Jānis Ciems is in conversation with Māris Liopa, director of the Latvian forest and related industries portal zemeunvalsts.lv, and Pauls Rēvelis, editor of zemeunvalsts.lv.
Let us begin with a simple question – about “Latvijas Finieris”, which the industry has always regarded as the flagship of our timber sector
I have a great many personal memories of how “Latvijas Finieris” has developed over the years – in effect, I have grown up alongside the company. In 1988, after graduating from what was then the Latvian Academy of Agriculture, where I qualified as a wood processing technologist, I began work as a shift foreman at the “Furniers” factory of the “Latvijas Finieru Ražošanas Apvienība”. Until 1992 I worked both as a shift foreman and as a workshop manager. I remember vividly how, in 1992, the employees of the “Latvijas bērzs”, “Furniers” and “Lignums” factories jointly decided to establish the joint stock company “Latvijas Finieris”, buying the business out from the state during the privatisation process.
The founding principles of the company's development were set out by its first, long-serving head, Juris Biķis. From the very beginning, the company's internal and external culture has been shaped deliberately, so that growth would be organic, grounded in shared employee values and a loyal attitude towards the country. That still underpins how “Latvijas Finieris” operates today. One of the company's fundamental conditions was, and remains, that over time the leading professional specialists become part of the ownership structure of the joint stock company, taking part together in long-term decisions about the growth of the group, in which we invest a significant share of profits every year.
If in 1992 the joint stock company was made up of three factories, the number of “Latvijas Finieris” production sites is now considerably larger, and has expanded beyond Latvia's borders as well
The factories outside Latvia were one of the company's most significant development steps. They are underpinned by the need to grow not only in product development but also in volume. Our conviction is that processing should take place as close as possible to where the resource is harvested. Diversifying production capacity across the Baltics and Finland is, of course, also a cornerstone of stability. It is not for nothing that people say you should not put all your eggs in one basket.
At the same time, I want to stress that birch resource availability in Latvia is currently balanced, given the condition that we are able to manage our own land efficiently. That is why one of the directions we are pursuing through technological development is to give forest owners the opportunity to direct towards local processing at least part of the birch wood volume that has until now been exported from Latvia as roundwood.
As for the company's development beyond our borders, the first plant was built in Lithuania, where we produce a primary processing product – veneer. The next logical step was to be closer to Estonian forestry – “Kohila Vineer” is one of the most technologically advanced birch plywood product factories. And finally Finland, where ten years ago we bought a company that now operates successfully in the primary processing of veneer logs. Of course, at the outset there were concerns about our ability to compete for roundwood resources on the Finnish market with the large local processing groups – had they wished, they could have used aggressive methods to force us out of circulation. But Finland has a highly developed, transparent and fair business culture, and moreover we work in a part of the country where the forests contain a great many mixed stands. When these are harvested, the conifers go to the sawmills, while forest owners are glad to sell us the birch.
Does “Latvijas Finieris” own forest property in Finland?
We have no forest holdings outside Latvia. This year we have begun, on a small scale, to take part in the standing timber – felling site – market in Finland. That allows us to balance the flow of resources, since logging in the region takes place mainly in winter and spring. If stocks fall, these felling sites are a way of keeping the factory running at a steady rhythm.
What impression have you formed over time of the industry and of forestry in Finland; can we compare it with Latvia, what is similar and what is different?
Without going into the finer points, there are things or practices that differ. For example, when a buyer and a seller agree on the purchase of a felling site, the final settlement is made “after the fact” – that is, once the harvesting has been done. In Finland the felling site is of course assessed in advance, but the actual return is calculated at the timber delivery stage. To my mind, that reflects certain cultural differences – business is business, no doubt about it, but there is a wish to balance the added value across every link in the forest sector chain.
“Latvijas Finieris” is often praised as a good cooperation partner
We are a significant player in the use and processing of birch wood, and that brings with it responsibility and a duty of care for the development of the whole sector as a system. We are convinced that the use of wood is the key to many future sustainability questions. The forest sector is an essential part of the bioeconomy, which is developing and towards which the whole world economy is gradually moving. That is why it is important to recognise the excellent opportunities offered by Baltic forest resources, and to keep developing production and product design. The sector must act as one, but of course public support is also needed, as is an awareness among decision-makers that the efficient use of land and the resources that come from it is extremely important and significant for Latvia.
