RMK’s timber marketing strategy

1. Legal basis

2. General principles of timber sales

3. Roundwood sales

3.1.1. The roundwood (logs, pulpwood and firewood) harvested by RMK is sold profitably to companies that manufacture products with the longest possible lifespan and are capable of providing added value, using sales methods that contribute to stability of the timber market and continued attractiveness of investing in the timber industry.

3.1.2. Up to 85% of RMK’s annual roundwood volume is sold to processors on the basis of long-term contracts, while the rest is sold by other means. Depending on the level of local processing and the market situation, RMK may sell more than 85% of the estimated annual volume of the assortment type on the basis of long-term contracts.

3.1.3. For roundwood sales, negotiations are held once a year for the purpose of entry into long-term contracts, while other sales methods are used according to the market situation and sales needs.

3.1.4. When evaluating the bidders and when offering quantities of round timber to the bidders, the RMK takes into account the principle of cascading use ², according to which the RMK gives preference to the bidder that generates the highest added value from the corresponding type of raw material. This means, for example, that a supplier using pulpwood for energy production and for the production of firewood, pellets, wood briquettes, charcoal, etc. will only receive the corresponding raw material from the RMK if there is no possibility to sell the pulpwood to a company that is able to provide higher added value and whose product life cycle complies with the IPCC methodology M2 ³.

3.1.5. RMK has the right to set additional objectively assessed conditions in the course of negotiations, for example, in connection with environmental protection and the achievement of climate goals.

3.1.6. In the case of sales of roundwood at the agreed price, long-term contracts are generally entered into for a period of 5 years. The organiser of the sale may enter into long-term contracts with a term of more than five years if this is necessary on the basis of objective, non-discriminatory and transparent conditions in order to meet the climate goals of Estonia and/or the European Union or to ensure the stability of the timber market.

3.2.1. Fulfilment of purchase commitments to RMK over the last two years ⁴;

3.2.2. absence of tax arrears to the country of residence and arrears to RMK;

3.2.3. the application complies with the requirements published in the sale notice and the tenderer has submitted a written consent with the sales notice and of acceptance of the Standard Terms for the Contract of Sale of Timber of RMK published on the website www.rmk.ee.

3.3.1. the average gross monthly wage of the tenderer’s employees in the reference period is not less than 70% of the average gross monthly wage in the same period in the activity of timber processing and manufacture of wood and cork products, except furniture (based on data from Statistics Estonia on gross monthly wages in the activity of timber processing and manufacture of wood and cork products, except furniture, in the last published year);

3.3.2. the bidder is an enterprise that processes hardwood and/or softwood logs, which adds value to timber in such a way that the production at the bidder’s production facility in Estonia increases the value of the raw material and the life span of the manufactured product complies with the IPCC methodology M2 and thereby contributes to the achievement of Estonia’s and the European Union’s climate targets, contributes to the protection of the environment and the sustainable use of wood.

3.4.1. the average gross monthly wage of the tenderer’s employees in the reference period is not less than 70% of the average gross monthly wage in the same period in the activity of manufacture of paper and paper products (based on data from Statistics Estonia on gross monthly wages in the activity of manufacture of paper and paper products in the last published year);

3.4.2. the bidder is an enterprise that processes hardwood and/or softwood pulpwood, which adds value to timber in such a way that the production at the bidder’s production facility in Estonia increases the value of the raw material and the life span of the manufactured product complies with the IPCC methodology M2 and thereby contributes to the achievement of Estonia’s and the European Union’s climate targets, contributes to the protection of the environment and the sustainable use of wood.

3.5.1. the average gross monthly wage of the tenderer’s employees in the reference period is not less than 60% of the average gross monthly wage in the same period in the activity of timber processing and manufacture of wood and cork products, except furniture (based on data from Statistics Estonia on gross monthly wages in the activity of timber processing and manufacture of wood and cork products, except furniture, in the last published year);

3.5.2. the bidder is an enterprise that uses wood for the production of wood fuels (firewood, pellets, wood briquettes, charcoal, etc.) or for the production of energy or other products (wood-based panels, timber chemistry, etc.) and transforms wood in such way that the products made at the bidder’s production facility in Estonia increase the value of the raw material (the life span of the product manufactured by the bidder that uses firewood for the production of products other than wood fuel or energy must comply with IPCC Methodology M2) or the production of energy at the bidder’s production facility in Estonia results in increased security of energy supply and the bidder’s production is structured in such a way that it contributes to the achievement of Estonia’s and the European Union’s climate targets, contributes to the protection of the environment and the sustainable use of wood.

3.6.1. The new production unit shall provide information on the circumstances referred to in section 3.2 in accordance with its background and previous activities.

3.6.2. The new production unit shall submit a business plan setting out at least the following:

3.6.2.1. the type of production and technology of the planned new production unit, including the assortment, quality and quantity of wood intended to be used, and the assortment and volume of wood needed and the place of delivery where the wood is to be purchased via RMK on the basis of a long-term contract;

3.6.2.2. the carbon sequestration capacity of the products of the planned new production unit, the estimated annual volume of carbon emissions associated with the production process, and a description of the environmental impact of the new type of production, the added value created with the products and the connection with the achievement of Estonia’s climate goals. This information must be provided, taking into consideration that, by the time of entry into the long-term contract with RMK, the bidder must be an enterprise that processes hardwood and/or softwood pulp, which adds value to timber in such a way that the production at their production facility in Estonia increases the value of the raw material and the life span of the manufactured product complies with the IPCC methodology M2 and thereby contributes to the achievement of Estonia’s and the European Union’s climate targets, contributes to the protection of the environment and the sustainable use of wood;

3.6.2.3. a description of the stages and schedule of setting up the new production unit;

3.6.2.4. the possible location of the new production unit, the need for employees, including the experience of employees and their connection to the new production unit;

3.6.2.5. a description of the products of the new production unit, their areas of use, target markets and main customer groups, as well as the means of reaching customers and main target markets;

3.6.2.6. the financial plan for the development of the new production unit until the completion of the production unit, as well as the financial plan for the first five years of operation and the plan for its implementation. These must be accompanied by information on existing and/or planned financial guarantees, capital or other sources of financing. When preparing the financial plan, the bidder must take into consideration that the average gross monthly salary of their employees must be no less than 70% of the average gross monthly salary in the field of production of paper and paper products (based on Statistics Estonia’s data on the gross monthly salary in the field of production of paper and paper products in the last published year).

3.6.3. The bidder submits additional documents and data concerning the circumstances referred to in section 3.6.2. to RMK upon the latter’s request.

4. Woodchip sales

4.1.1. Woodchips produced by RMK (i.e. the shredded wood material obtained from woody biomass (residuals, unlimbed stems, brushwood, stumps) during the crushing process) are sold profitably primarily to companies involved in production of heat and/or electricity in Estonia.

4.1.2. For the sale of woodchips, procurements organised by local energy producers are taken part in, and where appropriate, public tenders are carried out.

4.3.1. Fulfilment of purchase commitments to RMK over the last two years ⁵ ;

4.3.2. absence of tax arrears to the country of residence and arrears to RMK.

5. Sale of firewood and cutting rights to standing crop to private consumers

5.2.1. For sale of 3-metre firewood to delivery locations with guaranteed access for timber lorries of up to 52 tonnes gross weight. Up to 50 m³ of firewood are sold per year to one private consumer.

5.2.2. For sale of cutting rights to standing crop for forest sanitary cutting and for track cutting. The right to cut a maximum of 30 m³ of standing crop is sold per year to one private consumer.

5.2.3. For sale of the right to harvest independently cutting residuals from felling sites.