In the forest sector, in 11 months last year – a new export record; this year, the drop in prices is a cause for concern / Article

At the moment, data on the forest industry for 11 months of last year have been collected, but the executive director of the Latvian Wood Industry Federation, Artūrs Bukonts, estimated that the year 2022 will end with a new export record for the industry.

“If the previous year we talked about 3.5, so half a billion euros is here, we have reached the export value bar of 4 billion euros. Everything looks good in the numbers, but the real inflation is higher than forecast, various cost items have increased significantly, it is necessary to raise the salary, both everything that links production, the price of fuel is also a very important part of the cost of production. In forestry, fuel makes up 25% of the cost of production, while in the transport of logs it is already 45%, and if fuel is twice as expensive, it is a very significant impact,” noted Bukonts.

The three main export markets of the Latvian forest industry are Great Britain, Sweden, and Germany. Aiga Grasmane, adviser to the Minister of Agriculture, explained that the export of wood increased not because the volume of production increased, but because the price of wood grew rapidly last year.

“Due to the sanctions that were imposed on Russia and Belarus, the pressure on local resources increased, and with the start of concerns about gas supplies, energy wood and its prices soared and this caused a kind of panic. It was an extraordinary year. For forest owners, on the other hand, it was a good opportunity to make money by selling unproductive stands that have overgrown or damaged, or stands damaged by storms. This is positive in the sense that now at least some part of these unproductive stands has been harvested and then the owners must take care that a new and high-quality forest grows in that place.” said Grassman.

Until now, Latvian companies also imported lumber from Russia and Belarus. These volumes have been decreasing for several years.

Bukonts pointed out: “If before we imported lumber to one and a half million cubic meters, within the framework of last year, now it is 800,000 cubic meters. Since we have not really replaced this amount that came from the mentioned countries. The good news is perhaps that – they lumber, grown and produced by us, which was exported to other countries, is now consumed by local producers.”

Last year, the forest sector reached export records, but this year the situation will no longer be so encouraging.

Bukonts, the executive director of the Latvian Wood Industry Federation, said that the demand for building materials will decrease because warehouses are full: “Construction volumes fell due to inflation and other aspects, and what we see already at the end of last year, in the fourth quarter, is a very rapid drop in prices, a very sharp drop in demand. In principle, the industry reduced its output volumes by about 30% in the fourth quarter.”

Grasmane, adviser to the Minister of Agriculture, assessed that part of the wood products produced last year at very high prices will have to be sold below cost this year due to the drop in prices. Prices for logging certificates will also increase.

Grasmane pointed out: “The new year also comes with increased prices for obtaining a permit for economic activity from the Forest Service. This means that the planning of economic activity must be done more carefully. There are times when things are going well, there are opportunities to make investments, there are opportunities to build savings, and there are times when the market changes and when you have to work with either smaller profits or losses.”

Demand and supply are changing in the market, and the demand for timber could increase in the second quarter of this year.

Report a bug