Lost Russian supply forcing companies to buy expensive wood from Nordics
Replacing timber previously imported from Russia, Belarus and Ukraine cannot happen overnight, while the material is more expensive in Europe. The construction sector is experiencing a timber deficit and its price may never fall to recent levels again.
Tarmo Vadi, sales manager for timber traders Nordwood Eesti, told ERR that roughly a third of sawn timber used to come to Estonia from Russia.
"In a situation where most of it has disappeared while local demand remains unchanged, it needs to be replaced. But because there are few good options for this, demand is outweighing supply. Prices have been growing steadily," Vadi said, commenting on the effects of Russia sanctions.
Kaido Somelar, CEO of construction firm Ehitustrust, said that the material issue is serious and not just as concerns timber.
"The construction sector is in a bad way. Europe is busy reorganizing supply chains today. Many materials, whether we're talking about timber, metal or other things, used to come from Russia, so the situation is linked to the war."
Somelar said that while new sources of supply will appear, buying from Europe and especially Scandinavia means considerably higher prices. He said that construction material prices have grown by 100 percent and more due to broken supply chains and sanctions.
"We are getting hit by sanctions. It was a mistake to believe they would only have an effect on the other side of the border. They have a direct impact on us," Somelar said.
He added that this causes delays and has created a situation where everyone charges astronomical prices. "It has become the new norm that everyone asks for an arm and a leg. It is not sustainable."
Tarmo Vadi for Nordwood said that lost volumes cannot be immediately replaced as reshuffling all supply chains cannot be done in a month.
Even though Nordwood's material comes primarily from Estonia and Latvia, they also cannot sell as much as they wanted to because of the felling break in Estonian forests. Vadi said that timber prices will remain high for some time and that he doubts they will ever fall to the 2020 level again. "Prices are volatile and demand is holding."
Both buyers and sellers cautious
Executive manager of the Estonian Woodhouse Association Annika Kibus said that wooden houses makers are looking to neighbors and importing timber from the Nordics.
"One side of it is disappearing materials, while demand for wooden houses is growing everywhere in Europe. Because we are Europe's biggest exporters, there is a lot of work for housemakers, with demand for quality timber hiking prices even more. Price is what is changing," she said.
Kibus said that both manufacturers and buyers are cautious when entering into agreements. Both sides are waiting for prices to come down and taking their time. She added that while it would be unethical to hope for restored Russian imports, it would be sensible to use more Estonian wood instead of importing it from the Nordics.
"It could be allowed if only for the duration of the crisis to keep money in Estonia and the economy afloat," she suggested.
The Estonian Association of Construction Companies said in late March that public sector construction contracts signed before the war cannot be performed unless the government is willing to pay contractors more. Many important construction sector supply chains were tied to Russia and Belarus.
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Editor: Marcus Turovski