February 25 , 2022

Will Russia’s invasion affect timber prices?

Mr Putin has decided to invade Ukraine’s eastern regions of Donetsk and Luhansk for the purpose of “peacekeeping”.

Instead of discussing any political justification for this action, let’s focus on our industry. Will there be any immediate or long-term impact on timber supply from that region?

We mainly source softwood from Russia and its bordering countries, Ukraine, Estonia, Finland, and Latvia. The short-term consequences of this invasion will be trade sanctions, mostly imposed by the USA. Less likely by Europe, as the latter has too much to lose in trade with Russia, especially the supply of Russian gas.

Most of our recent Russian shipments travel by train to Vladivostok port and are reloaded onto vessels to China and Southeast Asia. Such business will not be affected.

Ukrainian orders are shipped from Odessa port, about 800 km away from the Donetsk region but near Russian-controlled Crimea. Odessa is Ukraine’s main seaport, and it is not unlikely that Russia will attempt to block in- and outgoing goods. Russia has fully or partly governed the earlier mentioned bordering countries Estonia, Finland, and Latvia in the recent past. They will probably stay out of this conflict and try not to antagonise Russia.

In conclusion: we don’t see any short-term effects on our timber supply from that region except Ukraine. However, history shows that wars involving one of the world’s power states like the USA, China, Japan, Germany, Russia, or others, result in economic unrest. Thus, the actual situation can affect the buying sentiment in Europe and could weaken the demand for timber in general. Oil prices will rise, stock markets will drop, and inflation will further increase.

Without a doubt, these factors will affect timber prices in the medium to long run.