The hunt in the past for easy money left the wood-processing industry of the ’90s in a desperate situation. The relatively high percentage of forest owned by the state has created continued controversies about how best to use the prospective timber and a debate over spruce or deciduous trees.

Right now, the Czech Republic has an all-time record supply of wood, yet, the country might suffer from a lack of it in 30 years,” said Jan Řezáč, executive director of the Wood for Life Foundation. Speaking on the occasion of a major industry event, the Wood-Tec fair in Brno, South Moravia, at the beginning of this September, he explained that the country is now exploiting the most productive growth planted after World War I. The yearly gain of 20.6 million cubic meters (mm3) of wood is not even fully used, as the yearly exploitation was 17.68 mm3 last year. Yet over the last 30 years, planting of new trees has decreased, while the demand for wood is soaring.

The domestic wood-processing industry is growing by 6 to 8 percent each year. And now, unlike in the past when we mostly exported raw wood, Czech companies also tend to process the wood longer and export either half-finished or fully finished products, Řezáč said. “Furniture manufacturing and construction industries based on wood are now recovering,” he added. And this trend impacts programs at universities for future building engineers and architects. “We are experiencing a surge in this industry,” said Anna Kuklíková of the department of steel and timber structures at Czech Technical University (ČVUT), Prague. “There are many new apartment [buildings] based on wood, as well as sports halls and multipurpose buildings,” she told CBW. The ČVUT faculty is now teaching young building designers and architects, and is extending the number of school subjects that deal with wood construction. According to the Wood for Life Foundation, the share of wood use in construction recently climbed from 1 percent to 5 percent. After all the years of teaching how to build houses from concrete and bricks, seminars are now organized in the Construction Faculty with professionals from Germany and Austria to introduce how to utilize wood in Czech architecture.

The explanation that the demand for wood exceeds its supply in the Czech Republic, given by Šárka Kubelková, spokeswoman of the state-owned forestry enterprise Lesy České republiky (Lesy ČR) seems quite plausible. “Wood is one of the few natural and renewable materials that is strategically important for the future, as this material can be used in traditional production, such as the furniture and construction industries, [as an alternative and to be prepared] with regard to fossil resources running out,” she said.

Deeper insight into this issue is offered by Jan Mičánek, managing director and owner of the second-largest Czech timber company Less, who sees two main spheres of influence. “There is a massive restructuring going on now in the wood-processing industry in Europe and during times like this, building manufacturing capacities and the supply of the raw stock on the market is being balanced.” So the demand increases as the manufacturing capacity grows. This chain reaction is happening in both Eastern and Western Europe. “In the Western part—Austria, Germany and Switzerland—this restructuring is mainly a consequence of technological development and the concentration of production in one place.” This basically means that there are fewer, but much more effective, sawmills. According to Mičánek, all this is true for post-communist countries, which are now experiencing unprecedented modernization of wood-processing factories.

Here we might use a little historical perspective. “Between 1992 and 2000, most of the Czech wood-processing factories were bought by foreign investors for very low prices,” Řezáč said. “They were gutted by their new owners, who gained them in privatization under unfair conditions, mostly just to ‘tunnel’ them.” All of them were extensively modernized, with new technologies established. Řezáč said he cannot think of any that were established then as a greenfield project, as all the investments used already existing factories. And then, after the millennium, other manufacturing capacities that process wood into the final products, for example, doors and windows, were added. “This is the case in Ĺ˝dírec nad Doubravou [East Bohemia]—there are three interconnected factories now—they put the raw wood in one side and get doors and windows from the other.”


Foreign roots

As Řezáč said, more than 80 percent of the wood-processing industry is now in foreign hands. There is Stora Enso Timber—an international packaging and forest product company that has one sawmill in Ĺ˝dírec nad Doubravou, and one in Planá, West Bohemia—and Austrian-owned Mayr-Melnhof, with its sawmill in Paskov, North Bohemia. Norway-owned Norske Skog, among many others, owns a large paper mill in Štětí, Central Bohemia.

This boom in the wood-processing industry in the last decade and the need for wood is another factor in the equation—in addition to the other factors resulting from the trends in the construction industry. The construction industry is now more than ever before interested in wood materials, which it used to regard as waste. “There is a trend in manufacturing wood by means of glued processes [as in that used to create fiberboard], in which wood imperfections can be removed,” said Karel Svoboda, director of the Czech Union of Manufacturers of Wood-Processing Machinery and Equipment (SVDSZ). His colleagues that also work with wood waste now have steep competition. “There are newer and newer technologies demanding wood waste; both originated in the forest during timber harvesting and during manufacturing in the factory,” Less’ Mičánek said. “They use it for production of energy from renewable resources. But if you ask our neighbors in Austria—who are further developed in this—they will tell you that only about 5 mm3 of wood, which could have ended up in chip boards or pulp mills, went through the chimneys of biomass boilers in the last year.”

“This is just a consequence of EU subsidies. Electric energy is subsidized, as well as the investments into such power stations,” Mičánek said, adding that it was not part of a global trend.

Biomass power plants can offer a higher price. Mičánek related a conversation where the general manager of the biggest Austrian company that produces energy from biomass told him that it is just a matter of time before all the pulp mills in Austria will have to close down.

Nobody realized how significantly these subsidies can distort the market, Řezáč added. “There is a supply of the wood material on one side and wood-processing capacity on the other. And this is balanced in the long term. But there are already signals that the EU is aware of [the flaws] and might consider revoking these subsidies,” he said.

Many industry specialists claim that the Czech timber industry market is stigmatized by yet another distortion: state ownership of half of the forests. “The state should, first of all, stop trying its business enterprise in forestry,” said Ivan Doubrava, CEO and chairman of wood processing firm CE Wood in daily Hospodářské noviny in an article earlier this year. “We have acknowledged this in all fields, in gas manufacture or mineral mining, only in the forestry we haven’t.” He contradicts often mentioned arguments that private administration of state woodland may bring uncontrollable risks, like plundering. “The system of private administration of the private woods works for 15 years already! And during all this time the state enterprise subcontracts logging, the private entities execute it and the state enterprise controls it,” he said.

Mičánek agrees. “If something can be private it is always better,” he told CBW. “The fact that more than half of the Czech forest belongs to the state has its origins in a historical context. Everything used to be private before the Czech state took the woods away from people and institutions. This is a complete anomaly. In Austria, 15 percent of the woods are under state ownership, but they only produce 7 or 8 percent of wood products, as a great part of the state woods is high in the Alps, where there is no wood production.”

State enterprise Lesy ČR sees this matter from a different point of view. “In neighboring countries the state does not resign administration of the state forest. It maintains them through transformed, modern companies,” Lesy ČR’s Kubelková said in an e-mail to CBW.

“In total, all forest owners together harvest about 16 mm3. One half of that is by private owners and the other half by the state. Lesy ČR maintain 86 percent of the state’s half, the rest of it falls within the national parks, and so on,” said Bohumil Kos, Lesy ČR’s commercial director.

Tender disputes

The system of commissions—or giving contracts—is a profitable business, with timber from the state going to private timber companies. But it has been subject to strong criticism that the state enterprise wanted to get more control over the business and reach higher profits. Forest companies were rejecting the system of commissions, suspicious that the business would not be transparent enough.

Disputes about tenders for forest operations have been in the forefront since 2004. Since then, some timber companies have criticized every tender and marked each as unlawful. In June 2007, the Ministry of Agriculture agreed to alter the method for assigning commissions. Until 2010 there will be two models for tenders, each receiving an equal volume of timber harvesting.

“According to this new tendering system, Lesy ČR is in control of 8 mm3 of wood. Out of that, 4 mm3 is sold to their contractual partners ‘at the stub’ as a semiproduct, or raw trunk. Therefore, Lesy ČR now has control over 25 percent of the total amount of the [finished] wood [products] logged in the Czech Republic,” Kos said in describing the new system for tenders.

He said that the previous model was based on 100 percent outsourcing of all activities connected with forest maintenance. Then, 100 percent of timber harvested by contractual partners passed over to them and at the same time, Lesy ČR was buying half of the wood back on the forest road. “Today we want Lesy ČR to sell 50 percent on their own. One half of the wood volume is treated the same way as it was in the past. However, the second half continues to belong to Lesy ČR until it is sold as a finished product to a wood-processing company.”

This half-way solution should settle some of the dissension at least for now. According to Ivo Klimša, president of the Confederation of Forestry and Woodworking Unions of the Czech Republic (KLDS ČR), the agreement is an essential step to a more peaceful period after four years of instability and contention.