Coming back to our shared goals, one of them is to provide truthful, scientifically and statistically grounded information about the sector. Latvia's geographical position places it at the very heart of renewable resources. We do not need to be turned into a nature reserve for regions of other developed countries that built their economies at a time when environmental questions were not so pressing. At present – and rightly so – environmental questions are the world's number one issue. We just need to understand how we approach them politically at a regional level, and how each of us treats them in our own conduct. Without polluting, without laying waste, working as decent and conscientious stewards. At the same time, it is unacceptable for someone to slip a hand into my pocket on the quiet and then dictate what should be in it and what I may do with what is in my pocket. Perhaps my assessment sounds rather sharp, but that is the feeling that arises.
The sector's task is to be as united as possible in what it does, and to help the public be united in its convictions too. For example, “Latvijas Finieris” is one of the participants in the information campaign “Is there life without wood?”
Perhaps this will sound a little subjective, but... If we look at the situation from the outside – what are logging and the timber industry to someone who is casually uninformed? Well, in Latvia we closed the sugar factories, we tore up a couple of railway lines, we no longer grow sugar beet, we restricted coastal fishing – “and did the country come to an end?” We will get rid of something else, or ban it – so what will happen? In this connection I recall a report by Latvijas Banka in which the wording ran roughly like this: “...what are you worrying about – look at the Netherlands – there is no logging there at all, yet the wood processing industry is so well developed!” ...
People who have little or no connection with our sector, who are far removed from land management and work in other fields, often have no idea how wood is obtained or where it is used; they do not know that wood is present in almost every part of daily life... Of course, if we are talking about aesthetics, some may not find a fresh clear-felled site a pleasing sight. It is just worth remembering that many things we find agreeable are not beautiful or attractive at some stage of their development or making, compared with the end result. That is simply how it is! What matters is to build the awareness that what is happening in Latvia is not the destruction of the forest but careful stewardship, carried out on a sound basis, productively and purposefully.
“Latvijas Finieris” is expanding its forest holdings in Latvia and has a subsidiary, “Latvijas Finieris Mežs”
We acquire forest properties and try to manage them well. We also have a tree nursery, in which we are currently investing seriously. We are building a timber-framed seedling cold store, which in spring will make it possible to keep seedlings for longer. Demand for birch seedlings has grown considerably – many forest owners who some time ago were focused on regenerating conifer (spruce) stands have changed their long-term plans and principles after the damage brought by bark beetles. They understand that unbroken spruce stands are not the best solution, and that it is better to mix them with birch stands. That, incidentally, can be seen in Latvia, in Sweden and elsewhere too.
In Latvia there is more and more talk of deeper wood processing with higher added value
As we know, there is a worldwide move towards using renewable resources as much as is economically justified, including natural fibre materials, whose creation is linked to the natural CO₂ cycle. In other words, the big long-term goal is to work as much as possible with the carbon that is above ground, and to take as little as possible from below ground. For the time being we cannot, of course, manage without underground carbon, that is, fossil resources. But although the transition is slow, it is irreversible.
As I said, the first and most important issue in the world today is the environment and the climate. Over recent years, however, geopolitics has come onto the agenda, and it may to some extent shift the timing of progress on these questions. Using renewable resources at a deeper, chemical level is capital-intensive and expensive, and European society is not currently ready – I would go further and say not currently able – to pay for it, because we undoubtedly have to direct substantial resources towards collective security, defence and support for Ukraine. As a result, the development of the bioeconomy may become somewhat slower. This is not just about “Latvijas Finieris” or the Baltics. It is about Europe as a single economic and cultural space. At “Latvijas Finieris” we have supported Ukraine as far as we are able from the very first days of the war – foresters, refugees and the military effort alike.
But the bioeconomy is of course continuing to develop. One area in which wood is irreplaceable is construction. One of our priorities is also to demonstrate the possibilities of using wood in our own projects. The production buildings recently erected by “Latvijas Finieris” have been built using timber structures, which are light, convenient and compliant with fire safety regulations, and moreover it was an absolutely sound decision economically.
As for our scope to move into “deeper” wood processing, we are watching how the chemical industry develops. Several years ago we opened a betulin plant, where we extract compounds from birch bark. We have successfully tested the technology, and work continues with potential end users operating in sectors that were previously little known to us – the food industry, cosmetics and pharmaceuticals.
This is a very important point, because people often forget that anything can be manufactured; what matters is who needs what is manufactured and who is ready to buy it in order to use it
In capital-intensive manufacturing, what matters is the amount of working capital or a sufficiently broad demand for the product being made. A wide range of products can be made from birch plywood. If a product's value is high but the market demands only small volumes, that product should be made by small-scale producers. Industrial manufacturing has to concentrate on large-scale production, while at the same time thinking about how to stimulate market demand for new products.
Is demand for plywood sufficient?
