Timber industry of Ukraine (2007)

Forestry

By reserves of industrial stem wood, Ukraine ranks the sixth in Europe. In Ukraine, forest stands dominated by finewood occupy 88.6% of wood covered area. Of them, pine accounts for 33.6% (Pinus silvestris L leading the way), oak – 24.4% (Quercus robur L dominates), and beech (Fagus silvatika L) – 7.4%. Class 2 (commercial) exploitation woods make up 40.7% of wood covered territory. Ukraine’s Carpathian Mountains are the cornerstone of timber industry: forest land percentage here reaches 42%, while the portion of finewood – pine, oak, and beech – exceeds 70% of all timber resources.

Forest land areas in European countries

According to data of the State Forestry Committee of Ukraine

Ukraine follows a steady policy of woodland area expansion. In 1956-2005, forests increased by 1,857 ths. ha or 20.8%. The gross reserve of timber grew 2.4 times, and reached 1,736.0 mn cu. m. Ukrainian forests have a large environmental and social importance, which has been confirmed by the country’s legislation. Wood cutting is restricted by its annual gain. Forests are state property.

Change of forest area of Ukraine in 1956-2005

Currently, the key priorities of forestry development in Ukraine have been spelled in the State program “Forests of Ukraine” for the period 2002-2015. These include:

• Augmentation of the territory’s forest land percentage towards 19% – scientifically reasoned optimal level,
• Increase of nature conservative potential of forests and preservation of biological variety of wood eco-systems,
• Raising resistance of wood eco-systems against negative environmental factors – climate changes, growing anthropogenic load, forest fires, forest diseases and worms, and
• Expansion of protective foresting works and sylvicultural reclamation.

According to data of the State Forestry Committee of Ukraine

According to the program, forest area till 2015 will expand by 400–600 ths. hectares (on average – up to 4%) at the territories excluded from agricultural turnover due to low fertility. These will become forest plantations – wood area plots, at which finewood species will be cultivated with artificial stalk. Fulfillment of the program draws a lot of attention, as over the years of independence the portion of coniferous underwood in Ukraine narrowed from 55% to 40%, while hard-leaved species share also slashed from 35% to 20%. Forest area should expand by almost 5% throughout realization of the “Forests of Ukraine” state program.

Certification

Ukraine began the first activities in voluntary forest certification as a procedure, which evaluates correspondence between forestry management and sustainable development principles, back in 1999. Certification is being held in the frames of Western European market requirements – the articles should not only be environmentally safe, but also manufactured in an environment-harmless way, – and provides a hope for particular market advantages.

Accession of traditional importers of Ukrainian timber articles – in particular, Poland, Slovakia, and Hungary – to the European Union in May 2004 was a powerful incentive for developing forest certification in Ukraine. Correspondingly, demand for certified timber articles from these countries has significantly grown. Organizations, which recently passed certification procedure and received the certificates, include all state forestry enterprises subject to the State Forestry Committee of Ukraine located at Zakarpatye and Lvov regions, as well as particular state forestry enterprises in Rivne, Zhitomir, and Kiev regions.

In 2007 the area of Ukrainian woods certified by Forest Custodial Council (FCC) scheme outreached 1.4 mn hectares and will undoubtedly increase in the following years.

The National working group was established in 2004 in order to develop Ukrainian national standards of voluntary forest certification – and thanks to financial support of WWF Alliance and the World Bank (and starting 2006 – also to Swedish IKEA company). In 2007, the second version of these standards coordinated with FCC principles and criteria was drafted, and field testing of these standards began in summer of the same year.

Having conducted the certification procedure, forestry enterprises proved that forestry management level in Ukraine fits with current international requirements, and forestry organization is run upon sustainable development principles maintaining balanced and weighted solutions to environmental, social, and economic issues.

Logging and sales

Ukraine has been recently increasing timber stock, mostly as a result of changes in the age of its woods and the growing portion of ripening and mature forests. The tendency will be preserved over the next 30-50 years.

The largest timber stocks are provided by enterprises of the State Forestry Committee of Ukraine (some 12 mn cu. m, including 5.6 mn cu. m, or 86% of main use cutting).

