Russia has made more than one proposal to ban the export of logs, but for various reasons, it has never been implemented. Although this proposal, or even the current increase of 60% of tariffs, could be a heavy blow to the Russian timber industry, the implementation of this measure seems to take shape in 2022.
It is not only the local Russian timber companies that have been hit by the log export tariffs, but also a large number of Chinese timber mill companies. Over the years, a large number of Chinese businessmen from Northeast China, Shandong, and Singapore have set up timber factories in St. Petersburg, Siberia, and the Russian Far East. These companies made large profits due to cheap labor and abundant forest resources.
Russia will ban the export of softwood and valuable hardwood logs from Russia on January 1, 2022, and a legislative and regulatory framework to set strict barriers to uncontrolled exports of unprocessed timber will also be implemented.
In addition, a preferential loan program has been implemented from January 1, 2021 to promote the modern development of the wood processing industry and promote the upgrading of the Russian wood processing industry.
Russian Federation Council Speaker, Valentina Matviyenko, proposed to completely ban the export of round logs during the enactment of the new Forest Law at the beginning of last year, but this idea did not receive the support of the Russian government. In November 2017, Russian Minister of Natural Resources Dmitry Kobylkin suggested to stop exporting roundwood timber to China (China accounts for 70% of Russia’s timber supply).
At present, Russia imposes export tariffs on round wood, and the tax rate has risen to 80% after exceeding the specified quota.
After Russia joined the World Trade Organization (WTO) in 2012, it has implemented an export quota policy. The quota is only used by log processors. Within this framework, tariffs have been reduced to 6.5%.
After exceeding the quota, the tax rate will rise to 80% by 2021. Therefore, according to the data, the amount of timber harvested in ten years has increased by 27%, reaching 212.4 million cubic meters in 2019, while the volume of log exports has dropped three times since 2006 and fell to 19.4 million cubic meters in 2019. Russian timber exports to China have fallen from 23 million to 13 million cubic meters.
In Russia’s Far East, timber exports are subject to the strictest restrictions. At the beginning of this year, members of the Dalexportles Association (which accounted for 52% of timber harvested in the Far Eastern Federal District and 80% of timber processing) proposed to suspend the increase in export tariffs because of the massive decline in timber exports.
Tariffs increased by nearly 28% in 2019. According to the association, the export tax on round logs of conifers from the Far East should be 6.5%.
In Siberia, the Governor of Tomsk Region requested that timber exports to China should not be restricted. Because of the rapid growth of China’s construction and furniture industries, there is an extremely high demand for wood products. If exports are completely banned, Russia will lose its vast Asian market and transfer to other countries.
There are more than 600 wood processing companies in the Tomsk region, and most of them have the participation of Chinese businessmen. Where will they go after the ban is implemented?
Wood industry products accounted for 50.2% of Tomsk Oblast’s total exports. Since 2015, the export volume of unprocessed timber has decreased from 51,400 cubic meters to 5,800 cubic meters per year. The main exporter of products is Uzbekistan, followed by China.
This will cause a fatal blow to Russian companies that still export whole wood logs. This is forcing small and micro wood companies to grow bigger and transform, and the fittest will survive.
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