Global anxiety as inflation bites

The economic outlook for timber products has never looked this promising before. The reasons for the uplift, however, are founded on three major world crises that have already fundamentally affected our industry.

ERIK ELIASSON, Sales Director Norra Timber

Published: 2022-05-19

The world has changed dramatically in recent months. It is tragic to witness the war in Ukraine and watch helplessly as its people suffer and the country is continuously attacked. The negative consequences of this war are considerable, and much can already be written about how our industry has been affected. Before the war Russia,  which exports 28 million cubic meters of timber a year, was the world’s second largest exporter of sawn timber behind Canada. Europe imported around 8 percent of its timber from Russia, Belarus and Ukraine. Egypt was an even larger customer, and imported approximately 12 percent of its supply from the current conflict zone.

Now a large proportion of the world market has been sanctioned, and only a few countries, including China, have chosen to continue buying timber products from Russia. So it is hardly surprising these are very turbulent times for our industry. Especially considering that the large forestry machine manufacturers have  stopped selling spare parts and machines to ‘Putin land’, and both the FSC® (FSC-C106716) and PEFC have classified timber from Belarus and Russia ‘as conflict timber’ - which effectively means they cannot be sold in the western world.

During the pandemic many European companies were able to significantly raise their average prices by exporting more timber to the United States, which found it could no longer solely rely on Canada’s production output to meet demand. The effect has been that about 3 million additional cubic meters of timber products left European markets. On top of the war and pandemic, we have a third crisis-like situation affecting the global supply of timber - namely the dramatic reduction in supply in the wake of panic clearings in Central Europe after the forests were attacked by spruce bark beetles.

We have also been affected by rising inflation, and market economists are talking about a dozen interest rate hikes ahead of us by the National Bank of Sweden. Yet despite the likelihood of a rapidly slowing economy, I believe the restricted supply will make it possible to avoid any significant price reductions. Even though this trio of world events has contributed to a reduced global supply, the increased interest in renewable raw materials remains. So how are we at Norra Timber handling the situation? Well, we’re following a consistent strategy in which prioritized customers are given the opportunity to confidently continue to develop their relationship with us. We’re still actively looking for win-win collaborations that are both genuine and long-term, in which we can gladly share our expertise and knowledge.