The slight rise in export prices to Finland and Sweden and the decrease in production are not expected to make a big difference to the Estonian lumber industry in the short term, experts say.

Estonia's domestic companies have struggled over the last couple of years due to the economic downturn in Scandinavia, its biggest export market. Companies are still split on the industry's future.

Raul Kadaru, purchasing director of Baltic wood retailer Puumarket, said the price of lumber exported from Finland and Sweden has increased by 10 percent, which has increased the competitiveness of Estonian companies.

"By now, on the one hand, Scandinavian timber mills have reduced their production and, on the other hand, local real estate developments there are slowly melting down. Demand and supply are now in balance and prices have returned to normal market levels," said Kadaru, adding that this is a positive development for Estonia's timber industries.

"By now, Scandinavian and Estonian wood prices have equalized, and both Puumarket and most Estonian retailers prefer local production," said Kadaru.

Although the decline in the construction industry affects timber producers, he believes the worst is over for the sector.

"Last year, many timber producers and processors took losses, but it seems that orders are slowly recovering and some sawmills are running several shifts again," the purchasing director said.

Since the competition in the market is extremely tight, Kadaru does not foresee a big price increase: "Favourable prices for timber and building materials in general will continue as long as the economies of Estonia, neighboring countries and major trading partners continue to falter. When the Scandinavian and German markets recover and the building industry resumes normal operations, this is bound to have an impact on demand and prices for timber and general construction materials in general."

But Henrik Välja, CEO of the Estonian Forest and Wood Industries Association (Eesti Metsa- ja Puidutööstuse Liit), is not so optimistic. He noted that the weak demand for lumber on the world market negatively impacts the Estonian wood industry.

Expensive raw materials and low demand have led to a decrease in sawnwood production volumes in Scandinavia and Finland. Välja said this puts Estonia's industry in a difficult situation as this is important process for the sector.

"Estonia has the capacity to further process twice the volume of our own sawn timber production, which means that import opportunities for sawn timber are an important input for us, and the decline in production volumes in Scandinavia and Finland will have a negative impact on our companies," said Välja.

He said the lack of local raw materials is caused, among other things, by the spring nesting lull, which is why the work of sawmills is stopped several months a year.

Välja said both the decrease in sawnwood production volumes in Scandinavia and the lack of raw materials in Estonia reduce the opportunities for companies that value wood to obtain raw materials at a competitive price.

The domestic industry is also affected by the so-called forest reform – the draft law on forest, nature protection and climate-proof economy – which does not support the economy or competitiveness of Estonian companies.

"Instead, they are trying to fix how much we are losing as an economy. In an already very difficult situation, the Estonian economy and the country's budget, which is in the red, will thus be burdened even more. In their current form, these bills mean that the Estonian economy will get worse, which means that every person in Estonia will be worse off," said Välja.

He also pointed out that cheap Russian and Belarusian wood is in high demand elsewhere in the world and cannot be sold in Europe due to sanctions. These markets are out of Estonia's reach, the CEO said.

Source: news.err.ee