{"id":87050,"date":"2023-11-28T08:40:54","date_gmt":"2023-11-28T08:40:54","guid":{"rendered":"https:\/\/tin.happy-projects.ro\/interview-the-current-state-of-the-latvian-wood-industry\/"},"modified":"2025-09-19T09:01:09","modified_gmt":"2025-09-19T09:01:09","slug":"interview-the-current-state-of-the-latvian-wood-industry","status":"publish","type":"post","link":"https:\/\/www.timberindustrynews.com\/ro\/interview-the-current-state-of-the-latvian-wood-industry\/","title":{"rendered":"Interview: The current state of the Latvian wood industry"},"content":{"rendered":"

The Latvian wood industry has experienced very rapid changes after Russia's repeated invasion of Ukraine, is the wood industry.\u00a0Kristaps Klauss, executive director of the Federation of Wood Industry, tells about how the industry is developing at a time when the market is rapidly shrinking and efforts are being made to bring wood from Russia and Belarus to Europe via detours.<\/span><\/p>\n

The Latvian timber industry is in such a state of constant change.\u00a0What does this year bring?<\/strong><\/p>\n

Here we have to talk about the markets where the Latvian wood industry sells its products.\u00a0The reason why the situation is currently worse than that of many other sectors of the manufacturing industry can be explained by the fact that more than half of the production, both in terms of physical volume and money, is realized in the construction market.\u00a0The other two markets are direct or indirect logistics and direct or indirect energy.\u00a0If a couple of months ago I was relatively \"optimistic\" that we have deep problems in two of the three markets, now I can say that we have problems in all three.\u00a0Moreover, after Russia's invasion of Ukraine, the world timber market we are interested in has split into two parts.\u00a0There is Europe and the USA, which with sanctions or a strict tax policy have either forbidden or severely limited the two aggressor countries - Russia and Belarus - to sell wood products in their markets.\u00a0At the same time, countries such as Japan, South Korea, Egypt and China are open to the products of these two aggressors.\u00a0Considering that Russia and Belarus have lost European markets, their wood industry is in an even deeper crisis than ours.\u00a0Therefore, they sell their products very cheaply.\u00a0This readiness manifests itself in the fact that it is almost impossible for us to compete with this very cheap production in South Korea or China.\u00a0Of course, some old contracts are fulfilled, of course there are some customers who refuse to buy from these aggressors on principle, but if we talk about the \"big picture\", then we are losing competitiveness in these Asian and African countries.<\/p>\n

Thus, one part of the world has disappeared for us, while in the second part of the world, where we continue to export, a very deep crisis has occurred in construction.\u00a0The year 2023 is terrible from the point of view of our industry, but it is better than it might have seemed at first, because there is inertia in construction and the projects that have been started must be completed.\u00a0However, market activity subsides as soon as these initiated projects are completed.\u00a0On the other hand, if we look at the new projects, then in Germany, for example, they have decreased by more than a third.\u00a0Britain is in decline, Sweden is in decline, Norway is also in decline.\u00a0In principle, there is decline everywhere.\u00a0Everywhere, the declines in the new projects are either ten or even several tens of percent.\u00a02024 will be even worse than 2023 in terms of demand.\u00a0Of course, as a result, prices are going down since the end of 2022, and this happens with small exceptions for almost all of our products.<\/div>\n

How much have prices fallen?<\/strong><\/p>\n

The question with which the moment is compared.\u00a0Regarding an essential segment of ours - softwood lumber - we can say that prices have fallen by a third during the year, from the peak of 2022 to almost half.\u00a0From a buyer's point of view, the prices we've fallen to now would still seem high from a 2018 or 2019 perspective.\u00a0But it must be noted that there has been insane global inflation during this time.\u00a0If we evaluate the cost changes, then we can say that the current prices are about 20% lower than they should be under normal conditions.\u00a0This directly affects the prices of building materials, but indirectly also the sale of furniture, as one part of the furniture market is directed to new buildings that need to be furnished.\u00a0On the other hand, other parts of the market are affected by people's mood.\u00a0When it comes to deciding whether to keep a security deposit in a bank account or buy a new wardrobe in place of an old one, many people choose to keep the money in the bank account instead of refurbishing their apartment.<\/p>\n

The second market is logistics, where huge changes have also taken place.\u00a0The global flow of goods has decreased, and as this happens, the need for boxes, pallets, cardboard packaging will logically decrease, and this will automatically affect the production of these products.\u00a0If global freight flows decrease, then truck production also decreases, which in turn affects the realization of birch plywood production.<\/div>\n

To outline what is happening in logistics, I can refer to the news that the world's largest container carrier \"Maersk\" plans to lay off around 10 thousand workers.\u00a0Currently, container freight prices to China are at a level I don't remember ever being.\u00a0Taking a container to China from Riga is twice as cheap as taking a truck to Germany.\u00a0This strongly characterizes the reduction in the global flow of goods.\u00a0For example, South Korea can generally be considered a country of the Western world, but it has no prejudice against the products of Russia and Belarus.\u00a0Therefore, it can be said that European companies are not competitive there, not only in terms of wood, but also in other products, thus the volumes of transportation and prices are falling.<\/p>\n

