As log prices rise, Baltic producers are trying to bridge the gap between increased costs and an indifferent UK market. But importers and merchants are adopting an ultra-cautious approach to buying, and price increases are not on their current agenda. While sales in the UK are said to be ticking over, most traders predict that figures will be down for the second half of the year against 2004.
Basic sawn carcassing has become a product that Baltic mills would rather avoid, instead they are favouring value-added products and are continually looking towards other markets. In the UK, the trend for planed and regularised dry carcassing has been gaining momentum this year, and terminal operators and importers say they anticipate strong growth in these products into 2006.
Added premium
From the Baltic producers’ point of view, this is a positive trend as it lifts the price beyond the basic level of C16/24, which is under pressure from increased Swedish production. UK merchants feel the presentation of regularised timber is a great sales aid, and they are able to command a premium.
Customers, in turn, like the production because the finished sizes are a lot more substantial than those of the corresponding dimensions in CLS, yet the pieces are still smooth and regular. A further benefit is that higher actual cubic metre volumes can be shipped and transported in one operation.
The drift towards higher returns is borne out by figures presented at the meeting of the UN Economic Commission for Europe Timber Committee, in Geneva in September. Statistics submitted for the meeting give a useful snapshot of supply and demand in the Baltics. In most cases, the latest available figures cover the period up until the end of May 2005.
In 2004 exports of sawn softwood from Latvia fell by 7.6%, but the monetary value rose by 4.1% due to improved price levels. Trends in 2005 have so far pointed to a further reduction in volume by 10.4%, but this will not be confirmed until the turn of the year.
Estonia’s sawn timber exports fell back due to raw material shortages in 2004, while processed and manufactured wood goods made strong gains. Due to fibre shortages, Estonia imported 54% more coniferous logs in 2004 than in 2003, mostly from Russia, and the trend is likely to continue into 2006. Exports of Estonian sawn softwood are forecast to reach around 800,000m3 in 2006, approximately 6% less than 2004.
Lithuania has also experienced reductions in softwood exports. Forest felling dropped in 2004 by 2% against 2003 figures. The reduced volumes of extraction were mainly attributed to state-owned forests, while the quantities from private stands remained steady.
In 2004 Lithuania exported 613,000m3 of sawn softwood, the largest market being the UK which bought 213,000m3. The US and Canadian markets increased their imports by 36% above the 2003 figure to 136,000m3 while Germany dropped by 37% down to 113,000m3. The first half of 2005 has seen a fall in exports to all markets except North America, which grew.
Certification focus
A key subject of discussion in Geneva was the importance of forest certification to promote sustainable forest management. Demands from end users that timber must come from legal and sustainable sources have induced trade and governments to pursue environmental purchasing policies, which focus on certification schemes. Certified timber is now specified for a growing number of construction projects at the design stage, and this requirement is expected to increase.
Looking at the situation in the Baltic region, Latvian forestry is divided into two sectors, state-owned (33%), and privately-owned (67%), made up from farmer growers to large forest products enterprises. The 1.62 million ha of state-owned forests are all FSC-certified, and the private areas have a mixture of accreditation including FSC and PEFC.
In Estonia, about 860,000ha (2.1 million acres) is certified under the FSC scheme, but there is little demand for certified products on the domestic market. All the demand for FSC timber comes from the exporting sawmills, but the growers are not getting the extra premiums to cover the costs involved.
Around 1 million ha (2.471 million acres) of forest land in Lithuania is owned by the state and is certified under the FSC scheme. This equates to approximately 50% of all the country’s forests, while the balance is owned by the private sector which, in principle, is aligning itself with PEFC. Lack of finance amongst the Lithuanian Forest Owners Association is causing a delay in ratifying the scheme, and extra support is expected from the Ministry of the Environment.
To summarise the situation in the Baltics, all mills are putting value-added products at the top of their priority list, particularly as raw material prices are rising and competition from other suppliers is heating up.
Shippers are becoming more aware of global markets and are continuing to forge longer-term trading relations with the US and Japan. The move towards regularised carcassing in the UK is providing better returns for producers and merchants and, more importantly, is improving customer satisfaction with the end product.
There is a substantial area of certified forest area within the Baltic states; whether buyers will pay the small extra amount for the service is another matter, but nobody can accuse the producers of not trying to meet market demands.
