Manufacturers are unable to meet the high demand in the forestry equipment market

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Higher costs and longer waiting times – this must be taken into account when purchasing forestry equipment. Manufacturers have increased the prices of equipment by an average of 5-7% this year and next year the possible increase is forecasted again, while the delivery time is no longer the traditional 4 to 6 months, but already 10 and even 12 months. However, despite long deliveries, the forestry equipment leasing market has grown by a third this year, and Citadele Leasing has provided financing worth more than 3.3 million euros.

“We are currently in a situation where equipment dealers have limited equipment. At the beginning of the Covid-19 pandemic, factories did not produce any new equipment for two or three months. “It is possible that the activity in the request for financing would be even greater, but the long delivery time also makes entrepreneurs wait,” says Ģirts Gāzers, Chairman of the Board of Citadele Leasing.

The growth of demand for Latvian companies after logging has been facilitated by events in the local market. Although the global demand for timber is high and prices are high, the investments of Latvian companies in the new technical are more related to JSC “Latvian state forests“(LVM), which is the largest forest owner and customer of logging works in the domestic market, announced this year ‘s development procurement for the next five years.

“LVM enters into agreements with logging and transportation service providers to ensure the timber production and supply process, moreover, approximately 70% of the total required service volume is provided by longer – term 4- and 5 – year contracts, which provide a solid basis for service providers to invest and develop their service. LVM expects from its service providers – partners – a service that ensures high quality of work performance, productivity and stable predictable production volumes over a certain period of time, which in turn enables LVM to assume and fulfill the agreed obligations to its customers, buyers of wood products. Experience and data show that the above can best be provided by using new (up to 5 years) equipment New equipment provides high technical readiness, which means minimal downtime and relatively low maintenance costs. productivity and ensure the quality of work required, and new technology facilitates the attraction of highly qualified forest machine operators to the service provider’s company. I believe that the longer-term service agreements offered in the LVM market are also a strong guarantee that companies can securely receive the necessary financing for investments, while financiers can issue loans more securely, “says Andris Balodis, LVM’s Deputy Director for Forestry.

“LVM orders and the unavailability of labor encourage investment in forestry equipment. Entrepreneurs buy equipment to ensure the full logging cycle. At present, small, large or medium-sized companies are forced to invest and need funding to provide services that were once subcontracted manually. Small and medium-sized companies are also investing in new equipment, which is one of the preconditions for successfully bidding for LVM orders, which means that the company has a fixed cash flow for the next five years. “High demand and rising prices in the global timber market have not significantly affected the investment plans of Latvian companies, because companies are not ready to take risks – there is no guarantee that such prices will be so high all the time, but the equipment is expensive,” adds Glaser.

In order to arrange a lease for forestry equipment, the classic client’s participation is starting from 10%. Small and medium-sized companies usually have a down payment of 20-25%, while large companies, although they can receive leasing with a small amount of self-financing, are often ready to co-finance 20, 30 and even 40%.

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