Global board producers accelerated expansion in the Baltic State and Eastern European countries in the second half of 2021, as the demand rose, stimulating investment activities in local markets.
In contrast to neighbouring Russia, which has been faced with a significant saturation of its boards market in recent years (due to the number of commissioned large-scale industry facilities) the Baltics states, as well as Belarus, still provide good opportunities for growth for most of the large board manufacturers.
In the case of Belarus, the development of the country’s boards sector in recent years has become one of priorities for the Belarus national government. Due to the lack of large-scale domestic producers, the state has paid particular attention to attracting foreign investors. So far, a number of producers have already launched operations in Belarus and are considering their further expansion.
One such company is Kronospan, which has been operating in Belarus since 2011 and has already secured strong positions in the local boards market.
Recently the company began the construction of its fourth plant in the Mogilev special economic zone (eastern Belarus). The new plant will specialise in the production of high density laminated boards, while the volume of investments in its building will reach US$90m. The new production will create at least 100 new jobs.
According to Alexander Chervyakov, Belarus minister of economy, the new plant will be export-oriented, while both the investor and the Belarus government hope for a high demand for its products in key sales markets.
As Mr Chervyakov has also added, the new production will rely on local resources and competencies, which means that the bulk of raw materials for the new plant will be sourced locally.
“A high degree of localisation will significantly increase the added value of finished products and create new highly productive jobs,” said Mr Chervyakov.
The Belarus government has already promised to provide all the necessary support for the project.
Kronospan already operates an OSB plant in the Mogilev special economic zone. It also has a facility in Smorgon, as well as a plant in the Minsk Technopark “Great Stone”.
At present the Belarus market remains one of the priorities for the company in Europe, which is reflected by large investments, which have been allocated by the company in the development of its Belarus business in recent years.
According to some Belarus media reports, during the period from 2012 to 2016, the holding invested over US$870m in its Belarus projects. Most of the funds were allocated from the company’s own sources, while part of them were provided by the European Bank for Reconstruction and Development (EBRD). According to some analysts’ estimates, the current share of the company in the Belarus market is about 20%.
In general, the Belarus boards’ sector shows good results this year, being traditionally export-oriented. The latest state statistics shows fibreboard exports out of the country in the first eight months of the current year grew by 86.1% year-on- year basis and amounted to US$228.4m in value terms.
In the meantime, in addition to Belarus, the boards sector in the Baltics region – Latvia, Lithuania and Estonia – is also very positive and dynamic.
In addition to Kronospan, which operates the Latvian Bolderaja plant – one of the largest OSB plants in the Baltics region and the EU – the local market has been historically dominated by VMG Group, Lithuania’s leading wood processor and manufacturer of wood products.
Last year the company commissioned its new particleboard factory in Lithuania in the Akmene Free Economic Zone. The volume of investments amounted to €146m, with more than 140 jobs created.
The company may consider a further expansion of the plant, the current capacity of which is estimated at 600,000m3, with most of the equipment being provided by Siempelkamp.
This, however, is just the beginning, because the company plans to build another €190m particleboard plant in Latvia. The latest plans have been recently confirmed by the company in an interview with some Baltics media.
As Sigitas Paulauskas, the sole shareholder of VMG, said in an interview with the Lithuanian Obzor business paper, the company is currently discussing the location of a future plant along with other conditions of the project with the Latvian government, with everything “in the working stage”.
The new plant is expected to be built in Jekabpils, a city in south-eastern Latvia. Technical details of the project are currently not being disclosed.
Most of local analysts expect the bulk of future production will be sent by the company for export. This is in contrast to previous years when most of supplies were destined for the markets of neighbouring Baltic states. This time a particular attention will be paid to shipments to countries further away.
According to earlier statements, made by Kristaps Klaus, head of the Latvian Forestry Federation, in an interview with the Latvian RusDelfi business paper, big hopes of Latvian timber producers, including panels producers, are currently placed on the US market.
“The US market is like a lottery, it is a market of great opportunities,” said Mr Klaus.
According to him, as timber prices in the US market are high, that provides additional opportunities for growth for Latvian producers.
Moreover, in addition to the US, supplies will also be growing to the markets of China, Japan, South Korea and the Middle East.
As for VMG, according to Mr Paulauskas, in addition to the Baltics region, the company plans a further expansion in the market of Belarus, where it already operates several production facilities.
“With regards to Belarus, we are preparing for a further expansion in this market,” he said.
However, according to him the company has no plans to launch completely new projects in this market, but rather expand the existing production facilities.
VMG currently operates three factories in Belarus, which are located in Mogilev, Borisov and Vitebsk. In addition to particleboard, they specialise in the production of plywood, and furniture, with the majority of output being primarily supplied to customers in the EU and Russia.
The importance of Baltic and Belarus markets is growing for producers, which stimulates them to increase exports of their products to these regions. For example, Kastamonu has been able to strengthen its presence in the Baltics region by an increase in exports of its laminate flooring to Lithuania in recent years. The company plans to occupy about 10% of the local market. At the same time, as some local analysts expect, successful implementation of these plans will allow the company to expand its local export range for the Baltics region in years to come.
Analysts also expect a further growth of demand for OSB in the region will create conditions for a further expansion of Kronospan’s Bolderaja plant – the largest OSB producer in eastern Europe (except Russia), which supplies its products both to the Latvian market and neighbouring states. The plant was founded in 1969 and has been operating on the international market for over 35 years.
