Metsä Group’s new pricing method, based on stem volume, has been adopted in the purchasing of thinning operations across Finland. Launched in June in parts of the country, the method has been received well by forest owners.
The price based on stem volume means that the trees to be thinned are purchased as whole trunks and the price paid to the forest owner is determined by the average volume of the trees removed. The way in which the trunks are cut into pulpwood and logs does not affect the forest owner’s income from wood trade.
“We’ve received very positive feedback on the price based on stem volume, from both forest owners and our own personnel working in the supply districts in which the method has been used since June. In November, we began applying this new pricing method for thinnings across the country, alongside the traditional wood grade method,” says Juha Jumppanen, EVP of Metsä Forest.
In the price based on stem volume, Metsä Group’s forest specialist provides the forest owner with an estimate of the average volume of the felled spruce and pine trunks, as well as the stem price paid for one cubic metre of each tree species.
In connection to the wood trade, the forest owner is given a table showing how the price per cubic metre changes if the volume departs from the estimate. The average volume of the felled trees is calculated by tree species from the harvester’s measurement results.
“The price estimates have been quite accurate and the method is seen as fair to both the seller and the buyer,” adds Jumppanen.
Samuli Leppänen, an owner-member of Metsäliitto Cooperative, Metsä Group's parent company, also considers the new pricing method fair. “The price based on stem volume rewards you for good forest management, because the average volume of trees in a forest that’s been managed well and at the right time is higher than in a forest that hasn’t been managed. This also increases the thinning income.”
Leppänen thinks that the pricing method of thinning that rewards average volume will also encourage people to manage their forests in time.
Metsä Group developed the new pricing method to enable the optimisation of wood’s conversion value in all end-product market situations. The period from when a wood trade is done to felling may be as long as two years, during which time the market situation for wood products may change a great deal. Given that trees can be cut into suitable grades based on need and the market situation, the price based on stem volume method is competitive compared to the traditional log-pulpwood pricing.
“This pricing method is very transparent. It’s important for Metsä Group to purchase trees in one piece and to cut them as required by the market situation at any given time. The l price based on stem volume seems to be developing into a significant alternative pricing method for us,” says Jumppanen.