Who will suffer from the ban on timber exports from Russia

The Ministry of Industry and Trade proposed a ban on the export of wood and certain types of wood products to unfriendly countries until the end of 2022, which imposed sanctions on Russia after the launch of a special military operation in Ukraine. The list of unfriendly ones includes in particular the United States, the countries of the European Union (EU), Canada and others. The corresponding draft government decree has been submitted to the Ministry of Economic Development and the Council of Ministers for approval. It should be approved soon.

According to the Ministry of Industry and Trade, export restrictions guarantee that the needs of the domestic market for raw materials will be met and will stimulate the increase of the depth of processing. In addition to raw wood, the ban will affect birch pulp (raw material for paper), fuel chips and plywood logs (raw material for plywood). Birch pulp and fuel shavings, according to the Ministry of Industry and Trade, are extremely important for the EU: deliveries from the Russian Federation represent 10-15% of the consumption of these materials from Finland. “It’s impossible to replace them <...> “The ban on the export of plywood logs under EU anti-dumping duties on final plywood from Russia will not allow European manufacturers to increase the capacity of their own companies to the detriment of Russian raw materials,” the statement said.

The government is also considering measures to support Russian timber processing, in particular logistical support for exporters and income tax breaks. The setting of domestic prices for chemical raw materials for wood-based panel manufacturers (urea, methanol, melamine) will be settled.

The EU depends more on the supply of Russian birch plywood – about 50% of consumption, says Igor Novoselov, a consultant at the forest industry analytics agency WhatWood. According to him, in 2021, about 1.4 million cubic meters were supplied by Russia. m in the amount of $ 900 million. The share of other Russian timber products in Europe is not so significant, adds Novoselov. Timber exports to Europe reach 5.4 million cubic meters. m per year, but this is less than 7% of the EU market. Wood pellets (granulated fuel) from Russia, according to WhatWood, represent about 8% of total EU consumption (2.2 million tonnes were supplied in 2021). “As for the US, the share of consumption of birch plywood from Russia is almost 100%,” adds Novoselov.

According to the FCS, in 2021 the EU accounted for about 42% of Russia ‘s raw timber exports in natural volumes (5.8 million cubic meters) and about a quarter in monetary terms ($ 259 million). Of all timber exports from Russia, the EU’s share is 14% in natural terms (2.5 million tonnes) and 23% in monetary terms ($ 1.4 billion). The EU accounted for more than 40% of plywood exports – 1.26 million cubic meters. m for $ 817 million In the US, Russia sold 0.57 million cubic meters. m plywood for $ 415.9 million.

Pulpwood from the Russian Federation goes mainly to Finland: in 2021, almost 90% of total exports (4.8 million cubic meters for $ 201.7 million) went there, according to Lesprom Analytics. Sweden accounted for 5.8% (312,400 cubic meters for $ 12.6 million), China for about 3% (164,100 cubic meters for $ 10.7 million). The main export of wood chips also went to Finland – 91.4% (2.9 million tonnes for $ 145.8 million). It was also exported to Japan (share in deliveries – 5%), Sweden (1.4%), Denmark (1.2%), China (0.1%).

In total, Russia exported $ 233 million worth of wood pulp in 2021, wood chips – $ 156.3 million, plywood – $ 1.9 billion.

Novoselov believes that the suspension of supplies from Russia may primarily affect the safety of Finnish raw materials. But Alexei Bogatyrev, CEO of Lesprom Network, draws attention to the fact that this country, in the context of sanctions against the Russian Federation, has banned the import of Russian raw materials. “Importers UPM and Stora Enso have said they will suspend supplies from Russia. “The only difference is that they are talking about a temporary suspension (without specifying the schedule), while the Ministry of Industry and Trade is talking about an export ban until the end of 2022”, the expert notes. He adds that Finland will be able to partially replace it with supplies from Germany, as well as increase domestic timber harvesting.

“Suspending the export of plywood logs, according to Bogatyrev, will also not be critical for the EU.” There are many plywood factories that consume Russian raw materials, but can switch to supplies from Germany and Sweden. ” explained.

The export ban, according to the expert, will primarily hit Russian plywood producers, for whom the US and EU markets are key. But even before the proposal of the Ministry of Industry and Trade, the Europeans themselves introduced this ban. “The voluntary international forest certification organizations FSC and PEFC have announced that they are suspending trade certificates for Russian products. “So, as of April 2022, these markets for Russia are actually closed, whether they are round wood, wood chips, plywood or timber,” said Bogatyrev.

Compensating for the loss of markets for Russian manufacturers through the measures proposed by the Ministry of Industry and Trade, according to Bogatyrev, is 100% impossible. He adds that now it is important to redirect supplies to other markets – the MENA countries (Middle East and North Africa) and Asia, especially China. There is a demand there, so the main issue is the organization of logistics, the expert notes. He recalled that the two largest container companies – European Maersk and Mediterranean Shipping Company – refused to cooperate with Russian companies. “There is a Chinese group COSCO, but it is seriously lacking in containers,” adds Bogatyrev.

Novoselov agrees that supply chains are “virtually destroyed”. A ban on lumber exports to the EU could negatively affect loggers in northwestern Russia, he warns. Consumption of birch pulp within the country is limited and it is unprofitable to transport this relatively cheap product to China, the expert noted.

The Segezha spokesman only noted that the company “respects the decisions made and continues to work”. Boris Frenkel, director of government relations at Sveza (one of Russia’s largest plywood producers), told Vedomosti that banning timber exports was a sensible measure. According to him, the company has repeatedly expressed the initiative to limit the export of veneer logs. “As for wood processing products – chips and sawdust, we strive for 100% use of these materials in our businesses as fuel for mini-CHP”, he added.

Vedomosti has sent inquiries to other major Russian companies in the industry.

Elena Filimonova participated in the preparation of the article

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