A conversation with Armands Apfelbaums, co-owner of ACA Timber

As someone who has been involved in timber trading for at least 30 years, how would you evaluate this year, the situation caused by Covid-19, the European “Green Deal”, and other events?

That is a good and broad question. I have survived, and that is good! “The market is quite volatile”: one cannot describe this year in any other way. Plans and budgets are being created or changed from one transaction to the next. The longest cooperation agreement at the moment might be signed for one month, no longer.

I estimate that the overall market volume could fall by 20%. A few market segments are still in very good demand, the market is “working” there; at the same time, there are products where demand and price have fallen, for example, the average price of cellulose is much lower than last year. Cellulose processors are operating at lower capacity, are not planning routine factory maintenance, and are cautious – consequently, the demand for pulpwood is relatively low.

On the other hand, demand for sawlogs has increased. At the end of 2019 and the beginning of this year, until the Covid-19 crisis began, there was a 3-6 week recession (almost bordering on panic) in the sawlog sector; recently, it has been observed that people have become more active and industrious again, they want to renovate, build, and construct, and for a few weeks prices have been rising noticeably again (for example, the price of timber in the USA has risen by 30-40%, and there is stable price growth in the UK). If we mention firewood, which is significant for many in Latvia: in this regard, I must say that we have experienced two not-very-favourable winters, when firewood consumption was low, and stocks for those two seasons increased because there was a surplus in both years, and evaluating the large flow of wood from Belarus in addition…

What is imported from Belarus?

Cheap fuel chips and cellulose chips, about 60,000 tonnes a month. As is known, we have not been receiving logs from the Belarusians for several years already, it is prohibited. It should be added, however, that at the beginning of the year, with the approval of the higher-ranking Belarusian leadership, several shipments took place; specifically, large quantities of pulpwood reached the new factory in Akmenė (Lithuania). From last autumn until the spring of this year, large quantities of logs were delivered to certain factories in the Baltic States in a similar way. About 10,000 tonnes of birch pulpwood “went” through Riga for specific needs. However – I repeat – these were individual agreements following a special order (“ukaz”) from the “big man” in the neighbouring country.

The reason for this is simple: in Poland, where Belarus previously had stable sales, the market was inactive and they needed to look for other options.

What is your experience working with Belarus?

I count my experience from the winter of 1993, when exporting birch veneer logs was practically prohibited, but they were cleared through customs as birch pulpwood, and there were no obstacles. Since that moment, the laws in Belarus regarding log exports have changed at least five times: for a long time, small-diameter timber (firewood, pulpwood) was allowed to be exported, for other assortments, state-owned companies organised auctions, and logs could be purchased at the Minsk exchange, where the processes that took place were quite well-organised. As I already mentioned – officially they talked about lower-quality materials, but in reality, sawlogs and veneer logs were also exported from Belarus.

There was a period when the private sector was not allowed into logging in the neighbouring country; it was carried out only by state companies; this seriously affected logging volumes in Belarus; by the way, they are still not being used by at least 50%. There is a need for harvesting, but it is not being done. Private sector activity in the forests is still restricted in various ways; as I said, laws and regulations change frequently. If one can put it this way, the “first-hand rule” always applies to state companies; there are many of them in Belarus, and they perform various functions.

Six years ago, there was a crisis in the neighbouring country’s forestry, there was a lack of money, and the “big leader” issued an order (Order No. 9) that one could export whatever one wanted and as much as one needed (except for birch veneer logs). At that time, a great deal of log material was imported into Latvia.

I will not talk about Belarusian politics; I am entirely apolitical. As far as I know, there have not been large investments in the forestry sector in this country; Schwainhoffer plans to build a factory in Grodno, Kronospan operates in the country, Chinese entrepreneurs are doing something but are not succeeding with starting up the factory, and there are Lithuanians with the VMG group (sawmill, pellet factory). There are a few investors from Latvia.

The price of raw materials in Belarus has always been 30-40% lower than in neighbouring countries. I already said earlier that the last few years show: there are investors who take risks and are not afraid. We shall see how they fare!

Is wood chip export still profitable for the Belarusians?

It is cheap and profitable for others. The goal set by the state: to ensure people live in rural areas, performs a social function, and it is the same with forestry. People in rural areas are given work, which would be comparable to support for European Union farmers. Of course, such goals require funds that are not always to be found in the Belarusian budget. Forestry there is not efficient! If we talk about trees, the species composition is quite similar to Latvia; the differences might be only in the very south of Belarus.

Are decisions made quickly in the neighbouring country? What is it like on a daily basis?

Everything depends on the market situation. For example, currently, when there is no demand for wood chips, they are literally “thrown at you”.

The Belarusian exchange is a quite well-organised unit; it trades various wood products. I know that several Latvian entrepreneurs have tried to operate there; every year, about 10-20 new entrepreneurs try to start something there. It is not simple; what is written on paper is not always carried out. I know that there are plenty of interested people in Latvia, but it is complicated to understand many things; for example, prices for many assortments or products are lower, but the quality does not always correspond to what is written! You have to measure and re-measure twice before you start cooperating! The experience is very varied.

What about resources in Latvia? Do we have enough of them?

There are enough resources in Latvia at the moment. For an entrepreneur, any requirements and restrictions increase the production cost; “Green Deals” undoubtedly cost more year by year! I have the certificates that are necessary; professional colleagues deal with that; we look, research, and check. The pressure is great, a certification platform has been created, it works, and without it, you cannot operate in the market. By the way, wood from Belarus also comes with a corresponding certificate; it is the rule there.

The recent attack on the industry: competition, uncertainty, style, fashion…

I have not studied or been interested, as I already mentioned regarding politics. I only know that I have written letters to “Latvijas valsts meži” several times with the desire to purchase pulpwood, to which I received a polite reply that I did not qualify because I did not have my own processing facilities. I purchase such pulpwood quite successfully from the Estonian state forests, with whom I have a five-year contract. The Estonians look at my cooperation history, what it has been, and how it has been.

I know the Latvian business environment well, and I have no intention of leaving!

A former Ventspils resident, you now live in Riga. What was the feeling before the recent elections?

It is an eternal experience – after electing new deputies, time passes before they grasp the situation, and new elections are upon us. I am sceptical, but one must believe in the good! For Latvia, Riga is like a “second Latvia”, and a lot of money circulates in the capital. It would not be bad if people could be found who would get down to work. For example, repair A. Čaka Street or some bridges that have been under repair for a long time.

My parents, brother, and friends live in Ventspils. I am there often. It is not the worst corner of Latvia, and I think the city is often given disproportionately large attention.

You have three sons. What do they do?

They play ice hockey and study. One graduated from the Stockholm School of Economics in Riga, the second enrolled there, and the third is studying at RTU. I personally am not much of a fan of hockey; I run and swim, ski, and in the summer, I use water skis. Everything is fine.
Photographs by Armands Apfelbaums and zemeunvalsts.lv used.