The Financial Times website reported on June 20, 2022 that the global timber trade situation has changed significantly in the context of the Russian-Ukrainian conflict. Some countries have changed or cancelled environmental protection regulations in order to increase timber production and ensure timber supply. The risk of sabotage is rising.
The report said that the Russian-Ukrainian conflict poses a direct threat to Ukrainian forests. Satellite images show wildfires burning uncontrollably. Some of these wildfires were the result of conflict but continued to spread due to a lack of fighting power. On the one hand, the conflict has severely hindered Ukrainian timber production, and on the other hand, international sanctions have restricted the supply of timber from Russia and Belarus to the international market. Industry data show that in 2021, Russia, Belarus and Ukraine will account for about 1/4 of the global timber trade share, exporting 8.5 million cubic meters of cork to Europe, meeting nearly 10% of the market demand in Europe. As the world's largest exporter of cork, Russia produces 40 million cubic meters of cork alone each year.
To make up for the lack of market supply, timber producing and exporting countries are taking a series of measures, including relaxing environmental protection measures to increase production. Shortly after the Russian-Ukrainian conflict broke out, Ukraine lifted a rule banning the logging of trees in protected forests in spring and early summer in order to expand timber exports, thereby increasing revenue and improving the country's defense capabilities. Environmental groups are concerned that this could lead to large-scale forest loss in areas with illegal logging and poor forest management. Ukraine's Ministry of Environmental Protection and Natural Resources has said that sanctions against Russia provide Ukraine with an opportunity to increase its share of the European timber market, which will raise more funds for Ukraine's post-war reconstruction efforts.
Other timber exporters, including Estonia, Finland and the United States, are also looking to increase logging due to the Russian-Ukrainian conflict. In April 2022, the U.S. House of Representatives Natural Resources Committee introduced a bill that would ban imports of wood products from Russia and Belarus, and seek to increase domestic logging to make up for shortfalls in imports.
After banning the import of Russian timber, Estonia announced in June 2022 that it would relax forest logging restrictions on state-owned land, and the area of land that can be harvested will increase by nearly a quarter to 2,400 hectares.
Official figures show that deforestation in Finland reached a record 76 million cubic meters in 2021, a 10 percent increase from 2020, and 2022 saw intensive logging convert Finnish forests from a carbon sink to a carbon source for the first time. According to the news from the Finnish Perevo Economic Research Institute, it is expected that in the next two years, Finland will increase the amount of logging at a rate of 3% per year.
Kane Carstensen, Director General of the Forest Stewardship Council (FSC), said: “Many countries are producing less wood than they can harvest, so there is some potential to increase production, but not all countries and regions are Decisions about how much to harvest need to be done with extreme caution.”
In addition to the Russian-Ukrainian conflict, other factors have contributed to volatility in the timber market. For example, outbreaks of the spruce bark beetle devastated forests in central Europe and Alaska in the United States, and emergency logging to clear affected timber led to a surge in logging. Despite headwinds such as conflict and market turmoil caused by pests and previous supply chain disruptions due to the Covid-19 outbreak, higher timber prices are a boon for European sawmills, with Finland's Stora Enso and UPM The Group raised its performance expectations for 2022 in June 2022.
Market demand will also have an impact on forestry management policies. In recent years, the growing demand for renewable energy has sparked heated discussions about the use of wood for biomass energy production. For example, a large amount of wood in Estonia is used to produce wood pellets to meet energy needs. The biomass energy industry has been lobbying the European Commission to recognize biofuels as a renewable energy source and maintain subsidies. But in May 2022, the European Union's environment commission voted to revise the Renewable Energy Directive and scale back support for biomass projects that have been popular with investors in the carbon offset market. In addition, the wood industry is keen to use wood as a building material, reducing the CO2 emissions of the construction industry by reducing the use of steel and concrete. In this regard, Beckmann, director general of the Swedish Forest Industry Federation, pointed out that it will be an elusive goal to use wood in a more sustainable way for the construction industry without increasing the amount of logging.