Export earnings for the forest industry in the first quarter of this year exceeded one billion euros, which is 36% more than in the same period in 2021, and this volume is equal to that of the entire year 2004 combined; however, industry experts consider these figures incomparable.
Information compiled by the Ministry of Agriculture based on Central Statistical Bureau data shows that an unprecedented increase in export income was observed in the first quarter of 2022, even though the actual export volume (m3 or tonnes) is lower compared to the first quarter of 2021.
Incomparable data
"These are incomparable figures, even though the product names are the same," says Kristaps Klauss, Executive Director of the Latvian Forest Industry Federation, when evaluating the data. He justifies this by stating that the data from the first quarter of 2022 cannot be correctly compared with the same period in 2021.
"2021 started very quietly, and price increases for primary processed products began in the second quarter, reaching their peak at the end of last summer – in August. In contrast, the increase for energy resources began exactly in the summer of last year, reaching their maximum price level in December. 2022 presents a completely different picture, especially because the consequences of the Covid-19 pandemic crisis are still being felt (particularly in the logistics segment), there is an energy crisis (which affects everyone through the high cost of energy resources), and on top of that, there is the impact of a war economy, which began on 24 February when Russia launched its invasion of Ukraine," K. Klauss explains. He emphasises that the impact of these factors is visible in the first quarter of this year, especially in March.
"What is the point of comparing anything in monetary terms this year with 2021 if we are essentially looking at a completely different system?" K. Klauss asks rhetorically. He draws attention to the fact that major suppliers of timber and timber products, such as Russia and Belarus were as recently as last year, are no longer present this year. "The volume of wood chip imports has shrunk this year, as has the volume of their exports. Birch pulp wood chips are currently being snapped up, which is essentially a measure to compensate for the vanished import of wood chips from Belarus that were used by heating companies operating in Latvia as an energy resource for heat and electricity production," K. Klauss replies when asked what to look out for. In his opinion, due to the several factors mentioned earlier, even the prices of many products in January of this year cannot really be compared with the prices of the same products in March. "It is better to study what changes and how it changes month by month, because timber product import volumes from Russia, although they continued to decrease, were still continuing in March (they were in transit), but were slowly ending, and this will also have an impact on export volumes (m3 and tonnes) as well as the money received," K. Klauss stresses. He predicts that we will only see the results of the disappearance of Russian timber imports in May and June. "The business reaction to the Russian invasion is characterised by buyer panic, which has not ended in several segments of forest industry products, for example, in the energy wood segment, but is ending for structural timber materials," says K. Klauss.
Less, but more expensive
Information compiled by the Ministry of Agriculture shows that in the first quarter of this year, income from sawn timber exports increased by 35.5%, even though the supply volume was 8.8% lower. The volume of roundwood exports has also fallen by 8.5%, yet despite this, income from exports increased by 28.7%. Essentially, the increase in income is based on global inflation of timber product prices, and in several segments, even on the question of the future availability of the respective products. "In March 2022, compared to March 2021, we are in a completely different world, with different prices, different availability of materials, and therefore any figures must be evaluated quite differently," says K. Klauss. He supports his statement by noting that while the volume of income is significantly higher, one must account for the fact that costs have also risen substantially, especially in product segments (not only in timber products, but also in products from other industries) where the sales price barely covers the increase in costs. "The new reality has not yet fully arrived, but it will arrive with a slight time lag, and essentially, one cannot purchase with the euros received in the spring of 2022 what one could buy for the same amount of euros in the spring of 2021," K. Klauss emphasises.
He admits that for the aforementioned reasons, it is impossible to compare export, production, sales, or even tax volumes. "It is a different economy, there is a different assessment, even if the transformation of the national economy in line with the new reality has not yet been fully completed," says K. Klauss.