Extended consultation in Bistrita – Romanian Wood Association – Prolemn

Top level representatives of various segments took part. As Prolemn members or invited guests, forest harvesting companies (Austrosomes Trading SRL, Asirex Star, Lignum Trend, RG Holz), softwood processing companies (HS Timber Productions, Silvania International, Lignum Trend, Romanel Internațional, RG Holz), hardwood processing (Virix Prod, Business Forest, Stargate Internațional), boards and panels (Egger România, Kastamonu România), energy from biomass production (Bioenergy Suceava, Egger România, HS Timber Productions), constructions and other products (Silvania International, Doxar).

The conclusions, according to the meeting’s agenda, are detailed below.

1. The current market situation – Prolemn-proposed solutions

The participants in the meeting pointed out serious disruptions to the supply flows on the internal market, with the effect of temporary shutdowns or reductions in production capacity, or the shutdown of some sections, manifested from spring 2021, aggravated in autumn 2021 and already chronic in spring 2022.

• the shortage of resources on the domestic market has led to an explosion in timber resource prices, far above international market levels, endangering the competitiveness of Romanian companies in the wood industry.
• there spot prices for auctions of shaped wood or wood on stump are inexplicable by normal economic activity. The exaggerated prices that should become risk alerts for illegal activities.
• the transition to the use of wood in shaped form, given that 75% of shaped wood is sold in inappropriate conditions, on the road, in uneconomical lots by small size, with difficult accessibility, is a limitation of transparency and fair competition in the market wood.
• the current system of capitalization of shaped wood leads to business models with economic operators that provide harvesting services, buy lots of wood resulting from the provision of services, process wood in their own facilities and in many cases buy wood on stump from the same area of ​​the provision of services, leading to risks of illegal logging and affecting fair competition.
• In some cases, high award prices lead to the postponement of the rescheduling of the plot by the companies that awarded them, with the effect of reducing the volume of resources available in the market.

The major causes that led to the artificial shortage of resources in the timber market are:

• The unprepared implementation of the SUMAL 2.0 system on February 1, 2021, with temporary blockages induced by functionality problems and long-term systemic effects by hindering the procedures for developing timber on small properties and in forest vegetation outside the national forest fund. Imports were also hampered by the obligation to issue notices registered in SUMAL 2.0 for transhipment from shipping to road or rail, with measurement of the entire volume piece by piece, an operation impossible to organize logistics in ports.
• The emergence of regulations on environmental assessment of forest management plans – by amending the Forestry Code – and orders on the revision of environmental assessment of forest management, with long-term blockages of the application of forest management and, implicitly, affecting the timber resource placed on the market.
• reduction of the volume of timber put on the market by RNP – Romsilva, because of the strategy of transition to shaped wood, with the reduction of almost half of the supply of wood on stump and delays in contracting the services of logging, with effect in appearance a shortage of wood resource on the timber market.

In the context of this artificial shortage of domestic resources, the war in Ukraine created further disruptions in supply flows, with significant imports from Ukraine, Belarus and Russia into the following segments:

• softwood and hardwood timber.
• chipboard, MDF and OSB.
• wooden plywood.
• wood chips and biomass.
• pulp and paperboard for packaging.
• wooden pallets.

In the wake of the war in Ukraine, which has led to a shortage of resources and an explosion in prices in many market segments with endangering the energy security at European level, there is an urgent need for action to make the best possible use of what is available – our national resource. We appreciate that the wood resource from Romania’s sustainably managed forests, capitalized by the wood industry, is a solution that can support energy security, reduce import dependence, stimulate economic growth and at the same time pursue the objectives of developing a green economy based on renewable natural resources, with a low impact on the environment.

There is a clear and urgent need to support the timber industry.

1. Measures with immediate, short-term impact:

• approval of an annual quota for timber harvesting by the Board of Directors of RNP – Romsilva at the level of the possibility established by the forest management plans, of 11-13 million cubic meters, according to the provisions of the Regulation for the capitalization of timber.
• the immediate offering on the market, on stump, of the timber resource scheduled to be placed on the market as shaped wood, under the conditions of the procedures for contracting operating services without being awarded.

2. Medium-term measures:

• Starting again the public debate the draft amendment to GD 497/2020 for the approval of the Rules on the origin, movement, and marketing of timber, so as to comply with the principles of EUTR 995/2010:
  • economic activity should not be hampered by excessive administrative burdens.
  • traceability should be pursued mainly at the first placing of timber on the market, with a focus on control of risk areas and activities.
  • to encourage voluntary compliance, by implementing own due diligence systems of economic operators. The SUMAL 2.0 system must be a basis for supporting the economic operators’ own systems.
  • to have separate norms for the own consumption of the small owners, according to the provisions of the Forestry Code.
• amending Ministerial Orders 1946 and 1947/2021 on environmental assessment and revision of the environmental assessment of forest management, so that the procedure is smooth and does not lead to blockages in the application of forest management, affecting the timber resource available in the market.

3. Long-term measures:

• developing a national forestry strategy and pursuing its implementation, with the aim of capitalizing on the potential of the forest-timber sector to simultaneously support economic growth based on renewable bio-resources and pursuing environmental objectives, following the principles of cascading timber resources and objectives to maximize the substitution effect of wood products and biomass used as an energy source for other products with a much higher environmental footprint.
• implementation of a timber capitalization system that prioritizes access to resources for economic operators that add the most economic, social and environmental value to the timber resource, in proportion to the consumption of timber from the previous year – see Polish model.

