In Russia, from January 1, 2022, a complete ban will be introduced on the export of unprocessed or roughly processed softwood and valuable hardwood species from the country.
Konstantin Lashkevich, the CEO of Russia’s forestry giant RFP Group sharply criticized the Russian ban on the export of roundwood.
According to Lashkevich, the ban on the export of roundwood, which comes into force in January 2022, is a disaster for both RFP Group and other processing enterprises of Russia’s Far Eastern Federal District.
The timber merchant said that there are no ready-made facilities in the region for processing low-grade raw materials. Including there is no pulp and paper industry, which usually utilizes pulp and low-grade wood. And to create such capacities in a year, in his opinion, is unrealistic.
Moreover, it is simply unprofitable – projects with a payback period of 10 to 20 years are deliberately unprofitable at the existing lending rates.
In a recent interview, he proposed to solve the problem with forests in the Far East through their privatization. According to the businessman, the sale of two or three percent of the country’s forest area would be enough to enable intensive forestry on these sites. Otherwise, he pointed out, the amount of high-quality, suitable for processing wood will inevitably fall.
4,000 Russian companies will be affected by the timber export ban
The export of unprocessed and roughly processed softwood and hardwood timber ban will affect the activities of about 4,000 companies that, according to the LesEGAIS system, were engaged in the export of timber in 2020.
According to the Federal Customs Service of Russia, in 2020, the volume of exports of unprocessed timber in Russia as a whole amounted to 15.5 million m3, or 7.2% of the total volume of harvested timber.
Regions with the largest export volumes of round timber: Khabarovsk Territory (2.7 million m3), Vologda Region (2.2 million m3), Irkutsk Region (1.9 million m3), Primorsky Territory (1.6 million m3), Leningrad Region (1.0 million m3), Krasnoyarsk Territory (0.8 million m3), Karelia (0.7 million m3). These entities account for 70% of the country’s total unprocessed timber exports.
In value terms, the maximum share of untreated wood in the total volume of exports of wood and wood products falls on the Far East – 42%. For comparison, the average for Russia is 12%. Therefore, in order to minimize possible risks from the ban on the export of unprocessed timber and increase processing capacity, a number of measures are being worked out in relation to the Far Eastern Federal District.
The Ministry of Economic Development of Russia and the Ministry for the Development of the Russian Far East are developing “road maps” to stimulate deep wood processing in the Far East. And the Ministry of Natural Resources of Russia and the Ministry of Industry and Trade of Russia, with the participation of a number of federal executive authorities, have prepared a draft action plan for the implementation of the Strategy for the Development of the Forestry Complex until 2030, which contains a set of measures for the development of the Far Eastern forestry complex.
Who will benefit from the roundwood export ban
One of the largest Russian timber companies, Segezha Group, positively assesses the export ban. Nikolai Ivanov, managing director for the implementation of state programs and forestry policy of the company, explained to Russian economic daily Kommersant that support for timber processing is necessary, and the shortage of raw materials, except for hardwood pulpwood, is obvious. Although Segezha is 70% self-sufficient in raw materials, the company admits that the introduction of a ban on exports may expand the possibilities of purchasing them on the side.
At the same time, Nikolai Ivanov calls for a clear definition of the concept of “roughly processed wood”: it is important that the export of packaged kiln-dried sawn timber not to be banned. He also expresses concerns about the too short transition period: “I believe that not all market players will have time to reorganize. This is especially true for the Far East, small and medium-sized businesses. “
The Ilim group notes that the steps to put things in order in the forestry sector look “certainly right”. They also believe that the ban on the export of unprocessed timber will increase the amount of available raw materials for domestic timber industry producers.
However, small companies will not be able to connect to processing so quickly, so the ban will only play into the hands of large players, experts warn. And then only if the state helps them to increase the volume of processing. In addition, there are entire city-forming enterprises that run the risk of being left without income and investment.
A ban on the export of softwood pulpwood will lead to an overstocking of the market and a decrease in its value. In addition, the situation will provoke a decline in logging, a redistribution of production costs to other assortments (sawn timber, plywood logs) and an increase in their cost, which will lead to an increase in production costs, a decrease in the efficiency and competitiveness of domestic sawmills, woodworking, plywood enterprises. Similar negative consequences, for example, arose after the introduction of a ban on the export of plywood logs in 2019.
“The fight against uncontrolled export of wood raw materials abroad in Russia has been going on for more than 10 years,” recalls Aleksey Kruptsov, deputy general director of OOO PKP “Titan” for production. According to the expert, the logging enterprises of the North-West have been working for the domestic market for a long time, there is practically no export of roundwood outside the country in the North-West Federal District.
Many players in the timber industry consider a complete ban on the export of round timber a dangerous step that could negatively affect the operation of the industry, especially in the Far East. Local companies are already complaining about negative business margins due to restrictive export duties on unprocessed timber.
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