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ADAPTATION PROCESS OF THE WOOD MARKET IN SLOVAKIA. Hubert P ALUŠ Department of Marketing, Trade and World Forestry Technical University in Zvolen Slovak Republic hpalus @vsld.tuzvo.sk. Contents. Principles of the wood market Forest r esources in Slovakia Ownership structure Harvesting

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ADAPTATION PROCESS OF THE WOOD MARKET IN SLOVAKIA

Hubert PALUŠ

Department of Marketing, Trade and World Forestry

Technical University in Zvolen

Slovak Republic

hpalus@vsld.tuzvo.sk

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Contents

  • Principles of the wood market

  • Forestresources in Slovakia

  • Ownership structure

  • Harvesting

  • Roundwood classification

  • Roundwood deliveries and export development

  • Points and methods of wood sales

  • Wood prices

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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HARVESTING

STANDING VOLUME

Allowable cut

SUPPLY

PRICE

DEMAND

World supply and demand, Economic development

Economic development

Exchange rate

Substitution materials

Preferences

EXPORT

DOMESTIC DEMAND

Incomes

Construction

Substitution materials

Preferences

Principles of the wood market

General conditions

  • Industrial market

  • Often oligopoly structure

  • Profit generation motive for sellers/buyers

  • Relatively high transaction cost

  • High volumes of transactions

  • Low products differentiation – competition focused on price

  • Often long-term relations between market players

    Supply side factors

  • Valid legislation

  • Allowable cut (accidental felling)

  • Ownership structure

    Demand side factors

  • Derived demand

  • Set of socio-economic factors determine final level of consumption

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Forestresources in Slovakia

  • Forest area 2 mil. ha

  • Forest cover 41%

  • Standing volume 444 mil. m3

  • Annual increment 11.6 mil. m3

  • Allowable cut cca 6.5 mil. m3

    Forest cover in regions of Slovakia

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Ownership structure

  • State owns 42% and manages 58% of forest area (LESY SR, state enterprise)

  • State forest’s network of enterprises – concentrated timber supplies

  • Number of non-state owners 48 thousand

  • Average area of non-state forest property – 200 ha

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Harvesting

  • Favourable conditions to increase harvesting volume by 2030 (7-7.5 mil.m3)

  • Threat – accidental felling!!!

    Development of harvested volume

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Roundwood classification

  • STN 480055, STN 480056

  • Temporary Governmental regulation 86/2005 on timber classification

  • Standards are only recommended for contracting parties

  • STN EN (harmonized standards) already elaborated

Roundwood quality classes

  • I. quality class - veneer logs (used for production of sliced veneer)

  • II. quality class- veneer logs (used for production of rotary cut veneer)

  • III. quality class- sawlogs (includes A, B and C quality sub-classes)

  • IV. quality class- posts, pit props, poles, and other industrial wood

  • V. quality class - pulp wood for chemical and mechanical processing

  • VI. quality class- fuel wood

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Roundwood deliveries

  • Increasing volumes of delivered timber (7.3 mil. m3 in 2006)

    Softwood deliveries Softwood deliveries for domestic market

Hardwood deliveries Hardwood deliveries for domestic market

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Roundwood export development

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Industrial roundwood consumption

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Points of wood sales I.

  • The three main points:

    • Standing timber

    • Roadside

    • Timber yard

  • Key factors influencing the use of particular points of sales:

    • size of forest property

    • volume and concentration of harvesting

  • Standing timber

    • 10% of sold wood

    • preferred by small forest owners

  • Roadside

    • partially used by small forest owners

    • sale of raw stems and pulpwood

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Points of wood sales II.

  • Timber yard

    • preferred by the State Forest Enterprise

    • big capacity timber yards with regional coverage

    • advantage – better condition for quality classification

    • disadvantage – higher cost resulting from timber handling

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Methods of wood sales I.

  • The three basic methods

    • Sales contracts

    • Timber auctions

    • Commodity exchange trading

  • Sales contracts

    • legal basis for exchange of timber

    • long term contracts (1-2 years) concluded between the State forest enterprise and its strategic business partners

    • short term contracts (quarterly revised) concluded with small sawmills

    • EWX and FCA terms used in domestic contracts

    • FCA, FOB and DAF included in export contracts

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Methods of wood sales II.

  • Timber auctions

    • high quality hardwood assortments

    • first-price auctions – bids submitted in concealed fashion

    • minimum price set at regular price list level

    • won volumes are soled at EXW term after payment

  • organised by State forest enterprise

  • possibility for small forest owners to participate (5-10% provision)

  • auctions require concentration of relatively large volume of high quality stems (selecting appropriate stands)

    www.lesy.sk

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Methods of wood sales III.

  • Commodity exchange trading

    • quick, secure and transparent way of selling timber

    • standardised timber demand and supply published on webside and regularly updated

    • trading allowed through registered brokers

    • little interest in trading timber at the exchange

      www.kbb.sk

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Wood prices

  • State forest enterprise acting as a „price maker“

  • Little space for price negotiations – (price lists used)

  • Price discounts offered to big timber processors

  • Small forest owners acting as a „price taker“

  • Small negotiation power (regionally spread, less concentrated, small volumes sold)

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Wood prices

  • Stagnation of prices between 2003-2005

  • 2006 – price increase by 14%

    Average timber prices (as of Jun 30, 2007)

    * Exchange rate approx. 34,- SKK/EUR

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007


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Thank you for your attention!

Wood market in Poland - towards stabilisation, Poznań, 4 December 2007