The operational results of A/s “Latvijas valsts meži” (LVM) for the first nine months of 2023 show that during the reporting period, 5.18 million cubic metres of roundwood assortments and 417 thousand megawatt-hours of wood chips were supplied to Latvian timber processing companies. The volume of carbon stored in the industrial wood supplied to the market in the first 9 months of 2023, expressed in CO₂ equivalent, is 4.7 million tonnes.
The slowdown in economic activity in significant timber product sales markets in Europe is also reflected in Latvia’s timber product exports: with a few exceptions, total sales volumes are decreasing, and prices even more so. Data on the softwood sawlog processing segment show that the value of softwood sawn timber units exported from Latvia in the first 9 months of 2023 fell by a third compared to the same period last year. This drop in value can be explained by a sharp decline in demand from the construction sector. Timber frame material manufacturers in Finland and Sweden are also facing a similar downward price trend compared to the record high levels experienced previously. However, the competitiveness of Swedish timber frame manufacturers is being positively influenced by the weakening of the krona, which has allowed them to avoid reducing their processing capacities.
LVM’s pre-tax profit in the first 9 months of 2023 reached 218.5 million euros, which is 32.2 million euros or 17% more compared to the same period last year. Profit figures were mainly influenced by the high timber prices during the first six months of this year, as well as a 6.6% increase in roundwood assortment sales volumes. 96% of LVM’s total revenue, or 462.7 million euros, comes from the sale of timber products – roundwood assortments, standing timber and wood chips.
The LVM board emphasises that the operational results for the first nine months of 2023 reflect an atypical situation – the company has achieved excellent financial indicators, but these have been bolstered by high prices in the first half of the year and timber sale prices set in long-term cooperation contracts. These high sale prices were formed earlier, as a result of timber product auctions held in December 2021, even before the war launched by Russia in Ukraine, which rapidly and significantly changed the situation in the timber market not only in Europe but across the globe. Under current conditions, assessing the situation in the European and global timber markets where Latvian timber processing companies also sell their products, a sharp downturn is visible in both timber product prices and demand. When evaluating potential future scenarios, it is expected that the entire Latvian forestry sector—which is the country’s largest export sector, accounting for 1/5 of the total value of all goods exports, and a significant employer in Latvia’s rural regions—is already facing critical challenges. However, as a public capital company, LVM does not have the ability under the current legal framework to make any changes to previously concluded long-term contracts, whether regarding volumes, prices bid by customers, or terms.