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Estonia’s Vibrant Forest Industry Part II: Imports & Exports

Estonia’s Vibrant Forest Industry Part II: Imports & Exports

Last month, the USDA’s Foreign Agricultural Service published a detailed report through its Global Agricultural Information Network (GAIN) on the forestry sector and forest products industry in Estonia. Since 2011, and in the wake of the Great Recession, the Estonian timber industry has shown stable growth; the forest and wood industry’s share of Estonian GDP reached 22 percent in 2014. (For reference, the industry accounted for approximately 4 percent of total US manufacturing GDP in 2015.) As evidenced by this tremendous number, it is clear that the forest product industry is one of the most important contributors to the Estonian economy.

 

Estonia’s Pulp, Paper & Furniture Industries

Estonia’s wood cellulose and paper industries have a long history, as some existing factories (Räpina Paper) have been in operation since the mid-19th century. The Estonian paper industry has a strong presence in the European market, and the sector's two primary companies make up roughly 2/3 of the sector’s revenue.

  • AS Estonian Cell is an aspen pulp mill located in Kunda, Estonia. The facility was constructed in 2006 by Austrian firm Heinzel Holding GmbH at a cost of €153 million ($164 million), which represents the second largest foreign direct investment into the Estonian industrial segment. The mill’s annual capacity is roughly 160,000 tons of aspen pulp that is used as a raw material for high-quality paper and tissue.
  • Horizon Tselluloosi ja Paberi AS (Horizon Pulp and Paper) is an independent, integrated pulp & paper mill in operation since 1938 engaged in 100 percent virgin long-fiber, unbleached sack kraft paper production. In 1995, Tolaram Group of Singapore acquired the mill and has since invested a great deal into product development as well as improving the mill’s efficiencies. The Horizon mill exports approximately 99 percent of its production capacity due to Estonia’s convenient geographic location and proximity to the large European market. The mill’s annual revenue is estimated to be roughly €62 million ($67 million).

The furniture manufacturing industry in Estonia also has a long history. Today, more than 500 companies operate in this sector and they successfully compete in many foreign markets, primarily in Western Europe. About 2/3 of the manufacturing output is exported. In recent years, however, exports have slowed as the domestic market has demonstrated strength compared to stagnating foreign markets. The leading export countries in 2014 were Finland, Sweden, Denmark, Norway and Germany, and the primary exports by product were chairs/seating, furniture parts, dining and living room furniture, kitchen furniture, bedroom furniture and other related furniture products.

 

Estonia’s Wood Pellet Industry

Per a 2016 article in Biomass Magazine, the entire Baltic region is becoming more and more competitive in the global wood pellet market. “Thirty-five percent of aggregate EU28 exports in 2014 came from the Baltic states—20 percent from Latvia, 10 percent Estonia and 5 percent Lithuania. Globally, 27.1 million metric tons of pellets were produced in 2014, about half, or 13.5 million, produced in the EU. Total production in the Baltic states amounted to 2.65 million tons in 2014, much of which was exported. Russia and the Baltic states combined produced 4.15 million tons of wood pellets during 2014. Producers in countries like the Baltics and Russia can more easily distribute their production to serve local European markets as opposed to overseas producers.”

AS Graanul Invest, one of the largest pellet producers in the EU, continues to expand its pellet operations in the Baltics primarily through acquisitions. The company purchased Latvia-based pellet producer SIA Latgran in July; Latgran was the largest pellet producer in Latvia with four mills producing an estimated 600,000 tons of pellets in 2015. Graanul Invest now operates 11 pellet plants in total—four in Estonia, six in Latvia and one in Lithuania. Raul Kirjanen, Graanul Invest CEO, estimates the company will produce 2.15 million metric tons of wood pellets in 2016.

The article also notes that wood pellet production in Estonia is just 20 years old and the export markets have traditionally been Sweden and Denmark. Estonia’s pellet production has grown rapidly, as the country’s 16 mills produced 1 million tons in 2014. Estonian production is growing at a pace of 300,000 tons per year and is forecasted to reach a peak of around 2 million tons per year. Estonia currently has two large producers—Stora Enso and Purutuli—producing 100,000 metric tons or more annually. Like Latvia, Estonia’s domestic market is small in comparison to its exports, at an estimated 50,000 metric tons. The country’s main export markets now are Sweden, Denmark, Italy and the UK.

 

Estonian Forest Products Trade

Like other Baltic nations, local species are used in wood products manufacturing and raw material comes from Estonian forests as well as imports originating in Russia, Latvia and Lithuania. The Estonian forest products industry is export oriented, as exports makes up nearly two thirds of sales for Estonian producers. According to the Estonian Statistical Office, in 2015 total wood industry exports reached €1.83 billion ($2.0 billion), and primary export destinations include Scandinavian markets, neighboring Baltic countries and other large EU wood markets like Germany and the UK. Segment/product leaders include:

  • Sawn and planed wood: €343 million, ($375 million)
  • Wooden buildings (prefab): €278 million ($304 million)
  • Wooden furniture: €254 million ($277 million)
  • Wooden construction details: €243 million ($265 million)
  • Wood pellets: €124 million ($135 million)
  • Round wood: €111 million ($121 million)
  • Pulp: €71 million ($78 million)
  • Unbleached paper: €50 million ($55 million)

 

Estonia_Industry.pngSource: Estonian Forest and Wood Industries Association

 

In 2015, imports of Wood and Wood Products amounted to €333 million ($358 million). Primary suppliers include Russia and other neighboring regional countries like Finland, Latvia, Lithuania and Sweden. The Estonian forest products industry typically sources round wood and raw materials for further processing from these other markets.

According to USDA BICO statistics for 2015, Estonian imports of forest products from the US were valued at €7.6 million ($8.2 million) and exports to the US amounted to €17.3 million ($18.6 million). Total trade between the US and Estonia reached €30 million ($32.3 million) in 2014. In 2015, however, US exports to Estonia fell due to changes in the currency exchange rates. Like many other foreign markets, the Estonian market is highly sensitive to currency volatility between the Euro and the US Dollar.

 

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