1. Wood market in Poland - towards stabilisation, Poznań, 4 December 20071 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

2. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 2 Contents Principles of the wood market Principles of the wood market Forest resources in Slovakia Forest resources in Slovakia Ownership structure Ownership structure Harvesting Harvesting Roundwood classification Roundwood classification Roundwood deliveries and export development Roundwood deliveries and export development Points and methods of wood sales Points and methods of wood sales Wood prices Wood prices

3. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 3 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 HARVESTING STANDING VOLUME Allowable cut PRICE World supply and demand, Economic development EXPORT DOMESTIC DEMAND SUPPLY DEMAND Economic development Exchange rate Substitution materials Preferences Incomes Construction Substitution materials Preferences

4. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 4 Forest resources in Slovakia Forest area 2 mil. ha Forest cover 41% Standing volume 444 mil. m 3 Annual increment 11.6 mil. m 3 Allowable cut cca 6.5 mil. m 3 Forest cover in regions of Slovakia

5. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 5 Ownership structure State owns 42% and manages 58% of forest area (LESY SR, state enterprise) State forests network of enterprises – concentrated timber supplies Number of non-state owners 48 thousand Average area of non-state forest property – 200 ha Type of ownership Area of forest land (ha)Share (%) ownershipreal useownershipreal use State807 7531 130 78641,858,5 Private275 243121 37214,26,3 Common480 160459 16224,923,8 Municipal187 816168 7709,78,7 Church 65 24247 4493,42,5 Cooperatives2 6354 1060,2 Unknown112 796-5,8- Together1 931 645 100,0

6. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 6 Harvesting Favourable conditions to increase harvesting volume by 2030 (7-7.5 mil.m 3 ) Threat – accidental felling!!! Development of harvested volume Year 1990200020052006 thousand m 3 totalaccident al totalaccident al totalaccident al totalaccident al Coniferous2 7771 838 (66.2%) 3 245.02 012 (62.0%) 6 927.46 152.7 (88.8%) 5 150.03 831.0 (74.4%) Non- coniferous 2 499766 (30.7%) 2 973.01 010 (34.0%) 3 263.1380.3 (11.7%) 3 207.2435.0 (13.6%) Total5 2762 604 (49.3%) 6 218.03 021 (48.6%) 10 190.56 533.0 (64.1%) 8 357.24 266.0 (51.0%)

7. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 7 Roundwood classification 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 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

8. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 8 Roundwood deliveries Increasing volumes of delivered timber (7.3 mil. m 3 in 2006) Softwood deliveriesSoftwood deliveries for domestic market Hardwood deliveries Hardwood deliveries for domestic market

9. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 9 Roundwood export development

10. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 10 Industrial roundwood consumption Share of industrial roundwood export on production year200120022003200420052006 %282117161915

11. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 11 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

12. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 12 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

13. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 13 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

14. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 14 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

15. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 15 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

16. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 16 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)

17. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 17 Wood prices AssortmentQuality classConiferousNon-coniferous SKK/m 3* Veneer logs I.39508772 II.30805673 Sawlogs III. A23002432 III. B18531812 III. C14501584 Pitwood IV.1658- Pulpwood V8821199 Fuelwood VI.634858 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

18. Wood market in Poland - towards stabilisation, Poznań, 4 December 2007 18 Thank you for your attention!