Roundwood prices in Estonia impacted by the bark beetle infestation in Central Europe and global economic downturn

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ERR/Fordaq
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Roundwood prices in Estonia started to fall rapidly from their spring high. A new report by the Estonian Public Broadcasting news service (ERR) describes the situation as serious, after interviewing several Estonian industry insiders. To be blamed is a cooling of the global economy and widespread damage to spruce trees caused by the bark beetle infestation in Central Europe. 

Martin Arula, CEO of Toftan, one of the largest sawmills in the Baltic States, said to ERR that the current situation of the Estonian timber market is comparable to the crash in prices which occured in 2007-2008.

''The global economic downturn is still very clear,'' Arula said, as quoted by ERR.

''We have seen price falls of up to 60 percent in the various international export markets, as compared with nine months ago. Within the Estonian market, wood products prices have fallen a bit less than this-we're talking about 20-25 percent- but this shouldn't be taken as an indicator that we are somehow isolated from the rest of the world, leaving us to remain on some sort of higher level''.

A more prounced fall in prices has been reported in the Estonian pulpwood and firewood markets, at up to 40%, even though some call this a normalization of the market.   

''These [higher] prices, which were the case almost a year ago, were somewhat 'utopian', and were partly the result of the wet autumn of 2017,'' said Jürgen Ainsalu, CEO of timber products company AS Barrus, as quoted by ERR. ''Since then, pulpwood producers in Scandinavia started to decline while the market demand remained high, which led to a price rally in the Baltics,'' he said. 

Forest fires have severly damaged softwood trees in particular in Central Europe, an effect which has been felt in Estonia too, and have had a strong impact on buying prices. 

''Damaged spruce timber has been available on European markets for less than €30 per cubic meter, whereas we can't afford to go lower than €60 per cubic meter,'' Arula said. ''The current glut, combined with the cool economic downturn is still really serious,'' he added. 

The knock-on effect to the sector as a whole will be significant, larger sawmills say, though there has been no talk of lay-offs or downsizing yet, ERR reports. 

“If a forest owner has nowhere to sell their timber, or it is no longer profitable, many forests will still be left without being managed,” said Erki Sok, CEO of the Võru County forestry association.

Estonian forest cover amounts to around two million hectares, about 50% of the country’s land area. Of this forest cover, about half is state-owned and managed.

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