Economic situation puts Estonian timber companies in tough position

Estonian timber.
Estonian timber. Source: Margus Muld/ERR

Due to the general economic downturn, export volumes for timber companies in southeastern Estonia have fallen. Timber companies that sell their products to Scandinavia are in a particularly difficult situation.

Like most Estonian timber companies, Hobbiton, a company that builds log houses near Räpina, has had to adapt to the recent decline in export volumes.

"There is not so much demand from the Nordic countries any more. The biggest reason for this is the significant weakening of the local currencies in Norway and Sweden. All the houses that we build in Norway and Sweden have become somewhere between 20 and 25 percent more expensive over the last year," said Hobbiton OÜ board member Ragner Lõbu.

Although falling timber costs offer some relief for furniture manufacturers, they still have to lower their prices of their products to retain both foreign and domestic customers.

"Competition has intensified, and in order to compete, you need to constantly re-price your products. In other words, customers are constantly signaling to you to re-evaluate your prices - wood material, the main raw material, is going down (in price), so your products could also come down. That is starting point of a major price war," said Remo Allikas, CEO of Võru Empak AS.

During these challenging economic times, managers in the timber construction industry are not making long term plans. Their main concern is simply to keep production going.

"Now, it is important for a company to have jobs. The most important thing is not how profitable it is, but to keep people in work, so that we don't have to start cutting back on salaries or going to the minimum wage. It's important to keep the rhythm, that's our target at the moment," said Peeter Peedomaa, board member of Peetri Puit OÜ.


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Editor: Michael Cole

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