Bigger, fewer wood exporters

With an enlarged client base and a new strategy that focuses on value-added products, Latvia's timber industry has increased exports by almost 15 percent in the first two months of this year.

At the same time industry representatives are bracing themselves for further consolidation, as new conditions force smaller players off the market.

Harijs Jordans, executive director of the Latvian Timber Exporters' Association, cited several factors in the industry's changing dynamics.

"There is a change in the kind or products we export," he said. "The volume exported has been stable, but we have increased the value of exports."

Statistics show that the volume of exported timber has remained largely unchanged, while the structure of exports contains more value-added products such as sawed, dried and processed timber.

Last year, for example, export of sectional wooden constructions rose by 30 percent, while those of prefabricated packaging increased 34 percent.

As a result of these trends, Latvia's timber exports last year gained 11.8 percent in value to reach 562.3 million lats (890 million euros).

And as value of exports have changed, so have the client base.

Whereas the United Kingdom imported 65 percent of Latvia's sawed timber, now exports are being increasingly redirected toward clients ready to pay for processed products.

"Japan, the U.S.A. and the Netherlands import more and more value-added products," said Jordans.

Biko-Lat, which produces mainly construction timber, exported 70,000 cubic meters of sawed timber in 2001 and since then has seen business expand.

"Yes, our market is expanding, mainly toward Europe," said Valts Kurpnieks, director of Biko-Lat.

To meet the growing trend in the industry, Kurpnieks said that Biko-Lat planned to develop the production of windows - a typical value-added product – this year.

But he warned of imminent changes in the industry.

"But the mood in the industry, especially for small, middle-sized companies, is a bit down," he explained.

"Many of them have disappeared, and many of them will disappear," he said.

Jordans also admits the situation in the industry is not easy for all.

"Yes there is a movement of concentration, and there is room for five to 10 big players on the market," he said.

According to Jordans, there are two possible paths for development: big, modernized sawmills with a 200,000 cubic meter capacity, or small producers who occupy a special niche.

The latter "will sell high value-added products, like furniture elements, and so on," he explained.

Andris Enins, a representative from the Vika Wood marketing department, said the company invested 2.6 million lats in a German sawing line.

"Our plan is to reach 190,000 cubic meters this year, and 210,000 - 220,000 in 2004," he said, adding that the market is strong and stable.

Vika Wood, the largest sawed timber producer in Latvia last year, is targeting 20 million lats in 2003, almost double last year's result.

Another major timber producer, Nelss, posted top-line results of 45.1 million lats last year, an increase of 35 percent year-on-year.

On the whole, Jordans said he believed the industry had achieved stability, and he stressed the importance of Latvia's forest management as crucial for the industry's long-term success.

"The industry is stable now, with 11 million cubic meters harvested each year and an additional 16 million cubic meters" added to existing resources, he said.

"And as a consequence, the industry feels stable," he said.