Forestry Stocks Go Timber!
Finland’s entire paper industry has ground to a standstill, over 17,000 workers down tooling and leaving their stations unmanned. Negotiations over pay have turned sour, and it’s left employers’ arms crossed, and investors’ arms up in the air!
Finland’s sawmills are like China’s super-factories. The country is known as Europe’s “forest giant,” three-quarters of its land area covered by Boreal wood, where intense tree-chopping is followed by even more intense tree planting. The backbone of the Finnish economy is, essentially, made out of plywood. Over fifteen million cubic tons of it is exported annually, the biggest operators being Stora Enso and UPM-Kymmene.
Shares in those Finnish lumber kings were up significantly through the second half of last year. The Invstr community has driven over 70 and 40-million-dollars of fantasy money into Stora and Kymmene respectively, and come out with much more than that as pulp prices go sky-high and sustainable initiatives catch on. However, the world of business changes fast, and now those stocks are coming down. Timber!
Trade unions are incredibly active in Finland, and they’ve struck again. The Finnish Forestry Industries (FFI) says almost 90 mills were abandoned yesterday by nearly 20,000 lumberjacks. Sure, pay, productivity, and moral matters. However, margins are thin, and strict laws of economics drive stock returns. Both sides are going to fight this tooth and nail!
Stora and Kymenne have announced rare lockouts. Striking workers can’t come back after February 9th unless they agree to salaries of X, Y, and Z. This quarter’s earnings are already a write-off, and shares have fallen double-digits to reflect that. However, investors are watching movements on the ground very carefully. These stocks could make hay if a deal is cut, so some are averaging down into positions now. Wise move?