Changes in market conditions in 2023 are gradually allowing the gaps created in 2022 in forestry work—forest planting and young stand tending—to be filled, and the shortage of logging and transport capacity is no longer felt this year. However, the consequences of last year's service unavailability and rising costs raise questions about covering huge peak fluctuations.

This picture is shown by data from the state forest manager a/s Latvijas Valsts meži. In the first five months of 2023, 12.0 thousand hectares of forest were sown and planted, and 20.5 thousand hectares of young stand tending were carried out, which is 6.1 thousand hectares more than in the same period last year. At the same time, other issues are relevant this year, as the prices for forestry services in Latvia have now levelled out with those in Scandinavian countries.

A 180-degree turn

“This year, the situation is diametrically opposed to last year's—when there was high demand and consequently very high timber prices, which triggered great interest in the private forest owner segment for logging services, resulting in a shortage of logging and timber transport capacity, as well as a failure to carry out young stand tending work. In 2023, with last year's hype subsiding, the ratio of service demand to supply has returned to its usual level,” describes Andris Balodis, Forestry Director of a/s Latvijas Valsts meži.

He points out that one of the most significant factors that caused these tectonic shifts was Russia's invasion of Ukraine. “We had to urgently look for solutions, as the rapid and unpredictable rise in fuel prices put forestry service providers, timber transporters, and forest road builders in a difficult situation, even with indexation mechanisms in place in contracts,” recalls A. Balodis. He acknowledged that there were situations where a service provider would terminate a previously concluded contract, pay the stipulated penalty, and go to work for others at significantly higher service prices, while the company faced problems with fulfilling its own obligations.

“LVM procures necessary work within the framework of public procurement regulations, so the company's speed of flexibility was much more limited compared to the private sector, and several repeat tenders were required to obtain the necessary service providers at a price acceptable to them,” explained A. Balodis. He admitted that, as a result, the set plans for young stand tending were not met.

“In the first months of this year, we have significantly increased the volumes of young stand tending and plan to complete last year's backlog over the course of the year. As a result of good re-planning, this delay in work execution will have no negative consequences for the forest stands, their growth, or the timber within them,” emphasises A. Balodis. The basis for this situation is the fact that activity in private forests is lower, and as a result of new service tenders, many service providers who had left providing services in state forests have returned.