Today a webinar hosted by the European Panel Federation and the Polish Association of Wood based Panel Producers informed about the current challenges in the plywood market, expecially concerning illegal imports of Russian and Belarussian Birch products into the EU. 300 participants were presented with recent market data, the current legal situation as well as possible strategies to ensure responsible sourcing across Europe. One common conclusion was that every regulation can only be as effective as its enforcement.

Jarosław Michniuk, European Panel Federation Board Member and CEO of Paged Morąg and Paged Meble, welcomed the audience pointing the serious issues that European birch plywood producers and traders are facing presented with illegal imports with such low prices that can not be attained by European producers. While the expansion of production capacities is needed, the ongoing market distortions are preventing suitable investments.

Mārtiņš Lācis, European Panel Federation Executive Board Member and Chair of Plywood Product Group (EPF) and Executive Board Member and Head of Marketing, Sales and Logistics in AS Latvijas Finieris provided the audience with some historical background and an overview of the impact of illegal imports on market stability and the European wood industry. He started with a brief timeline focusing on key events that influence the birch plywood market in the EU and UK.

A brief history of Russian birch plywood influencing the EU and UK market

In a recovering market several EU production facilities had to close or put investments on hold between 2018 and 2021 due to overcapacities in Russia and Russian products flooding the market. While the EU production of birch plywood dropped by 10% in 2020 investigations by the European Commision led to anti-dumping duties. After the war in Ukrania started, Russian and Belarussian wood products got banned from EU import in 2022 which led to an overall plus of 12% of EU production in 2022 to a before dumping state - followed by -4% in 2023 and a not to be ignored share of illicit imports of 19%. Also the new trade systematic (HS) code for birch playwood allowed exact tracking of this specific product and its ways through the markets. But the sanctions combined with a general economic stagnation put their own toll on the EU market and soon there were rumors of companies from Kazakhstan and Turkey circumventing the rules. The European Commission reacted with further investigations and anti-dumping duties in 2024. But still there is no investment friendly environment with new middleman countries potentially stepping up at any time. In the first quarter of 2024 the EU production dropped further by 5% lowering capacity utilization close to 80%.

New trade flows out of the blue?

As Lācis explained, the sanctions led to increased and new import trade flows of birch plywood coming from already known producer countries such as Kazakhstan and Moldova as well as countries that produce without sufficient local birch resources such as Turkey, Georgia, China, Vietnam, Ghana and others and also from countries without any production capacities such as Uzbekistan, Egypt and Armenia. Meanwhile the Russian birch plywood exports to some of those countries rose significantly.

The Russian plywood exports - that consist of 95% birch plywood - totalled in 2023 at around 1.5 million m3. Egypt imported the most with 337,000 m3, followed by China (244,000 m3), Turkey (196,000 m3), USA (187,000 m3), Kazahkstan (120,000 m3), Azerbaijan (92,000 m3), Uzbekistan (62,000 m3). South Korea (57,000 m3), Israel (52,000 m3), Georgia (30,000 m3) and other countries with 161,000 m3.

Thicker birch layers from China?

In the first quarter the skyrocketing imports by China stood out. But also Uzbekistan’s doubled compared to Q1 2023. With imports of EU and UK birch plywood imports from China Lācis noticed an alarmingly rising density of the products that usually have very thin birch top layers. Claims that the birch stems more and more from the Baltics are not at all covered by respective statistics and the needed volumes would be just not achievable and documents of origin for example seem to get copied illegally for several shipments. A Latvian forest owner already has initiated investigations. In conclusion 2024 brings a slight relief in terms of Kazahkstan and Turkey but on top of China’s increasing product densitiy Georgia claims a higher production and trade flows between Russia and Egypt and Uzbekistan are alarming. Lācis and his team estimate that there is still a 16% share of illicit plywood in the EU market. On top of that there still seem to be stocks of “unsaleable” birch plywood under false trademarks in the market.

10 million € duties retroactively collected

Yuriy Rudyuk, Partner at Van Bael & Bellis, discussed the legal frameworks governing timber trade and consequences of non-compliance. He started with the anti-circumvention investigations by the European Commission concerning imports from Kazahkstan and Turkey. Several leading EU producers requested the investigation that took place over 9 months of assessments, on spot verifications and audits in both countries. None of the investigated producers was able to proof not to be involved in circumvention practices with Russia-originated plywood and/or raw materials which led to an extention of the original duty of 15.8% to imports arriving from Kazahkstan and Turkey in the EU - no exeptions. Also a retroactive collection was carried out for imports registered during the investigation time until August 2024 - summing up to almost 10 million €. The most common practices of circumvention found were transshipment as well as minimal transformations to Russian products.

Rudyuk pointed out that in order to detect similar developments quickly the European Commission is now utilizing an almost just in time monitoring system to check on suspicious trade flows early on.

Active and passive circumvention illegal

Rudyuk also explained the current sanction regime around Russian wood product imports into the EU. Since June 2024 it is also explicitly prohibited to knowingly, intentionally or accepting the possibility to circumvent the regulation in question with trading activities. Touching on enforcement he made clear that the liabilities currently are very varied depending on the member state - reaching from administrative fines to natural persons to legal persons and the possible confiscation to criminal fines and prison sentences. The European Commission aims to harmonize these. As per directive from April 2024 individuals that provided financial services, traded goods or enabled designated people to entry into member states for example are facing a maximum term of imprisonment of at least five years. Companies could lose 1% to 5% of worldwide turnover or specific amounts between 8 and 40 million €. The member state are required to put these into national law by May 2025.

And of course there still is the EUTR that forbids imports of wood product that are linked to a combat or sanctions - such as birch plywood from Russia and Belarus or products containing Russian birch - and brings its own liabilities such as an immediate suspension of authorization to trade.

Ruling out most false declarations via isotope analysis

Victor Deklerck, Director of Science at World Forest ID introduced the audience to World Forest ID and it's novel timber tracing technology to verify the legality and sustainability of wood products. His solution uses isotope and soil analysis to provide a 20 km resolution map that will not tell if a specific birch tree grew in that area but can rule out false origin declarations in most cases using advanced algortihms to extrapolate sample data to huge areas. The growing project is working on more regions and wood species and wants to cover the most common ones soon.