Until now, South Korea seemed like a \"normal\" country in our understanding, which, among other things, does not support Russia's invasion of Ukraine.<\/p>\n

It must be understood that Ukraine is purely emotionally one hundred percent \"in our world\".\u00a0But in the context of the larger world, this question needs to be looked at more broadly.\u00a0For example, let's take a purely honest look at what our own attitude was in the context of events in Syria.\u00a0How are the events in Mariupol different from the events in Aleppo?\u00a0The human tragedy is exactly the same.\u00a0Russian atrocities are exactly the same.\u00a0However, at that moment we as a country did not impose sanctions against Russia.\u00a0South Korea is similar.\u00a0They sympathize with Ukraine in connection with this attack in purely human terms, as we once did with the people of Syria.\u00a0But let's be honest - at that time we were generally not ready to turn sympathy into any financial restrictions.<\/div>\n

You mentioned energy as the third big market segment.\u00a0Are meteorological factors also contributing to the decline there?<\/strong><\/p>\n

For the second year in a row, from a resource consumer perspective, we are doing terribly in energy.\u00a0We are one day before St. Martin's Day (the interview took place on November 9, ed.), and how many degrees do we have outside?\u00a0Warmer than traditional weather conditions are also present elsewhere in Europe.\u00a0From the consumer side, it is good because it allows the gas markets to relax, it allows the firewood markets to relax.\u00a0From the buyer's point of view, everything is cool, because not only the prices relax, but also the resource needs to be consumed less.\u00a0It is usually the case that summer has the lowest prices, but in autumn they increase for pellets.\u00a0However, this year it happened that the prices were relatively high in the summer and there were even some local production deficits when the pellets could not be purchased immediately.\u00a0However, in mid- to late September, downward price pressure was felt as people had purchased large stocks of firewood, the autumn was warm and there was virtually no consumption, and producers have built up large inventories.\u00a0The last couple of months have seen a very sharp decline in prices, showing the opposite trend to what we have ever seen.<\/p>\n

If we put together the above, can we conclude that we are on the eve of an economic crisis?<\/strong><\/div>\n

Speaking from a timber industry perspective, I would definitely say yes.\u00a0For us, the crisis in the Latvian wood industry has unfortunately already started to a certain extent.\u00a0If we look at employment data specifically for wood industry specific occupations, such as woodworking engineer, we see that since the beginning of the year there has been a decrease in the workforce of about ten percent.\u00a0I polled companies in the industry about what their situation was.\u00a0For example, softwood sawmills.\u00a0In many such companies, production has fallen by more than 20%, and this has also affected employees.\u00a0This does not mean a proportional reduction in the number of employees in production, because the employee is a value and fights for it.\u00a0The first step in this case is to try to send the employee on paid leave.\u00a0The second step is to find him another occupation within the company.\u00a0And only when all other options have disappeared, you are forced to terminate the employment relationship<\/p>\n

If I count together those who had to be fired with those who have some other occupation in the companies, then when I look at the table now, everywhere the first number is two.\u00a0This means that 20% or more employees are affected.\u00a0Fewer than these twenty plus percent have lost their jobs, but if nothing changes in the economic situation, then unfortunately the number of employees could continue to fall next year.\u00a0It is very sad.\u00a0On the other hand, if we talk about the overall economy, yesterday at the Bank of Latvia's conference, bankers outlined the situation that there will even be increases in GDP (gross domestic product, ed.) in Europe.\u00a0I ventured to ask why they think so, seeing the situation in construction, which is one of the engines of GDP.\u00a0To that, they answered me that, they see, inflation is decreasing and within the product groups in many places there is not only a decrease in inflation, but also a real drop in prices.\u00a0At the same time, wage increases in Europe have been ten percent, so they assume that next year's growth will be supported by an increase in private consumption.\u00a0If consumption increases, then maybe at least the logistics industry will revive.\u00a0Let's see how it will be in a year.<\/p>\n

Is there a significant segment or market that is growing for your industry right now?<\/strong><\/p>\n

Not in all segments the price drop is as rapid as for softwood lumber.\u00a0For example, birch plywood was doing quite well until the recent past, as Russian, Belarusian, Ukrainian producers supplied about 60% of the European market before the start of the second wave of war in Ukraine.\u00a0At that moment, when sanctions were imposed on the products of Russia and Belarus, but because of the war, exports from Ukraine stopped, because bumbo and men are at the front, a deficit appeared on the European market.\u00a0Among other things, Ukraine has already returned to the market to some extent.\u00a0From an egoistic point of view, this is not good, because they offer the cheapest products and even thoroughly \"dump\".\u00a0But this time, from an emotional point of view, it is difficult to blame them for anything and it is a pleasure that they find and bring some money into their country.\u00a0However, if we talk about the size of the birch plywood market as a whole, then, as I mentioned, all three countries supplied about 60% of the market.\u00a0For comparison, softwood lumber accounted for about 10% of the market.\u00a0For softwood lumber, the total demand in our markets has fallen by more than this 10%, and as a result, we have got \"quite a lot of soap\".\u00a0On the other hand, the 60% shortage could not be compensated so easily.\u00a0For this reason, depending on the market, birch plywood prices have remained either high or at least acceptable.\u00a0However, the latest events show that there has also been a \"break\" and in short-term transactions there is both a significant drop in demand and pressure for a sharp price reduction.\u00a0But it is not only the fall in consumption in Europe that is to blame.<\/p>\n

