Can the European Market Survive Without Russian Birch Plywood?

During the last decade, Russia has become the world’s largest birch plywood producer. The product is in great demand in the global markets, including Europe. Over the years, annual imports of Russian birch plywood to Europe have been at the level of 1.5 million m3. The main consuming countries are Germany, Poland, and France, followed by the Netherlands, Finland, Italy, and others.

Russian birch plywood is widely used in construction, formwork, and transport sectors, competing mainly with the Finnish, Latvian and Polish producers. The total European birch plywood market is estimated to be around 2.2 million m3 with a domestic annual supply of 800-900 000 m3. In the light of the sanctions related to the imports of Russian goods to the European markets, discussions on whether the local market will survive without Russian birch plywood take place. Indufor looked at the European birch plywood supply opportunities through the existing production capacities, export volumes, and the prospects of substituting the product with other plywood and wood-based panels.

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Figure 1. Selected Birch Veneer Consuming Mills in Europe. Source: Market information collected and analysed by Indufor.

The European Birch Plywood Capacity is Close to the Latest Russian Import Volumes

Major European birch plywood producers are in Finland and the Baltic states, due to the availability of the relevant raw material. In countries, such as Poland, local birch is used in combination with other hardwood species to produce so-called combi-plywood in addition to some birch plywood. In Southern Europe, mainly in Italy and partly Spain, birch veneer is occasionally used to face decorative plywood. The veneer is imported from the Baltic states and/or Eastern Europe. Based on publicly available information, we estimate that the total European birch plywood annual production capacity has been about 1.2 million m3 per year, including the mills producing birch veneer. Another 300 000 m3 exists in the mills using birch in the combi-plywood, and about 200 000 m3 in the decorative plywood. The estimated total birch and birch combi plywood capacity has a theoretical potential to produce about the same volume of birch plywood as the imports from Russia, but still much less than the current consumption in Europe. In fairness, it should be noted that the mentioned capacities can be increased, for example, if the mills changed to 24/7 shifts. In this case, the production facilities should be provided with enough raw material to operate, which can be a challenge.

 

Birch Log Supply May Limit Boosting the European Birch Plywood Output

The major birch forest resources are concentrated in Finland and the Baltic states. These countries, however, also import logs from abroad. The main trading partner is, again, Russia. In 2021, Russia exported about 250 000 m3 of birch logs to Finland, Latvia, Estonia and Lithuania, which is equivalent to about 100 000 m3 of plywood. Additional harvesting of birch forests in these countries is not expected, and increasing their stocks will take years, if even possible. Thus, the Russian log supply may remain an important component of the European birch plywood business unless other measures/changes take place.

Figure 2. Russian Birch Logs Exports to the EU in 2012-2021 (left) and by destination in 2021 (right). Source: Russian customs.

Relocation of the European Export Volumes to Increase the Domestic Supply

Over the past ten years, the European exports of birch plywood to outside Europe have been close to 100 000 m3 per year. The main destinations have been Turkey and the Asian markets. This volume could be potentially sold in Europe. Even so, the supply would still not satisfy the demand, as the production capacities and the raw material availability are limited. Besides, some of the export volumes are targeted at the end-use segments, where birch plywood is hard to substitute and thus the business is very attractive. To compete, the European market should offer at least similar conditions, which is unlikely. And of course, there is a risk of losing high-margin markets that have been developed over the years and which the major players will not want to leave.

Figure 3. European export of birch plywood outside Europe in 2012-2021 (left) and by destination (right). Source: Eurostat.

Opportunities for Other Types of Plywood, Products and Developments

Since the overall supply of the European market with Russian birch plywood is considerable and compensating for it with the existing production capacities and trade flows seems to be difficult, some end-users might look at substitution opportunities. There might be options for even in those sectors, where birch plywood has traditionally gained a strong foothold. Due to its properties, for example, unbeatable strength-weight relation, and light colour, birch plywood has limited substitution possibilities in technically demanding sectors such as formworks and/or heavy transports. In light transport and some construction applications, birch plywood can be replaced with more alternatives. Russian birch plywood has been widely used in these sectors.

Depending on the application’s technical and mechanical requirements, the product can be substituted by plywood made of other hardwood species, such as beech, poplar, maple, eucalyptus, etc. Tropical plywood can compete in formwork and softwood plywood in construction applications. Besides, combi plywood may substitute some uses of birch plywood, and this is currently under active investigation in the Nordic and Baltic countries. The research focuses mainly on the opportunities of combining birch with other hardwood veneers made of species growing in the same area. This option might increase the efficiency of birch raw material utilization, which is, as said earlier, an obstacle to boosting the European birch plywood output.

Other panels can also be considered as a substitution for birch plywood. OSB can compete with birch plywood in construction, and its modern varieties, such as the laminated OSB-4 announced by some Italian and German producers years back, seem to be promising for the automotive industry. MDF, HDF, particleboard and their combinations (incl. with OSB) may substitute birch plywood in furniture. In general, the opportunities for replacing birch plywood with other products in Europe do exist, but only partly, as birch plywood’s position in its main applications is rather stable.

 

What About Supplying Birch Plywood from Other Regions?

Russia has the largest reserves of birch forests and, consequently, birch logs globally. The reserves are in the so-called “birch belt” stretching from the Ural to the Baltic Sea region, including Finland. Some birch forests exist also in Belarus and Ukraine, but the plywood supply from these countries can also be limited, at least for the time being. Other regions do not have significant birch forest reserves that could be considered for industrial use. However, some countries, such as China, actively import Russian birch logs and utilize them in plywood manufacturing. Russia exported over 1.7 million m3 of birch logs to China in 2021, which is equivalent to over 600 000 m3 of birch plywood. In theory, the “Chinese” birch plywood could be imported to Europe too, although high logistic costs and the existing strong Asian demand will make it unlikely.

Figure 4. Russian birch log exports to China in 2012-2021 (left) and its share in the foreign trade (right). Source: Russian customs.

Key Findings, Suggestions, and Offering

Overall, the current birch plywood market in Europe of 2.2 million m3 can be domestically supplied with a maximum of 1.5 million m3 by full utilization of existing production capacity and re-directing the trade flows currently exported. Thus, about 700 000 m3 of the market is left for substitution opportunities, new products, developments, as well as new cooperations and trade ties. Many of these may not materialize but are still worth thinking about. Indufor has long experience in analysing the wood product markets in Europe and globally. We have carried out assignments in the fields of plywood, reconstituted panels, and sawnwood, including their value-adding further processing. We are working both with traditional and emerging industry cases. Our goal is to reach the clients’ needs and expectations to help them move towards more sustainable business models and operations.

For more information, please contact Sergei Senko.

Indufor is a global leader in Natural Resources Management, Investment Advisory, and Strategic Industrial Development consulting. We support our customers to compete and sustainably grow in international markets. Indufor has offices in Finland, New Zealand, Australia, the United States, and China. We have over 42 years of experience in more than 100 countries. Our services support our clients to make the world more sustainable and greener.

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