Adding value to quantity

Overall this has been a successful year with continuous favourable development in the Lithuanian forest industry sector.

An increase of value-added products share in exports during the first months of the year was noticeable. In spite of unfavourable development of the national currency litas, which is linked to the US dollar, the Lithuanian forest industry is further increasing sales and reports better earnings compared with 1999-2000.

According to Department of Statistics figures, the woodworking industry showed an increase in sales during the first six months of this year, rising by 34% on 2000. Furniture producers posted 17% and paper industry 6% growth. The forest industry increase was in line with sales growth in other sectors of the manufacturing industry (+19%).

Growing timber products exports, which increased by 8% this year, were largely responsible for this considerable upturn in business. Also the domestic market for wood products recovered its calm as compared with 1999-2000. The construction sector, which was slowing down in 1999-2000, stabilised in the first months of this year.

According to the Department of Statistics, gross domestic product showed an increase of 5.1% during the first six months of 2000, compared to the previous year. Domestic consumption in general is increasing and unemployment is falling.

Sawmilling sector

More than 500 sawmills are operating in Lithuania and most of them are very small, with production up to 10,000m². They account for about 70-80% of Lithuania’s total production. About two-thirds of sawn timber is exported, half of it to Germany. During 2000, production of 10,000m² was achieved or exceeded by 14 Lithuanian sawmills and they accounted for 20-30% of total production in the country. Most of the big sawmills increased their production and are planning further investments this year.

Production at the biggest sawmill, Pajurio Mediena, reached 63,000m² compared with 33,000m² in 1999. The company recently invested in processing by-products and is now replacing a small log line with a new one. It expects to reach annual production of 100,000m² in coming years. Last year Pajurio Mediena and Ochoco Lumber avoided the negative impact of euro devaluation by shifting their sales to the US market, and this year they continue trade there.

Most of the other big sawmills increased output last year and are planning further investments this year. Some are investing in kiln drying, expansion, modernisation or production of value-added products. During recent years most of the big sawmills have solved the problem of sawmill by-products: chips are sold to export markets for pulp making or to the local fibreboard industry; slabwood is highly demanded by the domestic particleboard industry while sawdust, bark, briquettes and pellets are widely used for fuel.

The general development is that the share of further products is increasing as sawmills turn from bulk products (carcassing, pallet elements) to value-added production such as glued panels, semi-finished products and prefabricated wooden buildings. For example, the export of prefabricated buildings rose from US$2.5m in 1996 to US$15m in 2000.

During the first months of 2001, sawn timber production volumes remained at the year 2000 level. The main reasons were the limited supply of logs, unfavourable sawn timber demand and prices in main export markets such as Germany and the UK. According to several producers, prices in Germany and Belgium fell by 5-10% during the first months of this year.

Because of falling sawn timber prices in export markets, sawmills lowered sawlog prices, which dropped by 10% during the first quarter of this year. Log prices reached their lowest level since 1996. The fall of raw material prices allowed sawmills to adjust their export prices; however, such decline influenced the reduced extraction of logs by forestry companies.

Raw material supply

During the first six months, fellings decreased by 5% in Lithuania. State forestry companies, which account for 60% of roundwood supply, reduced felling volumes by 15%. Patterns of roundwood supply in Lithuania are changing and the share of raw material from private forests is constantly increasing, together with progress in the forestland restitution process. However, according to some sources, even private forest owners, who usually offer cheaper logs, reduced their logging output because of extremely low prices, particularly in the second quarter. Imports of softwood logs from Russia ceased and this year imported softwood logs accounted for less than 1-2% of the total supply in Lithuania.

Reduced logging has left softwood sawmill yards almost empty this summer – they have logs for only one or two weeks operation. This may cause an upturn in sawlog prices shortly. Also the new Interflex mill, which will produce softwood plywood, will tighten competition for spruce logs in future.

It is a different situation in the hardwood sector – companies report good demand this year, especially for oak and birch. Availability of logs is better than in 2000 when an increased supply of spruce logs came about because of storm damage.

Among the companies dealing with hardwoods, the clear leader is Libra Group.

Wood based panels

This year, wood based panel manufacturers report further increases in production after the record high 2000.

During the first six months of 2001, plywood production grew by 15% on the same period in 2000. The plywood industry processes about 60% of all the birch logs in Lithuania. Interflex’s announcement of the new 100,000m² veneer/plywood factory coming on stream will double or triple volumes of plywood produced in Lithuania.

This year particleboard producers are running at full capacity and in the first six months they increased production by 30%, year on year. Klaipeda-based plywood and particleboard producer Klaipedos Mediena installed a new US$2.25m lamination line with a 45,000m² capacity. The company plans to sell laminated board to the booming furniture industry.

Fibreboard production this year increased by 5%. However, it remains down by about 10-20% on 1997-1998 levels.

Generally, all wood based panel manufacturers reported increased sales and profits on the first six months of this year.

In the first three months of 2001, forest products exports rose by 17% to US$111m, year on year. Furniture exports increased by 25% and timber products by 10%. Furniture and sawn timber account for the lion’s share in exports, 35% and 25% respectively.

Germany remains the main importer of Lithuanian timber but its share has consistently decreased during recent years. In January-March 2001, the value of exports to Germany accounted for 23% of the total export value, down from 27% during the same period in 2000.

At the same time, Sweden, at 11%, was the second biggest market for Lithuanian timber products, followed by the UK at 8%.

Forest product imports rose by 20% to US$60m in the first three months of 2001. Imports of almost all products, except roundwood, increased. Paper products account for half of the total forest products import value.

Poland and Russia were the biggest suppliers of wood products to Lithuania, accounting for 22% and 20% of total timber imports value respectively. Russia exports mainly sawn and round timber, while Poland exports wood based panels, furniture and paper.

In the first three months of 2001, sawn softwood exports totalled 128,000m2, down 15% on the previous year. Deliveries of softwood to Germany declined by 33% (to 45,000m²); however, exports to the US rose by 15% to 30,000m², to the UK they rose 12% to 16,000m² and to Denmark by 15% to 12,000m².

Sawn hardwood exports accounted for 60,000m² in January-March this year, an increase of 33% on the previous year. Hardwood was exported mainly to Germany (36,000m²) and Belgium (11,000m²). Hardwood exports consist chiefly of packaging grades, which are exported mainly to these countries.

In general, further growth of sawn timber domestic consumption is expected, assisted by Lithuania’s recovering economy.

FSC certification

In 2000 Lithuania’s state forest authorities led the way for certification and applied for Forest Stewardship Council accreditation of 70,000ha of state forest. SGS Forestry representatives carried out assessment visits. It is expected that FSC certification will be issued for 70,000ha of state forest, encompassing two state forest enterprises, including one state-owned sawmill, by the end of this year.

Three Lithuanian wood-processing companies, AMG, UMP and USG, were all awarded FSC chain of custody certificates in June. AMG produces dowels and round sticks for the furniture industry as well as for other uses. UMP is a factory producing components for the furniture industry while USG is the biggest birch sawmill in Lithuania.

Several other companies have now applied for the FSC chain of custody certification.

Related Files
Timber Products Export Value by Countries in 2000 (1999)
Timber Products Import Value by Countries in 2000 (1999)
State Forest Enterprises’ Roundwood Sales by Assortments in 2000 (1999)

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