Latvia can play a significant role in the development of the forestry industry and its resource processing sector – woodworking – by acting sensibly and taking appropriate decisions, particularly regarding the highly important issue of long-term timber resource availability, as well as by taking adequate action to address market failures.
These conclusions were voiced during the discussion “Timber resource availability in Latvia as a stabiliser for industrial development”, organised by the magazine “Dienas Bizness” and the Latvian forestry and related industries portal zemeunvalsts.lv. Timber resources in Latvia were, are and will be the most important issue, closely linked to the sensible, economically sound and environmentally friendly harvesting of these resources, which is influenced not only by the EU Green Deal, biodiversity and climate targets, but also by domestic decisions, attitudes and actions.
The current problem – price
“The most significant problem at the moment is the price. Although the price of roundwood has fallen over the last year (from an unprecedented (even extreme) high level to 'merely high'), from the private forest owner's perspective, the fact that 'the price has dropped' is what matters, and hoping 'that it will return to its recent dizzying heights', private forest owners are holding back on logging. In turn, the case of a/s “Latvijas valsts meži” (LVM) is special because the price index, developed before the war in Ukraine began and before the unprecedented rise in central bank refinancing rates, is unable to absorb rapid market fluctuations. Currently, by multiplying the LVM sawlog price by two (the cubic metre volume required to produce one cubic metre of sawn timber), we get the current market price for one cubic metre of boards, although normally the cost of the log in the board should be ~60%,” explains Kristaps Klauss, Vice President of the Latvian Timber Federation, noting that softwood sawn timber producers currently cannot afford to pay such a price for roundwood.
A solution is needed for the wintering period
“At the moment, Latvia is likely the least competitive, as we have the highest average timber sales prices. For example, the price of softwood roundwood in LVM's long-term supply contracts is currently 115 €/m³, while a Swedish timber processor buys the same log for 75 €/m³, and considering the nuances of measurement, this price is essentially even lower, so there is no need to ask who is more competitive,” K. Klauss assesses the situation. The above does not remain without consequences, as the forestry industry statistics show a decrease in employment of more than 10% compared to last August.
“Shifts in softwood sawmills are being reduced, and only a part of the laid-off shift workers manage to find other employment within the company,” K. Klauss explains. The situation in companies is currently varied but equally threatening. “Workforce reductions in many places are in the 10-25% range, while in others it has been decided to address this not by laying off employees, but by having them work fewer hours, and consequently earning less. Therefore, alarm bells are ringing, and the Minister of Agriculture, Armands Krauze, has also heard them,” points out K. Klauss. It is still too early to talk about potential solutions, but there is hope that they will allow for slowing down the further deterioration of the situation and creating conditions for wintering. If this fails, it will bode poorly for both the competitiveness of the Latvian timber industry and the people employed in it.
“If Latvia does not have a competitive timber industry, forest owners will also have to sell timber at lower prices, or in certain cases, there may be no buyers,” emphasises Arnis Muižnieks, Chairman of the Board of the Forest Owners Association of Latvia.
State forests – a stabilising factor
Arvīds Ozols, Director General of the State Forest Service, reminds that at one time the government decided on an additional 2+2 million m³ felling volume for two years – a total of 4 million m³ that could be harvested upon demand, but in reality, only 2.7 million m³ were harvested. “At that time, such state action allowed about 15,000-16,000 people to keep their jobs and not become unemployed and dependants on the state's social budget, remaining in the taxpayer zone,” A. Ozols explains. He recalls: the principle that state forests can act as a stabilising factor for the industry's development was included in Latvian forest policy documents.
“The current situation is not good, although it cannot really be compared to 2008-2009, so perhaps different decisions will be needed than 15 years ago, because the root of the problem does not lie in the availability of roundwood resources, but in the mechanism for setting roundwood prices at LVM,” says A. Ozols. He agrees that the conditions that led to the high timber prices for timber processors were formed historically. “In the short term, a solution must be found for high timber prices, while in the long term, solutions that would ensure that available timber resources do not decrease,” A. Ozols emphasises.
Private owners will wait for higher prices
“Looking at the average size of private forests in Latvia, which is about 10 ha, it is clear that the owner will develop a cutting area when the prices are at their best. If a very high price level has been experienced before, at the moment it has dropped, the owner will certainly do nothing,” A. Muižnieks is convinced. He points out that the total felling volume in private forests is decreasing, which was also shown in the summer of 2023, when there was an opportunity and trees infested by the European spruce bark beetle needed to be cut much more intensively to prevent the further spread of pests.
“Sanitary statements regarding bark beetle damage have been issued for a total area of about 4,000 ha, which is very little,” informs A. Ozols. “This does not mean that there is little damage caused by bark beetles, but that very few appropriate statements have been obtained (they are not free and cannot be obtained in a day), which allow for special felling of spruce trees affected by bark beetles regardless of their age and diameter.”
“Bark beetles do not discriminate – between commercial or protected forests or habitats of EU importance,” K. Klauss reminds. “Nature cannot be conserved; it develops according to its own laws regardless of human desires,” A. Ozols points out, explaining a specific example: an inventory of a forest concluded that in a herb-rich coniferous forest, which qualifies as a habitat of EU importance (and therefore – protected), there are no live spruce trees left; the habitat has essentially disappeared.
“With ill-considered protection requirements, we achieve the opposite effect, as demonstrated by the example of oak stands, the volume of which is decreasing. Why? If you cannot carry out a clear-cut, the interest in planting oaks and fighting off wild animals has decreased significantly,” A. Muižnieks describes the situation with changes in oak forest management.
“This is not the only example where, by setting restrictions to preserve something, we achieve the opposite effect,” A. Ozols is convinced. In his opinion, for the sake of biodiversity conservation, one should not try to preserve everything, because the goals might not be reached; instead, one should find the best possible way of management to show that biodiversity is maintained and not decreasing, while simultaneously obtaining timber resources for the wood industry.
Same requirements – different approach
“In the next 10 years, we will have to reckon with the EU Green Deal, and most likely, across all of Europe, including Latvia, Finland and Sweden, logging volumes will be lower. Then the main problem will be cubic metres,” K. Klauss explains his view on life in an era of change.
“At the same time, approaches differ. For example, FSC certification, which is voluntary, is much more difficult to fulfil in Latvia, much more demanding and even prohibitive if we compare it with Sweden or Finland. If such an approach 'moves' to (is included in) the regulatory environment, requiring everyone to achieve identical goals, in Latvia we will fulfil them as strictly as possible, while at the same time our competitors will have concessions, which will have a significant impact on both the availability of timber resources, prices and, of course, competitiveness,” K. Klauss critically evaluates the situation.
A. Muižnieks draws attention to the report by the Ministry of Environmental Protection and Regional Development (VARAM), which states that at a meeting of the Saeima Sustainable Development Committee, it was found that more than 50% of forest habitats were found outside protected areas. “This means that man, by managing the land for more than 100 years – planting, tending, cutting and planting again, tending – has created favourable conditions for the existence of the habitat,” A. Muižnieks is convinced, noting that decisions must be sensible and that forestry in forests containing habitats should by no means be considered as destructive to those habitats. At the same time, areas with high-value habitats should be “set aside” and adequate compensation paid for the imposed restrictions.
The video of the discussion is available here: https://www.youtube.com/watch?v=6pflsoCQilU