In his latest report, International Timber Resources (WRI) says Europe’s log and timber trade will “change dramatically” in the coming years, with timber harvests apparently peaking in central Europe. Meanwhile, Russia’s invasion of Ukraine is having a significant impact on European imports of all forest products, further destabilizing supply.
A pivotal moment for European wood
According to the WRI, Central Europe has seen record timber harvests in recent years. This was apparently caused by extensive damage from a spruce beetle outbreak in the region, particularly in Czechia and Germany, which resulted in an “unsustainable level” of roundwood harvesting between 2017 and 2021. With roundwood removals up 15% over this period, timber production and log export have also increased.
In response, WRI explains that domestic sawmills absorbed about 60% of this increase in wood supply, with increased sawlog and pulp exports accounting for the remaining amount. The Central European sawmill industry has grown, according to WRI, thanks to an additional supply of timber at competitive prices and strong timber markets both globally and in Europe between 2020 and 2021. WRI adds that the production of wood pellets has also increased during this period, as supplies of sawdust and wood chips have increased.
However, the WRI notes that roundwood markets have reached “a turning point” as damage from the bark beetle epidemic peaked in 2019. a further decline of 24% in 2021. The WRI indicates that the volume of damaged wood will return to “levels close to the long-term average” by 2025, decreasing by 10 to 20% per year.
WRI therefore predicts that Central European lumber production will decline from current record levels, which could lead to a regional shift from net log exporter to net log importer. In the coming years, this will force log exporters and consumers to adjust to a reduced softwood supply, according to WRI.
Russia’s invasion of Ukraine worsens supply shortages
In 2021, EU imports of forest products from Russia and Belarus comprised almost 14 million m3 logs and nine million m3 softwood lumber, according to the WRI. Following Russia’s invasion of Ukraine last month, embargoes on timber exports are expected to be a permanent feature of Europe’s economic sanctions against Russia. Additionally, globally, wood from Russia and Belarus is considered “conflict wood” and therefore cannot be used in PEFC or FSC certified products.
The European Federation of Wooden Pallet and Packaging Manufacturers (FEFPEB) has also predicted a major disruption to Europe’s wood supply as a result of the war in Ukraine, which could manifest itself as early as the next few weeks. According to the group, Ukraine, Russia and Belarus export a significant amount of softwood used in Europe to make pallets and packaging. Russia’s invasion of Ukraine is likely to destabilize Europe’s timber supply, with alternative Nordic and Baltic sources unable to explain the shortfall, the group claims.
Meanwhile, Cepi told Packaging Europe that the impact of the Russian invasion of Ukraine on the European paper industry will depend on how the war goes and how long, although he notes that Russia exports a significant amount of paper and cardboard to the EU. The group suggests disruption is likely, with instability and unpredictability shaping business relationships in the industry going forward.
Another problem, which precedes but has been exacerbated by the war in Ukraine, is that of energy prices. As an energy-intensive industry, Moody’s says some paper companies could struggle to stay competitive, as deliveries from Russia – from where the EU would supply 41% of its natural gas, as well as 27% of its crude oil – are expected to be sanctioned, adding to the energy price spikes caused by weather conditions in 2021 and the challenges associated with COVID-19. As a result, the company predicts that paper mills could accelerate the transition to packaging applications to maintain profitability.
According to the WRI, “the reduction in the supply of wood in Central Europe and the invasion of Ukraine by Russia will have an impact on the production of European industry, trade flows and prices of forest products for many years. many years to come,” implying that there is more uncertainty ahead for related industries such as packaging and its key players.
What can the industry do in the future?
WRI notes some solutions for sawmills and fiber industries in the future. For sawmills, the organization says it will be important to refocus on conversion efficiency and small-diameter sawing capabilities, while fiber industries could consider other fiber species and sources. wood. Furthermore, he adds that forest owners would “benefit from more intensive forest management”.
As for the industry’s response to Russia’s invasion of Ukraine, a number of facilities, such as paper mills, have been closed to protect the safety of people in Ukraine. Some companies, such as Stora Enso, have halted production and sales in Russia, while others, including Tetra Pak and Amcor, have begun the process of reducing or stopping new investment while retaining what they claim to be essential applications, such as food packaging, running. Other packaging companies, including Mondi and Smurfit Kappa, both of which have large paper portfolios, appear to have remained operational in Russia. This indicates a downstream disruption for industries that use the wood supply, which could be further compounded by changes in yields predicted by the WRI in the coming years.
In conversation with Packaging Europe, Veronika Khalaydzhi, PhD, President of the Packers Club of Ukraineand Valery Krivoshey, PhD, editor of packaging magazine Upakovka, said Ukraine does not have enough raw materials, such as cellulose and waste paper, to fully support packaging companies that have continued operations. In addition, a global effort will be needed to help Ukraine’s packaging industry recover after the war, which will likely include stabilizing the country’s domestic supply of raw materials.
Alexander Sobolenko, co-founder of Ukrainian company Re-Leaf, added that the best way for the packaging industry to support Ukraine now was to cease operations in Russia and buy “Made in Ukraine”. Together with the Packers Club of Ukraine, Packaging Europe has set up a dedicated page to facilitate connections between Ukrainian companies and the European packaging value chain.