As for the remaining already negotiated tenders for the forest operation in the second half of this year—the results of which were announced at the beginning of July—Mičánek can be content. His company Less & Forest, a subsidiary of Less, won most of the territorial entities: 30 out of the total 278 announced by Lesy ČR. The total amount of all tenders was Kč 1.9 billion (€ 69 million). Less & Forest also won 75 percent of Lesy ČR tenders in the last year for cleanup of the forest calamity in January caused strong and damaging winds. The disaster resulted in an estimated Kč 2 billion loss to forest owners and, according to Mičánek, reduced wood prices temporarily by high percentages.

The KLDS is an umbrella organization for many associations and unions in the industry. There is the Union of Employers in Wood-Processing, the Czech Union of Manufacturers of Woodworking and others. “It is necessary to have KLDS as one associating body,” Řezáč said. “The state, which owns most of the wood, regulates its use very strictly. And so the state—or Lesy ČR—doesn’t want [to deal with] 200 individual companies for various negotiations, they usually only deal with KLDS representatives.”


Post-communist countries

Russia resolved the raw wood exports problem recently by imposing a high export duty on timber to promote domestic wood processing. Romania is, according to Řezáč, exporting a lot of wood to China, as the potential for huge development there is peaking. “Romania is now the ‘fashionable’ country for all the wood-working investors,” Mičánek said. “The large investors are ready to invest there, yet the country has one significant disadvantage, a poor infrastructure for wood manufacturing.” In other words, there is a lack of forest roads and the wood is therefore very difficult to harvest.

“Poland is very specific. A substantial percentage of people are employed in agriculture. A share of the state forest is also very high, let us say 84 percent. And the Polish farmer, who has a farm of about five hectares, traditionally works the forest during winter. It is simply a social matter, so the changes are slower there than in the rest of Europe,” Mičánek said. Slovakia harvests about one-half of the total of Czech yearly logging, though half of it is beech, which is very unprofitable for them.

To illustrate the differences in the development of forestry technology between the Czech and Slovak republics, Mičánek relayed an incident in 2004 when his company was cleaning up at the scene of a catastrophe after high winds devastated an area in Slovakia’s High Tatras. “I stood up on a hill in Tatranská Lomnica and looked down on the plains where all the trees were toppled, and I counted roughly 35 harvesting machines, 30 of which were Czech.” His company itself has 22 such machines, terminators capable of grasping the tree, undercutting it, laying it on the ground, disbranching it and then cutting it into parts.


Sprucing down

An often-repeated keyword in Czech forestry is biodiversity. The prevalence of spruce is criticized frequently and “improvement of the species composition”—meaning more hardwood and mixed forests—is even included in the National Forestry Program II, which should be the basis for the forthcoming forest law. Also, Lesy ČR has set a variety of tree species as one of their goals. “Lesy ČR plants 40 percent of broadleaved trees and fir tress every year, which constantly increases the share of these species in our woods,” Kubelková said.

The spruce monoculture, more vulnerable to bark beetle and pollution is going to be significantly reduced, especially in the lower altitude Polabí area. Still there are areas, like Jeseníky, Beskydy or Šumava, where the spruce has its place and will be planted in the future, Řezáč said. He also said that the industry will have to adapt and learn how to exploit foliage plants, beeches and oaks, too.

The abundance of spruce, an eyesore for some environmentalists, is on the other hand something we should thank our great-grandfathers for—at least this is what Mičánek said. “Our forests are incredibly efficient because spruce is here in a high percentage. We are simply lucky to have an altitude of 300–700 meters above sea level in most of the area. And that is why we can plant spruce.” And spruce, Mičánek said, is absolutely the only tree that makes money and “sustains” other trees. “You can harvest 600 m3 per hectare of spruce in exploitable age, but only 200 of beech,” he added.


Seeing the forest through the trees

Urban people park their cars at the edge of the woods and walk in, as though the woods are parks. “But those who take care of the woods, so that you can easily [enjoy and] walk in them, should be rewarded by the right to decide what will be planted there. Even if it is spruce,” Mičánek said. “If you ask people, whether they like wood, they will shout ‘Yes!’ In the past, when a man got married, he and his bride bought a bed. And when they died, it was in the same bed. Now, the period [in which most people] use a piece of wooden furniture is getting shorter and shorter. Consumption of paper, of paper wrappings is growing. A substantial part of our population wants to live in their little own house now, and leave the panel flats. And houses constructed of wood are so easy to make, so undemanding in energy consumption and so popular. Just look around, almost every wooden product, every paper in the Czech Republic is made from spruce. But if you want to plant it or cut it, now the same people who love the wood in their homes have a problem.”

