How the war in Ukraine is changing the made in Italy wood industry?
The sector that has resisted the pandemic is now facing new challenges, such as exports to Russia and the increase in raw materials. Do we need to rethink the whole wood supply chain?
As the war in Ukraine doesn’t seem to stop, the risks for the economy of the entire wood sector for Italy are significant.
With a turnover of over 49 billion euros, increased compared to the pre-COVID19 period, exports also mark an increase of 20.6% compared to 2020.
However the numbers can be deceiving and new scenarios open up for the future.
Today uncertainty prevails over the crisis in Ukraine, not only because Russia is an important supplier of wood raw material, but also because russians are important customer in the furniture industry.
The Role of Russia
In the summer of 2021, FederlegnoArredo, an important wood company association, wrote to the European Commission to stop exporting European timber and convert it for domestic use.
The war had not yet started but there was already an increase in raw materials, including timber.
Russia had announced that from January of this year (2022) it would block the export of Russian timber outside its borders.
With the war in Ukraine, the problem has been further aggravated: Russia has closed itself even more in a patriotic autarchy, causing an even stronger blow in the raw materials markets.
In a few words, the more Russia blocks its export of timber, the higher the prices get.
So, on the one hand, there is difficulty in finding the raw material, while on the other hand it can no longer be sold to a large chunk of the market and to potential customers.
«For us Russia is an important market, not for the supply of timber but as a sales area, which to date is worth about 15% of our turnover», explains Moreno Brambilla, a.d. and president of Oniro Group».
Let’s not talk about the increase in energy costs, which is already being felt heavily.
Therefore the situation is pretty uncertain, the supply chain will have to be rethought, taking into account the new geo-political structures that will be formed.
The problem of raw materials
Raw material prices have never returned to pre-COVID19 levels and prices have doubled compared to normal values.
In the first 11 months of 2021, we Italians have imported 9 million timber, worth 4.9 billion euros. Of this, 5.3% comes from Russia (tenth supplier), Ukraine and Belarus, up 32.7% compared to 2020 (FIA data)
As you can see, this is not a huge share, since our main supplier is Austria, with 1.2 billion euros of imports, followed by Germany and China: Russia, in fact, is only the tenth supplier while Ukraine is the 15th.
However, the blockade of exportations by Moscow and the ongoing conflict are causing a further imbalance in the market, especially in the supply of birch logs, of which Russia is the world’s leading producer (over 80% of the market). The price has doubled so far.
Birch is used for many industrial and logistics uses, such as paving, developing tools, panels and interior parts of furniture and even toys. Besides being an excellent fuel.
So there is a risk that production will be blocked for many companies, not only for the furniture.
Crazy situation if we consider the amount of trees of our country (covered by 38% of forests) not seized enough, so that our needs is for 80% deriving from imports.
Conclusions
This war has laid bare, once again, the critical issues of countries like Italy, for their dependence on foreign raw materials.
On the other hand, globalization is becoming increasingly necessary, at the level of opportunities for new markets and with costs of research and development (better for abroad), such that “we cannot close ourselves off” but not even “ignore the opportunities that our country can give us”, as in the case of the forest heritage that must become a resource.
As far as our company is concerned, Astra Vernici is proud to have collaborated with numerous Italian, European and worldwide partners and always to look for the best way to grow in terms of quality and production.
It seems obvious that, for us, the choice is to rethink the supply chain, making full use of globalization and diversifying as much as possible the product lines, always looking for new markets.
Because the opportunities, around the world, are so many and Italian products enjoy a strong credibility and demand: provided you keep the very high level of quality and innovation. Binomial that in ASTRA VERNICI has never failed.
