According to data prepared by the Ministry of Agriculture, the export volume of sawn wood has slowed right down as investment in technology has enabled the country to add value and so increase the value of its exports.

The total volume of sawn wood export in 2002 increased by just 0.1% on 2001, while the value increased by 3.5%. The export volume of sawn hardwood increased by 15% and value rose 21.1%.

However, sawn softwood export volume decreased by 3% whereas export revenue increased by 0.5%. There are several reasons for this trend: export of sawn wood with higher added value; the strength of the British pound – the UK is Latvia’s biggest sawn wood export market; an increase in the value of the euro in relation to the Lat in the last months of 2002.

During the past couple of years investments have been made to develop timber technologies in Latvia. The result is a reduction in sawn wood exports and an increase in the export of value-added products.

This has been followed by a remarkable increase in builders’ joinery and carpentry exports during the last three years. The export value in 1999 was Lats13m, which rose sharply to Lats37.7m in 2002.

The total income of further processed sawn wood exports increased by 83% in 2002 on the previous year. The export value of wooden prefabricated buildings is rising by about one-third each year, and the export value of wooden wrapping and packing equipment has shot from Lats7.96m in 1999 to Lats20.4m in 2002.

Export markets

Latvia’s export markets have also changed. The volume of sawn softwood exports to Denmark last year decreased by 37%, to the Netherlands by 28%, to France by 21% and to Germany by 12.5%. At the same time revenue decreased too; to Denmark it was down 28%; Netherlands 16%; France 18.5% and Germany 2.1%.

However, sawn wood volume to Sweden rose by 87.7%, Japan was up 53.5% and Iceland 34.5%.

Experts believe that the rise in exports to Sweden is related to the fact that shipments to the US are put together in Swedish ports. If this is the case, Latvia’s sawn wood exports to the US could be much larger than thought.

Last year Latvian spruce was certified for the US construction market but the American market is quite unfavourable because of the instability of the dollar. However, when that changes the US could become a serious market for Latvian timber.

Experts believe that Latvian sawn wood export volume will not pass the record of 2000 – 3 million m3 a year – for some time. Of course, it is possible to increase it by sawing Russian and Belarussian timber in Latvia, and managing further processing of timber from those countries such as drying, sorting, planing and impregnation. Experts believe that during 2003 export volumes will decrease but the total value of exports could rise.

Raising efficiency

Each year Latvian wood manufacturers try to use wood resources more effectively to raise profits. Testimony to this is the increase in timber by-products volumes and an increase in profits: export volumes of chips increased by 40% last year and revenue was up 60% on 2001.

&#8220There are two different trends in the development of Latvian timber manufacturing: mass production, where the large sawmills will be more competitive; and special niche production where the winners will be small-scale companies”

The biggest sawn wood exporters in 2002 were: Nelss Ltd – 280,166m3; Lindeks JSC – 167,304m3; LDV Ltd – 147,730m3; Kurekss Ltd – 132,098m3; Vika Wood Ltd – 106,682m3; BSW Latvia Ltd – 100,371m3. These figures are not audited.

Market insiders believe the situation in 2003 will differ little from 2002, with the above companies retaining their positions in the exporters’ ‘top 10’ and some seeing a rise in export volume.

Softwood production consumption per resident in Latvia is 0.15m3 – against Finland’s 1.03m3. Experts believe that timber manufacturing will stimulate market activities that will increase capacity of the local timber market and therefore the development of building and furniture production in 2003. All this will increase the use of sawn wood in Latvia.

Resources of wood

Activities in the foreign market are not the only factors affecting the turnover and profit of Latvia’s forest industry. As important are Latvia’s taxation, timber accessibility and prices, and costs of power resources.

An increase of roundwood prices had an impact on both profits and competitiveness. There was not a sensible price increase for sawn wood during the past year, but in spite of that the price of saw logs in Latvia increased at the end of 2002 and the beginning of 2003. Experts believe that the rise in log prices was affected by large scale companies maximising production capacity.

Of course, it was also impacted by last summer’s hot weather which resulted in harvesting having to stop in many of the region’s forests because of the fire hazard. This led to log resources in many sawmills getting close to zero and resulted in some extreme actions. Latvian timber traders began buying increasing amounts of logs from Russia and Belarus to decrease the cost price of saw logs and because the capacity of the Latvian sawmills was greater than the log resources legally available in the country’s forests.

Production capacity

During the past two years relevant investments were made in Latvia’s forest industry, upgrading high-power sawmills and improving further processing technologies.

In 2002 the country’s biggest sawmills were: Vika Wood Ltd – 121,500m3; BSW Latvia Ltd – 119,000m3; Nelss Ltd – 110,400m3; Launkalne Sawmill Ltd – 84,300m3; Kurekss Ltd – 81,131m3.

There will be continuing development throughout 2003 when Vika Wood, Nelss, Launkalne, Swedwood and Merex plan to increase their capacity.

There are two different trends in the development of Latvian timber manufacturing: mass production, where the large sawmills will be more competitive; and special niche production where the winners will be small-scale companies.

Both these trends can develop in tandem in Latvia and co-exist successfully. Large sawmills will not carry out small special orders and small scale com-panies will not start mass production.

Latvia is seeing investment in small and medium-sized enterprises to improve production technology for further processing to ensure profit margins stay well in the black for the country’s future.