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Czech timber in brief

● The Czech Republic is ranked 12th among European countries in forest coverage (33.5 percent), fourth in timber resources by hectare (245.8 cubic meters per hectare) and sixth in total yearly gain by hectare (7.8 cubic meters by hectare).

● Total yearly gain, meaning new growth in the woods every year, in Czech forests is about 18 million cubic meters (mm3), while approximately 14–15 mm3 is exploited yearly. This means that the wood supply increases every year by at least 3 mm3, as a result of the extension of the area of woodlands.

● Since wood consumption per person in the Czech Republic is one of the lowest in Europe, over the next 10 years the yearly consumption per person in the Czech should be doubled from today’s 0.23 cubic meters (m3) to 0.46 m3. Yearly consumption per capita in Austria in the last 15 years increased from 0.3 m3 to 0.62 m3. The U.S. and Japanese wood consumption is 0.5 m3 per person, while people in Finland are at the top with 1.0 m3 yearly per capita.

● The forestry industry creates only 0.7 percent of Czech gross domestic product (GDP). This figure does not however account for the wider economic context, including an evaluation of the forest industry as the first link of an entire production chain.

● There are some 207,000 people employed in the wood-processing industry in the Czech Republic, which is 16 percent of the total processing industry. The number of employees in the forestry industry is about 24,000 people.

● The wood-processing industry sector creates a positive balance in foreign trade of Kč 40 billion (€ 1.4 billion), which is, for example, five times more than the textile and clothing industry.

● While in recent years the share of the exploitation of wood in the construction industry was less than 3 percent in the Czech Republic, it has now risen to 5 percent. This figure is still quite low compared to other countries. In Canada it is over 80 percent, in Finland, Sweden, Norway it is 70 percent, in the U.S. it is 65 percent, while Germany and Austria are at 20 percent.

Source: Wood for Life Foundation

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Huge exports of raw wood—a communist legacy

While the pre-1989 governments were extolling the export potential of Czechoslovakian forestry, even geography teachers could have told them that exporting raw wood cheaply from the source was not as advantageous as exporting wood products with higher added value.

This unfortunate trend started in our country soon after World War II, according to information from the Wood for Life Foundation, an independent legal entity and nonprofit organization. Wood was then listed among strategic raw materials to be used sparingly for domestic consumption. It therefore became an important export commodity that helped to support an otherwise incapable economy. The constraints on the domestic market, combined with intensive construction of synthetic panel buildings, led to a sharp decline in the teaching of wood-processing skills at colleges and universities.

“The communists didn’t have many other possibilities for getting foreign, Western European, currency,” said Jan Mičánek, managing director of Less and an industry expert. “What else could they export to the west? Food? Škoda cars? I remember once when the minister of the then-forest and water utilization and wood-processing industry promised the Czechoslovak government that he would exploit and export an extra 1 million cubic meters of wood from North Moravia for that year. With this currency the government was able to buy typical Czechoslovakian pre-Christmas goods, such as oranges and tangerines.” Mičánek said.

The Wood for Life Foundation Web site also cites the deceitful communist propaganda that was spewed about at the time claiming the necessity to reduce consumption of wood and paper. “This need for reduction was false. People were deceived; it had no effect on the state of our forests or on the wood supply. The only reason for lower consumption was to have enough for export,” foundation executive director Jan Řezáč told CBW.

Řezáč also said that communist projects to re-house people in panel flats led to a steep decline in the number of wood processing workers, although he pointed out that this trend was also being followed in the West. The changes left a deep imprint on the Czechoslovak wood-processing industry, which entered a long period of declining investment and skills.

“The percentage of raw wood exported has remained relatively high even today,” Řezáč said, adding that after the Velvet Revolution the forestry and woodworking industries were dealt yet another blow in the form of botched privatizations. “Most of the wood-processing factories, especially those belonging to district municipalities, were privatized very badly in the ’90s by various funds or odd business groups,” Řezáč said. “Such enterprises were unable t o respond to the opening of the market and were again steamrolled by the likes of Ikea and other modern furniture trends from the West,” he added, increasing pressure on the forestry companies to export raw wood.