Russian Forest Industry Review 2017-2018

In 2017, the Russian economy came out from a two-year recession. In 2016, the country’s GDP fell by 0.2%, and in 2015, it fell by 2.5% after slowing the growth to 0.7% in 2014. However, this is below the original expectations: initially, the Ministry of Economic Development forecast that the country’s economy will grow by 2% in 2017, the Central Bank expected a growth from 1.7 to 2.2%. In the second quarter of 2018, GDP growth was 1.8%, and in April-May 2018, the economy “accelerated” to 2.2%.

In addition to the exit from recession in 2017, the minimum inflation in the history of the country was recorded at 2.5%. However, this figure does not apply to the forestry sector of the economy. The timber industry costs for wood raw materials increased by 20-30% according only to Rosstat’s official data (the price for softwood sawlogs on the average increased by 35% YoY to 2,100 rubles/m3 excluding VAT, and the price for birch veneer logs increased by 30% to 2,300 rubles/m3, excluding VAT).

Unfavorable weather worsened the situation with wood raw material supply in a number of regions of the European part of Russia in the second and third quarters of 2017. Manufacturers of wood-based panels encountered a price increase for the chemical components during production: the prices for melamine film, resins and paper increased by 15% on the average over the year. The delivery cost for raw materials and transportation of finished products increased by 15-20%.

In such conditions, the woodworking industry in Russia remained one of the most dynamically growing sectors of the economy: index of industrial activity for woodworking in the second quarter of 2018 grew by 11% and in June 2018 by 15%, this is more than any other processing industry in Russia.

In contrast to a decline in the rate of housing construction in Russia (-0.7% as stated by the Ministry of Construction and -2.1% by Rosstat in 2017) and a reduction in production in the furniture industry, the timber industry has again benefited from favorable conditions in export markets. The weakening of the Russian ruble against the US dollar (-13.2% YoY in 2017) was offset by high prices for forest products.

Prices for commodities and exchange goods on world markets have peaked in the last ten years. For example, in May 2018, the capitalization of North American timber industries, Canfor and West Fraser, against the background of the regular “super cycle” of high prices, reached a historical peak for more than 20 years. The dynamics of export prices for Russian sawn timber, plywood, pellets, wood pulp, paper and paperboard from the beginning of 2017 was also positive. Prices for Russian sawn softwood lumber in China reached a peak at the end of 2017. The demand for sawn timber in China still exceeds the supply. Against this background, prices for Russian spruce sawn timber from the Northwest reached a level of $285/m3 (1-4 SF 30×125/150, central boards, Shanghai port) in November 2017. Prices for European spruce sawn timber reached $295/m3. A moderately growing price trend persisted in the first half of 2018 with minor fluctuations, but it provided a more restrained basis for further growth.

Russian Forest Industry Review 2017-2018

The review presents a detailed analysis of the timber industry sectors and its major trends; key indicators of industry performance (dynamics of output, consumption, imports, exports, prices in terms of regions and enterprises), as well as comments of market players.

• The state of the Russian economy and its influence on forestry and forest industry of Russia, the positioning on the global market;
• Changes in the forest legislation of the Russian Federation;
• Analysis of the annual dynamics of the main forest product indicators (output, imports, exports, prices);
• Capacity changes in the processing industry;
• Approved and launched priority investment projects in the forest industry;
• The main industry development trends;
• Production in terms of the following products: roundwood, sawn timber, wood-based panels (particleboard, OSB, fibreboard, MDF, plywood), pulp, paper, cardboard, packaging, biofuels; dynamics in terms of regions;
• Overview of the largest producers of forest products;
• Key events in the Russian forest sector.

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