects of structural changes in the market on the success of short‐term market modelling are investigated. Wood prices and quantities traded are stationary. Therefore, valid statistical inference using the levels of these variables is possible. Pulpwood prices were found to be directly proportional to sawlog prices during the study period, and the cross‐price effects were not statistically significant. The results indicated that the price sensitivity of wood supply in Finland increased during the 1980s and early 1990s. Nationwide collective price agreements were found to have increased the level of pulpwood supply and demand from private forests, but to have had no effect on either supply of or demand for sawlogs. Due to a structural change in the 1970s, the models estimated for the whole period cannot be used for short‐term forecasting in the 1990s. Higher‐than‐annual frequency data should be used in developing accurate short‐term forecasting models.     

Lipophilic extractives in different tree fractions and forestry assortments of Pinus sylvestris due for thinning or final cutting

The objectives were to determine the content and composition of lipophilic extractives, particularly fatty and resin acids, in three Scots pine trees from each of two stands in northern Sweden, one that was due for thinning and one due for final cutting. Extractives content of branches, needles, barks, stem discs from branch whorls, and sapwood and heartwood samples from various heights was measured. Fractions had very different concentrations and distributions of extractives due to differences in the composition of tissues. The needles had the highest total extractive concentration (around 150?kg/ton d.w.), followed by the branches, bark, timber from the final cut stand, and then the pulpwood and timber from the thinning stand. The final cut stand generally provided higher yields of extractives in assortments per hectare than the thinning stand; the difference was five-fold for timber, three-fold for whole trees, two-fold for branches, needles and bark and similar for pulpwood. This information on the content and composition of extractives in different tissues, and the dependence of these quantities on tree age could be used together with information on conventional stand data such as tree numbers and dimensions to guide the selection and management of feedstocks for biorefineries.     

Optimizing the joint production of timber and bilberries

Berries and mushrooms are increasingly appreciated products of Finnish forests. Therefore, there is a need to integrate them in silvicultural planning. Bilberry (Vaccinium myrtillus L.) is an economically important wild berry that is widely collected for household consumption and sale in North Karelia, Finland. In this study, bilberry yield models developed recently were included in a stand growth simulator and the joint production of timber and bilberry was optimized by maximizing soil expectation value (SEV) with 3% discounting rate, assuming that 75% of the bilberry yield is harvested. The effect of bilberry production on the optimal stand management increased with increasing bilberry price. With high bilberry prices (4–8 € kg⁻¹) it was optimal to manage the mixed stand of Scots pine, Norway spruce and birch, and the pure stand of Norway spruce so as to promote bilberry production. In the Scots pine stand, where bilberry yields are higher, bilberry production affected optimal stand management already with a price of 2 € kg⁻¹. Compared to timber production, joint production led to longer rotation lengths, higher thinning intensities, more frequent thinnings, and higher share of Scots pine in the mixed stand. The contribution of bilberries to the total SEV increased with increasing bilberry price and discounting rate. In the mixed stand and pine stand the SEV of bilberry production, calculated with 3% discounting rate, exceeded the SEV of timber production when bilberry price was 4 € kg⁻¹.With 4% discounting rate this happened already with bilberry price of 2 € kg⁻¹. It was concluded that forest management which promotes bilberry yields is the most profitable in pine stands where the potential bilberry yields are high.     

Effect of resin‐top disease caused by Peridermium pini on the volume and value of Pinus sylvestris saw timber and pulpwood

The role of the resin‐top disease caused by Peridermium pini in volume and value losses to Scots pine (Pinus sylvestris L.) was surveyed in two heavily infected stands in northern Finland. Of the Scots pines, 26% were infected by the disease. Peridermium pini caused 2% volume losses to saw timber trees and 3% volume losses to pulpwood trees in the stem‐lesion class and 10% and 14% in the dead‐top class, respectively. The disease caused saw timber volume losses to saw timber trees of 34% and 22% in the stem‐lesion and dead‐top class, respectively. However, saw timber volume losses increased the pulpwood volume in both disease classes. The disease reduced the marketing value of saw timber trees and pulpwood trees by 18% and 3% in the stem‐lesion class and by 15% and 14% in the dead‐top class.     

杨树立木材种材积成数及其应用

杨树立木材种材积成数与胸高直径呈极紧密相关。拟合回归模型9个，分别测算不同规格的材种材积成数，其相对误差在±5％以内。用林分蓄积量分别乘以各材种材积成数，可求得林分中各材种的蓄积量。     

The consequences for the forest sector of nuclear power discontinuation in Sweden

Electricity prices in Sweden will most probably double, or more, during the next 10 to 15 years as a result of the decision to discontinue nuclear power production. This will substantially change the comparative advantage of all forest‐based product industries, some to the worse, some to the better. Roundwood prices and fellings will be affected and possibly the competitive position of wood‐based energy production. This paper estimates various types of effects with a long run pulpwood market model. The effects on electricity intensive production (CTMP, newsprint, etc.) may be drastic. However, the fall in total industrial consumption and price of pulpwood will be limited. The reduction in price is not sufficient to make pulpwood economically attractive as fuel. Own‐price elasticities of electricity demand are greater than reported elsewhere.     

