Latvia allows felling of younger trees

The Latvian government has agreed to allow the felling of younger trees for commercial purposes, which could bolster availability for woody biomass producers and other competing industries during the coming winter season.

The decision — which included the reduction of the diameter of tree trunks that can be felled — was taken on 21 June, in a government bid to support local end users through the current energy crisis.

The new rules will allow a "significantly larger share of wood to be obtained and… allow the availability of Latvian [wood] chips to increase by 20pc," the Latvian agriculture minister Kaspars Gerhard was quoted saying yesterday in the state-run media. The minister added that there was a need for a rapid switch from natural gas to the use of wood chips to generate energy, following the energy crisis caused by the conflict in Ukraine.

The new rules also require that the harvested forest should be restored within three years of cutting with quality planting material.

Following the changes, the state-run forestry company Latvian State Forest is expected to harvest an additional 1mn cubic metres of raw materials, with the private sector expected to harvest similar additional volumes. Of these, up to 200,000-300,000 cubic metres of raw materials from each — the state and private-sector forestry firms — could be made available directly or indirectly to chip and pellet producers, market participants said.

Latvian woody biomass producers are expected to be able to compete with other sectors, such as the pulp and paper, construction and cardboard industries, to secure additional raw materials in the current pellet price environment.

It could take until late August or September for the law to start being implemented — as companies arrange for additional logistics and bureaucracy — and the first additional volumes are expected to be put in the market around December, a market participant said. Most of the additional volumes could be absorbed by the market during the winter 2022-23 season.

The government also plans to subsidise residential and industrial consumers for the increase in wood chip and pellet prices, a source close to the talks said, although no further details could be obtained.

The move is expected to offer some relief to pellet producers in Latvia, which have been facing tight raw material supply availability since the start of the year. That said, the impact on pricing remains unclear, as demand for pellets remains strong domestically and in the export market.

By Erisa Senerdem and John Cooper