Timber Industry in Latvia: Challenges and Future Prospects

The timber industry in Latvia is a major employer and one of the cornerstones of the national economy accounting for approximately one fifth of all Latvian exports and 30% of the total production of the manufacturing sector. Despite the challenges encountered in recent years, the industry is continuing to grow with a focus on high value-added products and innovations, according to Kristaps Klauss, Vice-President of the Latvian Forest Industry Federation (LFIF). Active exporting is the key to stable growth for many companies in Latvia as it allows them to expand their market and enhance competitiveness. 

The LFIF highlights that development of the industry is closely related to global trends, and over the course of the last year it has been impacted by falling demand in construction. “At the moment, construction has somewhat slowed down not only in Latvia, but the entire Europe, North America and Asia. With half of the production of the timber industry being used in construction, repair or improvement of real estate, this has been a challenge for the sector. However, it is a passing phase, and we expect to see an upwards trend return within the next year.” 

Despite a reduction in demand, the majority of Latvian timber companies have not only managed to retain their employees, but are also continuing to invest in development. This has promoted the diversification of the market and export stability. In 2024, Latvian timber products were exported to 107 countries with the main markets being the United Kingdom, Germany and Denmark. The forest industry overall is worth in excess of EUR 3.3 billion thus attesting to its significance for the Latvian economy. 

Development of high value-added products 

The growth of the timber industry is closely related to not only wood processing, but also sustainable forestry: forests take up half of the territory of Latvia, and modern technologies are increasingly being employed in the management of these forests. “Innovations in forestry don’t often make front-page news, but our greatest achievements lie within the details: savings of millimetres and seconds that add up to huge gains in efficiency and significant results in the long-term,” Mr Klauss explains. 

In recent years, increasing focus has been placed on manufacturing high value-added products. Company Latvijas Finieris is currently building a bio-based adhesive factory, CEWOOD has expanded its production of wood wool panels in Alūksne, while in Madona company Latvāņi is innovating the manufacturing of wooden windows for which they received the industry award Golden Pinecone. 

Kristaps Klauss refutes the myth that Latvia’s timber industry is concentrated on exporting rough sawn lumber: “In 2023, the timber industry ranked third among all manufacturing sectors in terms of value added per worker. Only pharmaceuticals and electronics ranked higher. We see room for further development by adding in more design and innovation in furniture production, making improvements in the processing of boards and planks. While round timber accounts for just 10% of exports, the goal is to bring it down to zero. We are gradually approaching that target by making investments, improving knowledge, and entering new markets.” 

Focusing on exports 

The LFIF emphasises that timber companies in Latvia are already successfully competing on the global market. For instance, company Nordic Homes has specialised in timber frame modular technologies and is focused on exporting their products, mostly to Germany, Iceland, Sweden, the Faroe Islands, and the United Kingdom.  

“Fluctuations in the price of raw materials and international supply chain interruptions remain among the main challenges for the sector. Automation and green energy solutions are expected to play an increasingly important role in the future of the industry. At the same time, timber is gaining popularity as a construction material, particularly in the Nordic countries and elsewhere in Europe, where requirements for sustainable construction are being raised. This is, of course, a very positive trend for our company. We expect that, in future, wood will be used more and more in the construction of multi-story and industrial buildings due to its ecological advantages and availability of modern technologies,” Linda Okmane, Sales Manager at Nordic Homes, explains. 

For example, timber frame modules manufactured by Nordic Homes are suited for construction of both private residences and multi-story buildings. In Sweden, the Latvian company has already delivered several dozens of row houses, as well as multi-story buildings. 

Specialisation in complex solutions driving growth 

ZAZA TIMBER has made significant investments in a facility to produce large glued laminated timber structures and is working on projects of various scale throughout Latvia and Europe. This Latvian group of companies has been involved in the construction of residential and office buildings, sports venues, bridges, concert halls, open-air stages, and various types of commercial buildings. Projects outside of Latvia account for about 60% of the group's earnings with its main export markets being the Nordic countries, although the group has also implemented projects in farther-away regions, including Australia and Morocco. The group attributes its rapid growth to a synergy of several areas of operation: manufacturing timber structures, construction and design services.  

“For the time being, the construction market in the Nordic countries, where timber is very popular, has slowed a bit, as demonstrated by the number of issued construction permits. However, ZAZA TIMBER does not manufacture standardised products, and we are able to find projects that are aligned with our profile. Our timber structures are large – reaching up to 32 metres in length, they may be curved or requiring complex, high-precision CNC (computer-controlled woodworking machinery) cutting, and, furthermore, they need to be ready-to-assemble at the construction site meaning that all steel mountings are installed and surfaces are treated at the production facility. In more complicated cases, other manufacturers will advise their clients to contact us. An advantage is also our ability to provide several services at once, such as design and production, production and assembly or all three together,” Āris Dreimanis, Marketing, Brand and Communications Manager at ZAZA TIMBER, explains. 

ZAZA TIMBER emphasises that timber structures allow for the application of diverse and innovative solutions, and timber frame buildings are becoming increasingly popular in Latvia and throughout Europe. “Wood buildings are experiencing a rebirth around the world as modern design science, manufacturing and construction technologies make it possible to build large, safe and beautiful buildings out of timber. This is also facilitated by the European Green Deal. In view of the growing demand, our group is making targeted investments in development and upgrading our factory to be able to carry out even bigger, more complex and time-consuming projects in future,” Māris Peilāns, Chair of the Board at ZAZA TIMBER, reveals. 

The ability to provide a full range of services is highly appreciated abroad 

The Latvian group CLT Profi consists of companies CLT Profi, Cross Timber Systems and Steel Profi. These companies specialise in the production of CLT (cross-laminated timber) products, designing multi-story and public buildings made from timber, delivery and assembly in export markets, and professional sheet metal processing services. At a smaller scale, the group also manufactures private homes. Exports account for approximately 90% of the group’s total turnover with the main markets being European Union member states, especially Spain, Denmark, the Netherlands, Belgium, and Germany. 

The group believes that the answer to lower activity in the construction sector is to increase production of high value-added products and expand provision of services related to these products in export markets. Trends in sustainable construction are driving up popularity of solid wood structures, and this is currently most evident in Northern and Central Europe where various state and other support instruments are available for timber buildings. Thus, even if total volumes in construction are going down, this reduction is seen the least in timber construction. 

“In these countries, solid wood construction is growing at a faster pace thanks to favourable regulations and a higher willingness of the market to use timber as the primary construction material. While the speed of development differs from country to country, there is an overall trend towards expanding the use of wood in construction. It is increasingly the material of choice in the construction of private residences and public buildings, as well as multi-story projects. Hybrid-timber construction solutions are also rapidly gaining ground: these involve the combination of CLT and other materials to attain higher efficiency and customisability. Demand for timber buildings is boosted by increasingly stringent requirements regarding reduction of CO₂ emissions in construction, as well as digitalisation allowing for precise modelling and optimisation of timber structures,” Andris Dlohi, Member of the Board of CLT Profi, explains. 

Over the course of the last ten years, CLT Profi and its subsidiaries have implemented around 800 construction projects throughout Europe: from private residences to schools, kindergartens, and multi-story apartment complexes. CLT material manufactured by the company has even been used in the construction of the Belgian polar research station in Antarctica. “I believe that our main competitive advantage is our full range of services: design, manufacturing and assembly,” Mr Dlohi says. 

Future challenges and development prospects for the sector will be further discussed by experts and industry leaders at the 2025 Forum for the Future of the Wood Industry on 12 February.