Belarusian wood processing industry has been cut off from margin market
Just over a week the belarusian wood industry has suffered twice. First it got hit by sanctions against the attack of russian forces on Ukraine. Then, according to the Belarus Investigative Centre, Belarus got stripped of a prestigious international certificate, which allowed Belarus on the premium market.
In 2021 Belarus exported various wooden goods worth $3 bln. More than half of sales occur in the EU. Furniture was most sought after and accounted for $891 mln, $379,2 of which amounted to the EU. The second popular product was planks, which overall accounted for $802 mln, with $690,7 mln occurring in the EU. The latter is followed by chipboard and fiberboard, amounting to $411,5 mln ($110 mln in the EU) and $369 mln ($129,4 mln in the EU) respectively. The surge in export profit was caused in part by the sharp increase of prices for wood in spring 2021, when the prices reached its world record. Lithuania was one of the beneficiaries.
Analysing the goods which are exported to Lithuania from Belarus, it is clear that wood makes hundreds of millions of dollars. In fact, this is the initially processed wood that goes to Lithuania. There lithuanian wood processing plants perform further processing and export the final product to other countries in the EU, – said the Prime Minister Roman Golovchenko.
However, soon supplies to the EU could become questionable. The thing is that belarusian enterprises won’t be able to obtain new international certificates of compliance of standards of sustainable forest management and certificates of conformity guaranteeing respect for the rights of wood industry workers known as FSC.
International auditors decided so as they were unable to check whether strikes and meetings can be safely carried out in Belarus or whether workers can freely enjoy the rights under standards of International Labour Organisation. Accreditation Service International declared that “it will resume its activities in Belarus when the circumstances in the country will allow to impartially assess the respect for rights without consequences for the parties involved”.
– FSC is a worldwide certification scheme, which is recognised in many countries. A lot of companies and end-users won’t buy a product without the FSC logo. Thus, if an enterprise loses the certification, then its product automatically becomes unclaimed on the Western market, – says Lev Fedorovich, a national representative and coordinator of FSC in Belarus.
The Ministry of Forest Management says that they have foreseen the situation and even managed to find a solution.
– We have developed our own land “Silk Way”, which doesn’t require maritime containers. The cargo arrives in China in just two weeks. I won’t deny that the European market was premium for us and that in China our profitability will decrease nor even to 60% but 20%, – says Vladimir Krech, Deputy Minister of Forest Management.
Lev Fedorovich claims that China will require at least some part of certified wood, and if an enterprise won’t have the certificate, then China will desist from cooperation with such an enterprise.
– Certification was never required in China and Central Asia. Obviously things will become slightly inconvenient and we will suffer minor losses, but we had way worse times, – Krech says.
This way, lack of certificates could not only shut the European market for Belarusian furniture, which hasn’t been sanctioned yet, but also take away clients in Russia or China that export to the Western market.
On the other hand, these restrictions might put massive deforestation in Belarus on hold, which was used to close momentary gaps in the budget. Such a situation is not only dangerous for the environment but also might disrupt the resource base of Belarus timber processing complex. The point is that the largest share of cut forest was exported at the raw material level to get a quick gain.
According to the International Organization Global Forest Watch, deforestation significantly accelerated in 2016. Belarus authorities associated the situation with storms that fell trees and plague of timber beetle. In 2021, when the prices for wood soared all around the world, Belarus increased logging. However, the Ministry of Forest Management claimed that it was scheduled because Belarus had been at its highest forest cover over the last hundred years. Since forest is a renewable source, it requires prompt logging in order not to lose the quality of wood. Interestingly, according to the data provided by Global Forest Watch, forest cover in Belarus has been continuously diminishing and has already left its tenth since the beginning of this century.
Western companies were also profiting from the massive logging in Belarus, despite the deterioration of the situation with the human rights in the country after the election 2020 and imposed sanctions. The companies significantly increased the procurement of Belarus forest and invested in expansion of production, which costs less than in the EU. One of the major customers is Swedish concern IKEA. IKEA was planning to increase the supplies of belarusian goods up to 300 mln euro.
Apart from that, in the last two years, the share of belarusian wood supplied to IKEA increased 1,5 times and exceeded the proportion of supplies to Sweden. In the year 2021 8% of total supply accounted for Belarus, where Sweden amounted to 7%. Last year the supply from Belarus increased by one quarter and made up 1,68 mln cubic metres.
But the recent invasion of Russia in Ukraine and the following massive sanctions made the Swedish concern suspend its activities both in Russia and Belarus, which hosted Russian troops. As a result Lithuanian group SBA, which used to be one of IKEA partners and produced furniture in Mogilev, decided to put the belarusian enterprise on hold.
