Main auctions of the 4th quarter: 99% of the offered volume of roundwood and firewood contracted
Demand for timber continues to grow. Based on the results of exchange auctions for delivery in the fourth quarter, 99% of the products offered by the branches of SFE “Forests of Ukraine” were sold.
The average price of roundwood increased to UAH 6,800/m³ (compared to UAH 5,700/m³ in the third quarter and UAH 5,400/m³ in the second quarter).
The average price of industrial firewood amounted to UAH 2,300/m³ (compared to UAH 1,800/m³ in the third quarter and UAH 1,500/m³ in the second quarter).
The starting prices at the auctions were lower than the sales prices of the third quarter. Thus, SFE “Forests of Ukraine” once again sought to restrain the price dynamics; however, under conditions of free competition, the final prices are determined solely by demand.
SFE “Forests of Ukraine” is taking all possible measures to increase supply.
– The entire available resource is put up for auction (excluding firewood for households, the social sector, and resources for the Armed Forces of Ukraine), while the stock of timber at warehouses has decreased by 200,000 m³ compared to the beginning of the year.
– A small percentage of products declined by buyers is immediately put up for additional auctions (the contract fulfillment rate consistently exceeds 90%, so compared to last year the volume of timber offered at additional auctions has decreased threefold).
– Products for which there is no demand, or for which a high price has formed, are put up for a Dutch auction to establish a market price.
– 1.5 million m³ of timber in the second half of the year is supplied to clients under forward contracts at a fixed price — that is, processors had the opportunity to avoid the risk of rising product costs in advance.
– Over the past three months, timber harvesting has consistently exceeded 1 million m³.
As for increasing harvesting, this issue requires comprehensive solutions, most of which lie beyond the competence of foresters.
The enterprise’s annual allowable cut is 8.2 million m³ per year, and is currently utilized at about 70%. The reasons lie in changes to the legislative and regulatory framework that have occurred over the last 5–8 years, as well as a significant expansion of areas with restricted forest-use regimes. We described this in detail using the examples of the Karpatskyi, Poliskyi, and Podiskyi Forest Offices of SFE “Forests of Ukraine.”
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Over the past three years, the volume of final felling at SFE “Forests of Ukraine” has remained virtually unchanged—within 5.6–5.7 million m³. That is, where there are no restrictions, foresters harvest the resource in full. Year-to-year fluctuations in harvesting volumes are due solely to sanitary fellings. This year, for example, sanitary fellings will decrease.
However, this is an objective factor — the purpose of sanitary measures is the improvement of forest health. Control over the designation of sanitary fellings was strengthened at the end of last year. Special commissions are being formed. In addition, under the current rules, sanitary measures (clear sanitary fellings) reduce the limit for final felling in subsequent periods.
Therefore, harvesting volumes should not be regarded as the exclusive responsibility of foresters. We operate within defined limits, the violation of which is strictly punishable by law.
We plan, starting next year, to gradually increase harvesting through the updating of forest inventory materials; however, a substantial increase in supply is possible only through legislative changes.
Regarding the organization of auctions. During meetings with businesses, very different, and sometimes even opposing, proposals are voiced concerning lot sizes, guarantee deposits, and the volumes of products offered under quarterly and long-term contracts. SFE “Forests of Ukraine” is always open to discussing proposals and seeking consensus with the market.
We are interested in the stable operation and development of the Ukrainian wood-processing industry, which is the main consumer of our products.