RMK’s strategy for timber marketing

Objective

To sell all timber cut from the state forest managed by RMK to enterprises who are able to provide as much added value as possible by using selling techniques, which contribute to the stability of the timber market and the attractiveness of continuous investment.

Sub-objectives

  • To sell approximately 85% of the annual volume of timber with a negotiated price on the basis of a long-term contract and 15% by using other selling techniques (public auction, pre-negotiated offer and sale with a negotiated price, except for a long-term contract);
  • To sell the part of the wooden biomass obtained from forest management as wood chips, which cannot be marketed as timber or where it is not reasonable to.

General principles of sale

  • The sale of timber has to be clear, uniform and transparent.
  • The information about the offered timber resource has to be accessible and up-to-date.
  • The annual volume of the timber received from the state forest is forecast based on the standard of RMK's stacked timber and logs according to the assortments for the next year annually in October. The annual volume of wood chips is forecast according to the logging sites suitable for procurement and the existence of planned forest improvement sites.
  • All persons interested in the purchase of timber who are correctly fulfilling the obligations to the country have the opportunity to participate in the tenders organised by RMK.
  • RMK delivers the timber to the delivery address of a customer.
  • Timber sold with a negotiated price according to the long-term contract to one bidder up to 50% of the annual volume of the assortment.
  • If timber is sold with a negotiated price, a long-term contract is concluded with a term of at least 5 years.

Target groups

 a) Legal persons to whom RMK sells timber throughout the year, including: 
  • Clients with a long-term contract (approximately 100 enterprises) – concluded with a duration of over 1 year
  • Clients with a short-term contract (approximately 150 enterprises) – concluded with a duration of up to 1 year
  • Clients of wood chips (approximately 15 enterprises) – contracts concluded with a duration of up to 1 year and over 1 year
 b) Natural persons to whom RMK sells timber on the basis of a purchase order – buyers of a small amount of firewood and timber. 

Legal basis of a sale

The sale of timber takes place according to the Forest Act and by Decree No. 1 of 4th January 2007 by the Government of the Republic of Estonia "Procedure for the Sale of Cutting Rights to Standing Crop of State Forest and of Timber". The organisation of timber sales takes place according to the "Regulations of the State Forest Management Centre for the sale of timber on the basis of long-term contracts". The organisation of timber sales takes place according to the " approved by the directive of the chairman of the management board of RMK. In the case of the sale of wood chips, the provisions set in the procedure for the sale of cutting rights to standing crop of state forest and of timber are applied and there is participation in local procurements for heat and/or electricity producers.  

The general provisions for the qualification of bidders:

  • The fulfilment of purchase obligations in front of RMK during the last three years 1;
  • No tax debts to the host country (enterprises not registered in Estonia have to submit certification of a competent authority of their host country);
  • The application meets the requirements of the substantive requirements published in the sales notice and the participant has submitted written consent with the sales notice and about the Standard Terms for the Contract of Sale of Timber of RMK published on the homepage www.rmk.ee.

The additional requirements for the qualification of bidders on the basis of long-term contracts with a negotiated price:

  • The average gross monthly salary of the employees of the bidders is no less than 70% of the average gross monthly salary during the comparative period of the same time frame in the area of timber processing or paper and paper products (andmebaas.stat.ee table PA5241, the comparative period is the last published year).

Sawlog

  • An enterprise who is processing or establishing processing of deciduous and/or coniferous logs in a country of the European Economic Area (EEA) and Switzerland or their subsidiary or parent company who owns at least 50% of the share or stocks of the enterprises processing the logs.

Pulpwood

  • An enterprise who is processing or establishing processing of deciduous and/or coniferous pulpwood in a country of the European Economic Area (EEA) and Switzerland or their subsidiary or parent company, or also an enterprise whose areas of activity, according to the commercial register or the report of the financial year, include the purchase, sale and mediation of timber (timber trading), and the proportion of this constitutes at least 50% of the turnover.

Firewood

  • An enterprise who is using or establishing processing of firewood in a country of the European Economic Area (EEA) or in Switzerland for the production of wooden fuels (chopped wood, pellet, wood briquettes, charcoal, etc.), energy or another type of production (wooden board, etc.), or their subsidiary or parent company, or also an enterprise whose areas of activity, according to the commercial register or the report of the financial year, include the purchase, sale and mediation of timber (timber trading), and the proportion of this constitutes at least 50% of the turnover.

The sale of wood chips

In order to use the potential of the timber, wood chips are sold additionally. Wood chips are bulk commodity produced during the destruction of wooden biomass (logging residues, stems, shrub, stumps, round wood) crushed with a device (chipper).

Wood chips are sold at a price that at least covers the procurement, chopping and transportation costs of the raw materials. In the forecast of the annual volume of wood chips, the proximity of the potential consumption locations are considered in addition to places suitable for the procurement of raw materials. The volume of the wood chips sold in a year is approximately 400 GWh i.e. approximately 180 thousand m³.  

Activities

Negotiations are organised for the conclusion of new long-term contracts for the sale of timber once a year in the second half, the public auctions are generally once a quarter, and other selling techniques are used according to the market situation and needs.

In order to sell wood chips, procurements are held by energy producers before the start of the heating period and if necessary, public auctions are also held.

The amount of timber to be sold is planned according to the development plan of RMK.

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1 It is applied for enterprises with whom there have been prior contracts concluded and the fulfilment of which the parties have not withdrawn from or cancelled unilaterally before the end of the term, regardless of the reason. In the case of withdrawal or cancellation, the reasons for withdrawal or cancellation will be taken into account.