China cuts timber prices

Given the escalating international situation, China has become the main trading partner of Russia and, in particular, of the Far East. Such an exclusive regime gives foreigners an advantage, but creates risks for the Russian Federation. Representatives of the timber industry, in a conversation with a correspondent of Oktagon.Vostok, said that Chinese importers began to reduce the price of timber, taking advantage of their position as monopolies in the market.

Wood, along with seafood, is one of Primorye ‘s main exports. And the lion’s portion of the products was shipped to countries in the Asia-Pacific region – China, South Korea, Japan. However, in 2022 the situation changed.

According to the territorial division of Rosselkhoznadzor, in April 2022, Russian businessmen exported more than 216 thousand cubic meters of timber from Primorye and Sakhalin. Timber deliveries to Japan have come to a complete halt due to sanctions on the Japanese side. A consignment was sent to the Republic of Korea, the volume of which is close to the symbolic – 192.6 cubic meters of timber products.

According to the department, the main volume of timber exports is recorded in China. The Chinese partners have taken a privileged position and, according to Octagon.Vostok interlocutors, have begun to take advantage of it.

“Foresters say China is cutting prices for the purchase of forest resources, they say, ‘God forbid we should at least make up for our costs,'” the president of Opora Rossii’s regional branch said in a statement. Vitaly Gumeniuk.

“The checkpoints have a large concentration of timber waiting to be shipped and are not yet ready to be offered at the price offered by China.”

Vitaly Gumeniuk
President of the Primorsky Regional Branch of “Opora Rossii”

The Primorsky Timber Manufacturers and Exporters Association (PALEX) does not fully confirm the information – they say it is too early to draw conclusions. But the current situation is called really worrying.

– I can not say that now they took the prices and reduced them. It’s too early to talk about anything. But the monopoly is really very bad. And there are no companies that do not take advantage of this. Also, do not forget the situation with the coronavirus: this may be the main thing that will affect prices. They do not sell this wood, many factories are located in China. “Of course, prices will fall,” the PALEX general manager told Oktagon.Vostok. Pavel Korchagin.

Timber traders call the current situation really worrying.Timber traders call the current situation really worrying.Photo: Yuri Smityuk / TASS

According to Korchagin, the timber traders were negotiating with India. These foreign partners are primarily interested in the so-called round timber (raw sawn tree trunk), the supply of which Russia has been trying to deny for many years. In addition, the delivery of goods by sea increases the complexity.

– It is also necessary to understand the economy, that the needs for raw materials are quite large, so there has not yet been a significant drop in prices. Despite the actions of Chinese businessmen, many factors affect the forest industry, – explains the head of the expert group of the Primorsky regional branch of Opora Rossii Alexander Ognevsky.

“Many forest companies have loans and in recent months, lending policy is far from ideal, unilaterally, banks have begun to impose interest rate hikes.”

Alexander Ognevsky |  head of the expert group of the Primorsky regional branch of Opora Rossii
Alexander Ognevsky
head of Opora Rossii Primorsky regional expert group

“This, of course, is very bad, an absolutely unbelievable burden in the context of a general decline in business,” he added.

It is also reminiscent of problems with checkpoints on the Russian-Chinese border. For example, at railway stations, wagons are supplied less than the quantity needed by entrepreneurs. The products stand for months waiting and wear out. There are still queues at car checkpoints.

Given all these problems and the potential reduction in resource costs, we can expect a reduction in forest industry revenues and, consequently, deductions in regional and federal budgets.

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