Roads closed, businesses closed, truck drivers in military service – this is the easiest way to summarize the situation. The Russian invasion for the “military special operation” (c: Vladimir Putin) causes hopes to collapse and prices to rise.

It starts with the things that are available at home: with firewood, for example. Jakob Müller sells firewood in the Unterallgäu Ettringen-Höfen. He does not have as many inquiries as he does at this time of year, he revealed on the BR24 platform: “Customers wanted to know whether there was any wood left and how the prices would develop. Some even ordered firewood. In any case, the demand is unusually high for this time of year.

Run for firewood has begun

The Füssen firewood seller Christian Sichler is also quoted in the above report. Normally he delivers his wood, especially in late summer. In view of the uncertainty caused by the Ukraine war, many homeowners are already filling up their wood storage, he says. A star of hardwood (one cubic meter of logs or logs) currently costs around 110 euros. Sichler expects prices to continue to rise.

Firewood prices could go up

Higher fuel and freight costs will ultimately affect firewood prices. But why pellets are becoming more expensive is not yet fully clear to end users. Finally, Christian Rakos, Managing Director of the interest group Pro Pellets Austria, emphasized that pellets are produced regionally in Austria because there are pellet plants all over the country? Since the outbreak of war in Ukraine, many traders have registered a significantly higher demand for wood heating pellets. So demand drives the price. Rather than transport costs for a 100 kilometer journey.

How will China decide?

According to the US industry service Wood Resources International (WRI), China imported almost 6.5 million m3 of round wood from Russia in 2020, mostly softwood species. However, trade was much lower than in previous years. Nonetheless, in 2020, Russia was still the largest supplier of hardwood to China (more important than any other temperate or tropical timber source) and the third largest supplier of softwood.

WRI writes: “It is important to remember that China has switched from sourcing roundwood from Russia to European suppliers in recent years due to a temporary abundance of insect-infested wood in central Europe.”

China increased its wood imports from Europe tenfold

From 2018 to 2020, softwood roundwood imports from Europe increased from 1.3 million m3 to 12.3 million m3, while roundwood shipped from Russia decreased from 7.8 million m3 to 4.2 million m3. However, transports from Europe are not sustainable in the long term. A study just published by the consulting firms Wood Resources International and O’Kelly Acumen (Russian Log Export Ban in 2022 – Implications for the Global Forest Industry) comes to the conclusion that in the short term China will purchase more sawn timber from Oceania, Europe and the USA. In the longer term, the study suggests that China is likely to switch from importing logs to sawn timber, creating opportunities for timber producers, mainly in Europe and Russia, to increase supplies to this growing market.

Thus, wood-hungry China now has a choice between warring Russia and the Europeans (with the US as an ally). Whatever China decides, demand will rise, and the price will probably rise as well.

Round wood will be missing worldwide

The German “forstpraxis.de” sees the situation as follows: “The export bans on logs from both countries that are already in force – in the case of the Ukraine since 2016 – are likely to become more severe as a result of the war. Austria’s HS Timber cited them as the reason for the closure of its Radauti sawmill, located in Romania near the Ukraine border. One scenario is that China will immediately satisfy its thirst for wood in Europe due to the lack of volumes from Russia.

Unofficially, it is said that the implementation of the Russian export ban, even to the West, is only half-hearted. Since Russia’s President Putin is looking for fraternization with China, one can imagine that the export ban in this direction may not be implemented at all. It remains to be seen how the market will develop further.” (fortspraxis.de, March 1, 2022).

SWIFT complicates the timber trade enormously

The exclusion of Russian banks from the SWIFT system now makes payment transactions very cumbersome, if not impossible. This is how Wood Resources International (WRI) sees world trade affected in the coming months. Shipments of forest products around the world must be stopped and diverted. Trade with Russia will decrease drastically.

You can imagine what that means if you look at the dimensions: In 2021, Russia was the world’s largest exporter of softwood lumber with a value of US$ 5.8 billion. The export value of all forest and wood products amounted to a good US$ 12 billion.

Less material – higher prices

A lot is coming together – and will also affect the downstream industries in Germany, Austria, Europe “The loss of raw material deliveries and workers has indirect effects on the German imports of wood products, furniture and furniture parts from the neighboring countries of Ukraine, such as Poland, Slovakia, Hungary and Romania,” said the managing director of the German timber industry council, Denny Ohnesorge, to the newspapers of the Funke media group.

These supply problems in the neighboring countries “are likely to limit the availability of materials and also have a price-driving effect here in Germany”. Because it is to be expected that “the producers will also endeavor to supply raw materials and materials in Germany,” explained Ohnesorge.

(hst)