Latvia is one of the three Baltic states in Eastern Europe, former satellite of the Soviet Union, and current member of the European Union. Since its transition to a market economy more than two decades ago, Latvia has become a major producer and manufacturer of consumer goods for international export. Latvia has a population of less than 2 million citizens, a gross domestic product (GDP) of almost US$50 billion, and a relatively small territory of 64,600 square kilometers, which is slightly larger than the state of West Virginia. Nevertheless, Latvia is the fourth most forested country in Europe after Finland, Sweden, and Slovenia. This article explores the status of wood markets in Europe.
European Wood Production and Markets
During 2015, agriculture merely represented 3.3% of the total Latvian economy. However, more than half of Latvia’s territory is forested area, which accounts to 3.3 million hectares. Furthermore, within Latvia’s forests the predominant tree varieties are Pine, Birch, Spruce, Grey Alder, Aspen, and Black Alder. The Latvian lumber and timber industry recorded a record of 13 million cubic meters of wood harvested during 2010. In more recent years, Latvia has harvested an annual average of 11.7 million cubic meters of timber. Similarly, the lumber and timber market has been growing in recently, driven particularly by the increased demand for wood and wood panels from the construction industry in northern Europe.
Like in many other countries, the Latvian government owns almost half of the forests throughout the national territory. However, in some of these areas, the Latvian government itself participates in the lumber and timber market by managing state-owned wood mills. This government participation within the lumber and timber business occurs in other countries with large forested areas such as Canada. The problem with these types of state-owned wood suppliers is that other countries or companies, such as those in the United States, accuse them of representing uneven or unfair competition within the international markets.
Today, wood processing represents more than a fourth of Latvia’s total manufacturing industry as well as an important export, more than 90% of which are destined for fellow EU member states. These wood exports consist of the following products: sawn wood accounts for almost 30%, fuel wood for 12.5%, round wood for about 10%, plywood for 8.4%, and furniture for some 6.2%. Latvia has managed to sustain an annual economic growth above 2.0% the last several years because of its role as a key supplier of lumber and wood products for Europe.
In recent years, Latvia’s forestry exports have been mainly destined to the United Kingdom with 19% of the total, Germany with 10%, and Sweden with 9%. Another important market for Latvia’s lumber and forestry exports is Russia. However, given the economic sanctions that have been in place between Russia and the EU during the last several years, the Russian market has been closed to Latvian exports. Another economic setback that affected Latvia’s lumber and wood exports was the slowdown in infrastructure development projects throughout Western Europe due to the financial crisis. Nevertheless, as western economies continue to regain steam and economic relationships with Russia are set to renormalize during 2017, Latvian lumber and timber markets will continue to grow and drive the national economy forward.