Models for Assessing Timber Grade Distribution and Economic Value of Standing Birch Trees

In order to obtain a more precise prediction of the distribution of each timber grade or log grade with regard to the volume of birch (Betula pendula Roth., B. pubescens Ehrh.) in models for long-term planning, ordered probit models were developed. These models were developed by using data from three mixed birch and Norway spruce stands in Norway. The data consisted of 168 stems. In Norway, three ordinary birch saw log grades are commonly used, with pulpwood as a fourth grade. In this study, these four grades were applied in addition to waste timber, which was treated as a fifth grade. The developed models showed that the grade distribution of birch trees of mixed birch and spruce stands was highly correlated with tree height (p<0.01) and height to first visible dry branch (p=0.081). The statistical significance of both models was good (p<0.0001), as measured by log likelihood test statistics. Classifying the 168 stems by saw timber or pulpwood in butt log led to greatly improved estimates (p<0.01). The developed models would allow the incorporation of timber grade in stand simulators, enabling more precise predictions regarding the economic implications of alternative management strategies for birch trees.     

湿地松半同胞家系主要经济性状的遗传变异及其综合选择

湿地松(ＰｉｎｕｓｅｌｌｉｏｔｔｉｉＥｎｇｅｌｍ)是优良的纸浆材与建筑材树种,对湿地松的遗传改良,过去侧重于生长性状方面,材性改良仅做了些基础性的工作(管　宁等,1993)。本研究旨在探索湿地松半同胞家系生长、形质和木材性状的遗传变异规律,并利用选择指数,按不同材种(纸浆材、建筑材)培育目标,选择一批生长、形质和材性均优良的湿地松半同胞家系供生产上推广应用。1　材料与方法湿地松半同胞家系测定林设置在湖南省汨罗市桃林林场,属湿地松最适宜引种区。试验于1981年造林,完全随机区组设计,5次重复,6株单行小区,株行距3ｍ×3ｍ。共…     

Influence of Log Characteristics on Drum Debarking of Pulpwood

Properties of 200 poorly debarked softwood logs were studied in order to examine how different log characteristics affect drum debarking of mixed pine (Pinus sylvestris L.) and spruce [Picea abies (L.) Karst] pulpwood during the summer. The definition of a poorly debarked log and the sampling criterion was that >10 dm² bark remained on the log surface. The average share of poorly debarked logs was 8% and the most frequent log type was breakage logs. The main species among the poorly debarked logs was spruce and the mean wood moisture content was considerably lower than for the pulpwood chips. Many logs were affected by root rot or were damaged by harvesting equipment, resulting in reduced moisture content and, consequently, in increased bark/wood shear strength. Bark from the poorly debarked logs contributed to approximately 68% of the bark content in the chips. By avoiding air-drying of pulpwood, or by sorting pulpwood prior to debarking, the bark content in chips might be substantially reduced, which would improve the purity of the pulp and decrease production costs.     

宜昌市几种工业用材针叶树种引种选择研究

为了提高宜昌山区 (海拔 1 0 0 0～ 2 0 0 0m)针叶树新造林分生产力 ,为本市引种驯化筛选出最适宜的工业用材树种 ,以达到工业用材林定向、速生、丰产、优质、稳定和高效的目标。我们于 1 980年开展了欧洲云杉、日本冷杉、欧洲赤松等几种工业用材针叶树种引种选择研究。研究结果表明 :欧洲云杉、日本冷杉、欧洲赤松的生长量分别比对照油松大 1 6%～ 2 8% ,1 9% ,2 2 8%。     

The Effect of Two Different Price Systems on the Value and Cross-cutting Patterns of Norway Spruce Logs

A computer program of a forward reaching algorithm of dynamic programming is presented for optimal log bucking. The application is implemented using an object-oriented programming approach. Sensitivity analyses were applied for evaluating the effects in terms of economic value and usable volume, and of altering the price system for saw wood. The data used consisted of 451 Norway spruce (Picea abies (L.) Karst.) stems collected from 13 forest sites located in three regions in Norway. Grade I and Grade II saw wood and pulpwood were used. The mean timber value increased approximately 1% when the new price system was introduced. The value obtained by introducing the new prices varied between the sites (0.1%-1.6%) as well as between regions (0.3%-1.6%). The analyses based on taper equations over-estimated the total value for all the alternatives. Finally, decreasing the width of stem sections and increasing the number of log length alternatives increased the total value of the sample trees but increased the computation time.