Various types of plywood are produced around the world, depending mainly on the tree species that grow in the region in question. Birch plywood's share of the total volume is not large, but in many industries it is an important material because of its properties. While birch is biologically fairly perishable, in a dry, suitable environment it has very good physical and mechanical properties that can be used and applied in a variety of ways. Birch plywood is produced in regions where the resource is available – Finland, the Baltic states, Ukraine, to a small extent Poland and, as we know, also Belarus and Russia. If we recall, five years ago Russian plywood producers dominated in Europe with low dumping prices; an anti-dumping procedure was launched against them and an anti-dumping duty applied. That almost coincided with Russia's invasion of Ukraine, which was followed by a logical, complete import ban. Where Russia and Belarus once held 60% of the European plywood market, the situation has now changed... It has to be acknowledged that just under 20% still reaches the European market via intermediary countries, because demand for birch plywood has remained high.
Speaking of diversification, this is fundamentally about birch plywood; has using other timber been considered as well?
We are not looking at conifers; sawn timber production in the Baltics is at a high enough level for us not to create unnecessary competition. Softwood plywood is also a different niche product. Instead we work with black alder on a small scale. If a customer wants it, and it is agreed when the order is placed.
An important matter – knowledge, of which there is never enough...
At “Latvijas Finieris” every process is knowledge-intensive, which is why how the education system develops has always mattered to us. We work on joint projects with Latvia's leading higher education institutions, with both academic staff and young people. It is cooperation aimed at developing shared knowledge, but at the same time it makes it possible to build an understanding of land use and the forest sector as a whole within the education system. We run programmes for schoolchildren in the Rēzekne region, where we organise the Green Classroom. Together with a wide circle of industry partners we tell and show how forestry works, how wood processing companies work, and explain what economic activity that shapes and develops the environment actually is.
Education has to start early. The question is what background information children are given at home or in the classroom. I have myself happened to hear teachers coming out with careless phrases such as “everything is being cut down”, “everything is going to ruin”, and so on. People with such convictions live “in their own bubble”, where sound information is lacking. A fine example is clear-felling itself, which as a word may sound dreadful, but... if a tree is a light-demanding species and has no sunlit ground to grow on, it simply will not grow. Take the pine, so often mentioned in this connection – as we know, it will not grow in the understorey, but a great many people neither know nor suspect that. Until you come up against these questions yourself, you may simply never find out.
Another matter – our society is fairly closely attached to mushroom picking. What do we hear about forestry in that connection? “I have picked mushrooms here all my life, and now my patch has been felled!” I would draw attention to the fact that the person is speaking in the first person about property that does not belong to them – “my”! If the mushroom spot was in a state forest, that would be one situation, but what if the forest owner is the mushroom picker's neighbour? I often hear that basic respect for private property is quite literally being trampled in hobnailed boots. I have listened to interviews in which people say “it all belongs to us”. One of the foundations of a state is private property. Land is our wealth and our resource, and its owner has the right to use it as a proper steward. If they cannot look after it properly themselves, they can sell it, but this property is not “ours”, it is “yours”, “mine” or “theirs”. That must not be forgotten!
Comparisons with our neighbours often lead to mistaken conclusions – how bad this and that supposedly is in Latvia...
You cannot say that we have it bad! Yes, things could always be better or done differently. But this is a fitting moment to recall the saying “as you sow, so shall you reap”. We must learn to see what is positive and ask ourselves – how can I encourage or support it? For example, state forest management in Latvia takes place within a unified, well-ordered system that is rich in innovation. Nowhere else in Latvia is such a high level of knowledge and understanding of the forest and the processes within it concentrated as at AS “Latvijas valsts meži”. In Estonia things are much as they are here. In Lithuania, meanwhile, the old MRS (forest industry enterprise) system has survived almost intact, with many separate units; everything is far more fragmented and overall efficiency is therefore much lower.
Thoughts about the coming year...
In the company's core production we must of course stay on course for efficiency and for working with customers. The investment projects already under way must continue, namely the expansion of the Rēzekne factory and the Zābaki tree nursery, and next year we will begin the active construction phase of the synthetic resin plant. It is worth mentioning that the technology installed there will make it possible to replace gradually some of the fossil raw materials used in resins so far with lignin.
Questions about shaping public opinion and about cooperation with politicians are very important, and I think they will remain so, so that a sector which consumes resources is not restricted without good reason, and so that there is no need to think about scaling it back. Latvia has the resources, and as a nation we can and do know how to use them sustainably. Unfortunately, uncertainty about the future is dominant and is holding back capital investment in company development. Take, for example, the uncertainty about the flow of resources from state forests over the next five years. Let us remember one thing – a strong economy is the foundation of every country's prosperity.