Latvia's wood product trade falling rapidly

Wood production exports have fallen by more than 20% in the first five months of the year, and import by over 30%, according to data from the Ministry of Agriculture, Latvian Radio reported on July 21.

Industry experts, however, believe that this information should not be seen as a crash of the timber industry, since last year, with the beginning of the war, prices climbed to inadequate heights in fears about the future. Now there is a respite and a period of reflection about working smarter.

The forest sector is justifiably seen as a cornerstone of Latvian exports. Along with the war launched by Russia, demand for timber climbed sharply, also affecting prices. In the middle of last year, forest owners, processors, and traders experienced profit peak moments, as exports grew by nearly 50%.

Data for the first five months of this year show a significant drop in exports – the timber has been exported at €1.4 billion, opposite last year's nearly €1.9 billion.

The information gathered by the Ministry of Agriculture shows that wood and its products have been exported worth €1.3 billion, which is 20% less than last year. The value of exports of sawn wood amounted to €304 million, a drop of 51%. Wood fuel is valued at €270 million, an increase of nearly 22%. The export value of round timber has also increased by a quarter. Most of the production of the forest sector has been exported to the UK, Sweden, and Denmark.

Latvia imported 33% less than last year: €456 million worth of forest production in five months, compared to €682 million last year. Consequently, imports are falling even faster than exports.

Kristaps Klauss, vice president of the Latvian Wood Industry Federation, commented on these indicators in a laconic manner: war.

Imports fell first due to sanctions imposed on Russia and Belarus. Secondly, prices in many forest sectors have bounced back from the ceiling to the floor.

Klauss said that “in the longer term, individual business niches will have to be closed” – for example, the previously developed business niche – purchasing low-treated conifer boards in Belarus and Russia and processing and exporting them, “we do not have this option at this time”.

Export figures are falling as imports have decreased significantly: in the past, up to one million cubic metres of boards were imported from Russia and Belarus in order to carry on with added value.

Klauss said that, in terms of prices, it was no worse than it was before the war.

“This floor is well higher than it was before Covid and before war, there has been rapid inflation for many products, because the “helicopter money” that was scattered to support the population and business structures of many countries could not remain without consequences. This loss of imports will also have an impact on exports. But certain products, which have always had a logical growth, such as carpentry products and other finished wood products, have and will continue to grow, "said Klauss.

Artūrs Bukonts, executive director of the Latvian Association of Wood Workers and Exporters, said the drop in exports and imports was logical after last year's rise.

The decline in exports is exacerbated by a slowdown of construction abroad, which leads to a reduction in demand for Latvian goods.

“The main story is our competitiveness at the moment, because we still have one of the highest raw material prices in the region, and the other important cost factor is electricity prices, with which the situation is not so severe at the moment, but the first half of year was harsh enough,” said Bukonts.

“Demand is small, solvency mediocre, and those who can produce cheaply fill in this relatively small demand,” summarized Bukonts.

Industry experts also add that Europe is already experiencing a slow rise in wood fuel prices, but here, for example, pellet prices are still standing at the lowest point.

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