Greetings from Asian shores, colleagues. I keep on returning to my blog and post summary of the most important news from Wood and Wood products industry.
The biggest local issue with global impact is still Russia-Ukraine conflict. Reading different timber news sources, I noticed that the number this issue mentioned decreasing in the headlines but we all understand that this is one of the most important trendsetters. The others are congestions in the biggest ports around the globe, disruptions in global supply chains and pandemic related issues. Reading the articles and expert opinions, I miss the honest words on the problem and realistic analysis on the short-term and long-term impacts on European consumers and producers but most of all on ones located in Baltics. Well, I’m not an expert but clear mindful entrepreneur with basic analytic skills and I may say that we are heading the chaos on the market in full throttle.
It seems quite an easy from my point of view. In case import to Europe isn’t possible from Russia and Belarus, Europe should increase own production increasing deforestation or import logs and lumber from the offshore markets which requires huge moves within each particular market segment. Ok, let’s see what it brings us but so far…. As normally below are news I found the most notable for myself and worth spread with you.
By the way, to develop new markets and clients I came to Vietnam and going to spend the nearest 4-5 weeks here. If you have any questions, wanna meet up or just suggest anything – feel free to contact me over the eurochinagroup.com webpage or LinkedIn.
War in Ukraine
The war in Ukraine dealt an unprecedented blow to the global wood products markets. Russia, one of the world’s largest wood products exporters, having unleashed a war, found itself under sanctions that immediately cut it off from its main markets: the European Union, the United States, and Japan. Due to the war on its territory, Ukraine cannot export as usual. The global shortage of timber is increasing and product prices are rising. In my humble opinion this also works in counterwise and the EU, US and Japan market also found itself cut off the major source of raw material and this is huge problem!
Winners: forest owners.
Loosers: processing and production industries; construction companies; construction developers; final consumers…
My home country – Latvia
In the first quarter of this year, the price of wood in Latvia returned to the level of the summer of 2021, when the prices of pine and spruce had already reached a historical high.
In the first quarter, the price of softwood sawlogs increased by 21 euros per cubic meter compared to the fourth quarter of 2021. Prices for birch wood are also rising, although the first quarter of the year is not its season. The sharp rise is closely linked to the war in Ukraine and sanctions against Russia and Belarus.
Despite the fact that the purchase prices of roundwood in the second half of the first quarter were lower than the actual value of the felling, the wood was sold at the forecast price, which is the advantage for forest owners in Latvia.
The return of softwood roundwood prices to the level of summer 2021 and the increase in the first quarter of 2022 is mainly due to the increase in the price of pulpwood and firewood. As a result, the price of a thin spruce and pine sawlogs rose. The rise in roundwood prices was also linked to sanctions against Russia and Belarus, the decision of the European Union (EU) and other countries to stop buying wood products from Russia and Belarus. Belarus and Russia have long been important suppliers of wood products throughout Europe.
Although the softwood thick sawlogs had not reached the price of the beginning of last summer, it was compensated by the prices of small logs, pulpwood and firewood, which were higher than the prices in the beginning of summer 2021. The average price for softwood logs was therefore almost the same as at the highest point last year, according to E-silva.
At the beginning of this year, a significant increase in prices was observed in the segment of thin sawlogs – the price of thin pine sawlogs reached 68 euros per cubic meter, which was 31% more than at the end of 2021, but the price of thin spruce sawlogs was almost 67 euros per cubic meter, 22% more.
In March of this year, compared to February, the prices of both spruce and pine assortments increased. The price of thick pine sawlogs increased from 111 euros per cubic meter to 124 euros per cubic meter, which was an increase of almost 11%. The reason for this increase was the constant demand for wood products and the more difficult supply of wood raw materials due to the geopolitical situation, the representatives of the auction system explain.
In the first quarter of the year the price of birch veneer logs rose sharply to 123 euros per cubic meter in the territory of Latvia. Also, comparing March of this year with February, the price of birch veneer logs increased, which is very atypical for the spring months. The transportation of birch wood is more convenient in the cold season of the year. The reason for this increase was both the war in Ukraine and the related sanctions against aggressive countries, as well as internal forecasts of rising timber prices in the near future.
At the beginning of the year, the price of birch pulpwood continued to rise and by the end of March had already risen to 68 euros per cubic meter, which is an increase of 17% compared to the beginning of the year.
After the end of Russian wood imports, the Finnish forest industry will be looking for substitute wood mainly from Finland. During the spring, the Finnish forest companies have increased their procurement organizations. Even with increased wood purchases, there may be challenges in harvesting and transportation. Wood imported from Russia – mainly pulpwood and wood chips – has been harvested and transported to Finland by Russian workforce with Russian equipment. It is unclear whether there is enough equipment and drivers in Finland to replace the Russians.
According to Finnish machine entrepreneurs, a lot depends on how much the amount of wood to be harvested increases. There will hardly be any problems this year, as the spring strike reduced the consumption of wood and there was time to import some wood from Russia at the beginning of the year.
But if, for example, the amount of wood imported from Russia last year (just over nine million cubic meters) were to be replaced next year, the situation would be more challenging.
Prices are rising all over the EU. Logs prices are rising, end product prices are rising, certain but sometimes significant shortage of supply nearly in all segments from natural moisture lumber to veneer. I suppose I know all the buyers around the Baltics states and those never replied our offers in recent years are calling now to establish long term supply contracts (IMHO).
More and more companies are competing for the forest raw material. The ongoing war in Ukraine has sharply reduced Russia’s export volumes to Europe. This creates a shortage of supply and leads to a strong price development that benefits forest owners all round the Europe. At the same time, the risk of shortage of wood raw material is growing.
Material prices in the UK have shot up again after months of gradual decrease, following Russia’s invasion of Ukraine. Timber was one of the hardest hit materials, seeing prices rise in March. The price of imported sawn or planed timber going up by 2.5 percent, following five months of steady decline. It was also 11 percent more expensive than it was in March 2021. Imported plywood also went up in price by 2.5 percent, and cost 28 percent more than in March 2021. At the same time UK’s lumber imports return to pre-Covid levels.
Construction in EU
Construction sector in timber importing countries “unsurprised” to see a sharp rise in timber prices as the impact of the war in Ukraine began to feed through to the sector. Some contractors on fixed-price contracts signed up to 12 months ago are badly affected, especially those working in construction sectors such as infrastructure. The latest pressures come on top of a “challenging couple of years” for subcontractors, with labour issues, material costs, all taking effect.