Unfortunately, it must be recognized that there are gaps in the dam of sanctions against Russia and Belarus.\u00a0I can't name specific amounts, and they are probably even less than a third of what these countries used to import into Europe, but I assume that a significant amount of wood from Russia and Belarus enters Europe through Kazakhstan and Turkey.\u00a0Both countries produce plywood.\u00a0If we compare with the period before the full-scale Russian invasion of Ukraine, exports from these countries, especially Kazakhstan, have increased significantly.\u00a0Moreover, at least apparently more than the production capacities of these countries allow.\u00a0If we look at Turkey, then there is more like groping, whether and how a Russian product can be made with Turkish origin.\u00a0There, the list of countries that buy this product changes a lot.\u00a0A lot is sold in Bulgaria, but the Bulgarians may not have anything to blame, because this country bought a lot before the war.\u00a0However, it is different with other countries.\u00a0At one time, Romania attracted special attention, but then it suddenly disappeared from attention again.\u00a0Then, unfortunately, the name of Latvia also appeared, then it also disappeared.\u00a0There seems to be a kind of groping going on in sanctions evasion.\u00a0On the other hand, with regard to imports from Kazakhstan, which are significantly larger in volume, the situation looks very suspicious.\u00a0Before the war, we imported almost nothing from this country to the European Union, but in recent months, about eight thousand tons of production have been imported per month.<\/p>\n

It is much?<\/strong><\/p>\n

I'm not sure that pre-war Kazakhstan produced that much per month at all.\u00a0Where else did they export to Europe?\u00a0I'm not saying they are all sanctioned products because I have no proof of that.\u00a0This is my subjective assumption.\u00a0Imports are substantial, and it seems that they have found a \"good\" partner in Poland, and that country has become the weak link through which this sanctioned product flows into Europe.<\/p>\n

Is there any way to slow it down?<\/strong><\/p>\n

There are such possibilities.\u00a0And in this regard, I would like to express my appreciation to Latvian customs, because unfortunately, our country was also \"touched\" for a long time as a possible place of the circumvention scheme.\u00a0Unfortunately, it seems that initially something has flowed in here.\u00a0However, it should be noted that our customs is thoroughly studying and working with this issue.\u00a0I shouldn't reveal all the tools how they do it, but they do.\u00a0This is definitely not a case where the employees of an institution \"have a foothold\".<\/p>\n

They try to trace the entire supply chain?<\/strong><\/p>\n

It's not that easy, but they try to do it.\u00a0It's not a cheap pleasure either.\u00a0For example, one wood DNA origin test costs almost a thousand euros.\u00a0If there is a fairly high degree of confidence that this product is of \"bad and wrong\" origin, then I think that this thousand euros should not be spared.\u00a0It's not easy, fast, and cheap, but there are tools to stop this kind of thing.\u00a0I think that if our customs were not so active, then Latvia would look much worse from the point of view of potential circumvention of sanctions.\u00a0We unfortunately have a large section of society that tacitly supports Putin, and thus his actions.<\/p>\n

Looking at the overall situation, can we believe that the timber industry will be able to avoid massive waves of insolvency?<\/strong><\/p>\n

Of course it will work.\u00a0If we were talking in 2008, I would say something very similar in this regard.\u00a0At that time, we were learning to find the tools to create even a period of time where we were technologically ahead of our competitors out of complete hopelessness.\u00a0These instruments cannot be used in 2023, but it cannot be said that they would not exist at all.\u00a0We are working and will definitely find the right medicine to overcome the current crisis.<\/p>","protected":false},"excerpt":{"rendered":"

The Latvian wood industry has experienced very rapid changes after Russia’s repeated invasion of Ukraine, is the wood industry.\u00a0Kristaps Klauss, executive director of the Federation of Wood Industry, tells about how the industry is developing at a time when the … Continue reading →<\/span><\/a><\/p>","protected":false},"author":1,"featured_media":50584,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[4716],"tags":[],"class_list":["post-87050","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest-trends"],"acf":[],"yoast_head":"\nInterview: The current state of the Latvian wood industry - Timber Industry News<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.timberindustrynews.com\/ro\/interview-the-current-state-of-the-latvian-wood-industry\/\" \/>\n<meta property=\"og:locale\" content=\"ro_RO\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Interview: The current state of the Latvian wood industry - 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