Tuomas Viro from Pori, on the west coast of Finland, concluded his first wood trade using pricing based on stem volume in the summer of 2022. In February, all the felling was completed to the forest owner’s satisfaction.
“It was a good experience in every respect,” says Viro.
Felling was carried out over a total area of 6.4 hectares. Selection cutting was chosen for Viro’s mixed forest covering 4.5 hectares of spruce and pine with an average age of 70 years. Next to it, a smaller, slightly younger spruce- and pine-dominated forest of 1.9 hectares was opened up.
“In the larger forest, trees had already been felled for construction, so it had an uneven age structure to start with. My goal is to expand continuous cover forestry across the whole area,” says Viro.
Equally matched offers
Viro had previously received an offer for his stands from another company.
“But then last summer, I noticed that trees were being felled in my neighbour’s forest. Metsä Group’s forest specialist, Antti Karttunen, was there, and I had a chat with him.”
The men agreed a forest visit, and afterwards, Karttunen made an offer for wood trade with pricing based on stem volume. At around the same time, the other company made a new offer to Viro based on wood grades.
“I compared the offers and found that they were pretty equally matched.”
Based on a stem price matrix
Pricing based on stem volume is a relatively new method, which Metsä Group introduced across Finland in late 2021. In this method, forest owners are paid for trees as whole trunks.
Offers are made based on a stem price matrix, which provides the forest owner with an estimate of the average stem volume of the trees removed and the corresponding stem price per cubic metre.
The final price is determined after harvesting, according to the average stem volume of the felled trees. If the average volume exceeds that of the estimate, the buyer pays more for the trees. If it is smaller, the buyer pays less.
Trusted driver was the decider
What finally tipped the scales in favour of stem volume-based pricing was Karttunen’s promise of a driver specialised in continuous cover forestry.
“Antti said he had a driver who likes to do continuous cover felling. That settled the matter.”
Viro estimates that the felling resulted in approximately 700–800 cubic metres of wood.
“The stem volume and the accumulation of wood may have been larger than estimated. Some of the trees were decayed, but since this is old pastureland, that didn’t come as a surprise,” says Viro.
Large purchase volumes
According to Metsä Group’s Purchasing Manager Petri Tahvanainen, pricing based on stem volume has become an established pricing method in thinning. Its share in wood trade has increased.
“We no longer talk about a few per cent, but rather about tens of per cent,” says Tahvanainen.
Pricing based on stem volume works best in homogeneous, well-managed coniferous forests that have reached the age for thinning. Metsä Group continues to purchase hardwood based on wood grades.
Forest owners who have opted for pricing based on stem volume are satisfied with no longer having to worry about which piles the trees end up in after felling.
“It’s true that this method does away with the need to check piles. It’s a good and straightforward method all in all,” says Viro.
He and Karttunen have already talked about a potential new trade.
Text Maria Latokartano
Photo Veera Korhonen
This text is an abbreviated version of an article published in Metsä Group’s Viesti 1/2023.