Following the provisions of the Land Code adopted in 2001, three types of ownership were declared n Ukraine: state, community (municipal), and private ones. Plots up to 5 hectares of farmlands can be given to private ownership. Besides, legal and individual physical entities may acquire plots of abandoned degraded land for foresting purposes. Municipal property includes forest plantations within settlement borders, except for state and private property sites, as well as beyond settlement borders at community property sites. State property is currently dominating in Ukraine. State forests have been granted for constant use to various ministries and agencies. The largest forest areas today belong to the competence of the State Forestry Committee (68%) and the Ministry of Agrarian Policy (17%). Around 0.8 mn hectares were not rendered for use and are the resource area. The State Forestry Committee is the central body of executive powers in forestry and hunting issues.

Starting March 2007, according to the decree of the State Forestry Committee of Ukraine, all round timber prepared by all constant users in the order of main use and improvement felling (except for firewood and timber essential for companies’ own needs, such as construction and repair) should be sold via exchange auctions. Auctions are held once a quarter and based on commodity exchanges, which are present in the regional centers. Business entities involved in timber working are liable to take part in the bids. Technical raw stock, pulpwood, and raw stock for peeled veneer manufacturing are only sold to enterprises, which have their own board, veneer, and pulp and paper production at specialized bids at the exchange – in one auction session – with the rest of untreated timber. Wood unsold at commodity exchanges should be sold by companies – regular users upon direct agreements at prices no lower than fixed at the recent auction. It should be noted that current system of bids gives rise to criticism by Ukrainian buyers of raw stock, including the Association MebelDerevProm (FurnitureWoodIndustry).

Wood working

In the 1990s the wood (wood working and pulp-and-paper) industry suffered a deep crisis caused by the reforming of the state administration (Ministry of Wood Industry of Ukraine), ownership changes, lost supplies of cheap timber and traditional sales markets, skyrocketing prices for energy resources and inflation, as well as a lack of necessary investments. The wood industry’s share in gross industrial GDP of the country slashed from 2.9% in 1990 to 1.7% in 1998, but later went up, to 2.4% in 2000. The industry’s machinery was outdated and depreciated long ago. The wood chemical industry went bankrupt and ceased to exist.

Investment flow to the industry made it possible to change negative tendencies for better. Starting from 2000, production of commodities and providing of services started to grow steadily. Domestic and foreign investments and proceeds from export are among major financing sources.

Further development is characterized with appearance of great many private companies dealing with timber sawing and forming of large and medium enterprises, which specialize in deep working of timber. Northern and western regions of Ukraine, where significant forest resources are concentrated, gave priority development to wood working and furniture industry.

To draw investments into the national wood working industry and create favorable conditions for development of deeper wood working, the years 2007–2011 should see gradual separating of wood working sector of the State Forestry Committee enterprises from forestry business.

The results should be greater efficiency of forest resources’ use in the country, increased investment flow into wood working industry, higher volumes of products of deeper wood working, as well as quality improvement.

The key manufacturing types are the production of paper and cardboard articles (44% of the entire output), production of plywood, plates, panels, and veneer (19%), and production of pulp, paper, and cardboard (14%).

The industry’s major enterprises are located in Mukachevo, Kiev (saw and planing production; wood impregnation), Kostopol, Nadvornaya, Kiev (production of plywood, plates, panels, and veneer), in Kiev, Lvov, and Kharkov (production of wooden building structures and millworks), in Kiev and Dnepropetrovsk (manufacturing of wooden containers), in Mukachevo, Kiev, and Lvov (production of other timber and cork articles, straw and plating materials), in Obukhov and Zhidachev (production of pulp, paper, and cardboard), in Rubezhnoye, Koryukovka, Dnepropetrovsk, and Kiev (manufacturing of paper and cardboard articles).

The largest volumes of timber production are attributed to Kiev region (including the city of Kiev), Lvov, and Zakarpatye regions.

The number of wood working enterprises grew from 3.6 ths. (in 2001) to 4.2 ths. (in 2004), mostly due to small firms involved in timber sawing. Corporate/collective (including joint stock companies) and private ownership are the dominating forms, but joint ventures are also arising. One of the key tasks in the industry is to pick up the volumes of timber deep processing.

The largest decline in production volumes was reported by furniture manufacturing. It is one of the most complicated production types, and its recovery demands sizable financial investments.

Most of exported commodities were wood working output – timber and timber articles. Higher financial volumes were mostly caused by the physical increase of export supplies, rather than by higher prices because of deeper processing.

The irrational structure of timber exports is explained by the lack of cash to buy state-of-the-art equipment for deep processing of wood.