2. Development of the National Forestry Strategy

Starting from a reality of:

• reduced annual harvest volume compared to forest growth, with harvest quantities well below the European average;
• the structure by age classes of Romania’s forests, which will lead in the next 20-30 years to a significant increase in the possibility of harvesting;
• the low level of execution of the forestry maintenance works, the execution of which can lead to the increase of the stability of the forests and at the same time to the activation of the forest growth;
• the sequestration effect of carbon in wood products, the substitution effect of wood products and wood biomass used for energy production for products with a much higher environmental footprint,

a clear positioning of the government and all ministries is needed to keep sustainable forest management active.

In the elaboration of the national forestry strategy, Prolemn will be involved by supporting the experts who participate in the working groups representing the main types of activities in the wood industry.

At the same time, Prolemn will support public communication campaigns on the role of timber resources in sustainably managed forests in the new bioeconomy.

Prolemn will support the study of the evaluation of the economic, social and environmental contribution of the forest-wood field, as a contribution to the substantiation of the national forestry strategy, based on the partnership with INCDS “Marin Drăcea”.

3. Establishment of working groups

It was decided to set up permanent working groups on legislation and communication and support working groups within Prolemn, with the identification of specific issues for each type activity: primary processing, board industry, biomass, wood construction and finished products other than furniture. In order to better substantiate the positions of the Association, the following groups will be set up:

Main and permanent groups:

• communication.
• legislative – legal proposals.

These groups will be supported by the participation of the Prolemn executives, with the co-optation of experts from the member companies.

Technical support groups – on the lines of the main activities in the wood industry:

• harvesting and logging sector – leadership Austrosomes Trading
• primary processing (hardwood) – leadership Virix Prod.
• primary processing (softwood) – leadership HS Timber Productions
• board industry – consultations will follow with companies in the board industry.
• wooden constructions / semi-finished and finished products, other than furniture – leadership Silvania International.
• biomass energy – leadership Bioenergy Suceava.
• European policies – Prolemn executive apparatus.

The first points identified as a priority to be addressed, following a first consultation of the working groups:

Softwood primary processing group:

• authorization of cutting facilities, with minimum requirements – for example wood peeling.
• simplification of port timber import procedures.

Hardwood primary processing group:

• the extension of the reduced VAT rate of 5% for the biomass resulting from primary wood processing used for heating, with the same arguments as for the reduced VAT rate for firewood.

Board industry group:

• development of wood recycling policies and legislation.

Biomass group:

• the inclusion in the biomass certifiable for the support schemes for renewable energy of biomass from exploitation residues, from orchards, tree grooming, administration of green spaces, with the elimination of the bureaucracy for issuing transport permits for this biomass.
• ensuring the confidentiality and secrecy of trade by public access applications of the SUMAL system, in particular in the case of interrogation of data by means of means of transport and public tracking of the transport route.

Construction industry / Wood products other than furniture:

• introduction of quality control standards for wooden constructions.
• updating ISU certification standards for wooden constructions.

4. Debates on the two important legislative projects under public debate

Regulation for the capitalization of wood and the Regulation for the operation and organization of SUMAL.

Debate on the Regulation for the capitalization of the wood mass.

The debate resulted in proposals:

• the opportunity to be regulated in the Regulation on the capitalization of the procedure for the procurement of operating services, in order to streamline them.
• implementation of a timber recovery system that prioritizes access to resources for economic operators that add the most economic, social and environmental value to the timber resource, in proportion to the consumption of timber from the previous year – see Polish model.
• in the case of capitalization of wood in shaped form, capitalization from warehouses with minimum economic dimensions of the lots in compliance with sorting standards.
• good practice measures to eliminate the risk of illegal logging and unfair competition in the case of capitalization in the form of timber in the form of: framework operating contracts; separation of the activity of operation, transport and capitalization, so that they are different economic operators.
• the elimination from the Regulation of the provisions regarding the history of the processed wood mass, the fulfillment of the processing condition of at least 40% following to be assumed by declaration on one’s own responsibility or sanction in case of non-compliance with the condition.

Prolemn will request the organization of a public debate on the draft Regulation for the capitalization of the wood mass.

Debate on the Regulation on the organization and functioning of SUMAL.

During the debate, it was pointed out that the draft amendment to OM 118 for the approval of the Methodology on the organization and operation of SUMAL 2.0 applications refers to an amendment to GD 497/2020 – Regulation on the control of timber movement.

The draft amendment to GD 497/2020 has not been submitted to public debate since April 2021, practically promoting an amendment to GD 497/2020 would be completely non-transparent.

The substantive observations of AIL-Prolemn related to the amendment of GD 497/2020 are current, according to the position paper sent to the Ministry.

AIL-Prolemn will request a public debate on the draft Amendment to GD 497/2020, in the context of the debates at European level of a regulation on the traceability of timber that will substantially amend European Regulation 995/2010.

Regarding the draft amendment of OM 118/2021, it was concluded that the deadlines of 24 hours of reporting, from the request of the control bodies, of the sorting, sawing, transformation minutes are unfeasible and impractical.

5. Organisational strengthening of Prolemn and increasing the representativeness of the Association

The participants in the debate stressed the need to strengthen the Association, for a better representation of the wood industry.

More news: