Russian plywood and panel industry in 2015-2016: financial status and capacities
We publish the abstracts of WhatWood’s chief editor Kirill Baranov presentation at the conference “Panel industry of Russia”, which was held by the editorial board of the journal LesPromInform in October 2016 at Lesdrevmash Expo.
During this time some of the realities of the market have changed, and we have corrected and supplemented the information in the article.
The plywood industry in Russia today is presented by 65 factories with projected capacity of 4 million m3. They are working with a 85-90% load (3.6 million m3 at the end of 2015). Nearly all of this volume is birch plywood, except for the mill of Ilim Timber in the Irkutsk region and presently stopped Yenisei FK, which has been recently purchased by an investor for re-launch.
The domestic Russian market buys approximately 1.5 million m3, of which, according to our estimates, 1.2 million m3 is white (non-laminated) plywood (including 500,000 m3 in the Moscow region, 200,000 m3 in the St. Petersburg region).
The reduction in domestic demand and weak rouble led to the fact that exports increased markedly in 2015-2016. The most important export markets are the USA, Egypt (a major consumer of square plywood), Germany (imports large-format laminated plywood), and Turkey.
Russian plywood has noticeable effect on the pricing in Europe. Scandinavian and Baltic factories have to cut shifts, seek funds for upgrades and lower the prices to compete with products from Russia.
Plywood industry is the most profitable in woodworking, 23% of the total revenue of the timber industry in 2015 fell within plywood. Its revenue for full-year 2015 amounted to 96.6 billion rubles (+10% yoy), while the average annual growth rate (CAGR) in 2009-2015 was 8%. The plywood industry also enjoys high profit marginality: EBITDA/margin ratio stays around 40%.
Favourable state of the market induces the companies to construct new lines. Segezha Group intends to build a new line on the basis of Vyatka plywood mill in Kirov and another one in Vologda region. Ustyeles doubled production in early 2017, also in the Vologda region. Polish companies Barlinek and Paged are regarding projects of plywood mills in Russia.
The production of MDF, HDF, and hardboard in Russia is presented by 26 enterprises, including 14 modern dry-process plants. The output is constantly growing with new capacities: Kastamonu has launched the second phase able to produce 485,000 m3 of thin MDF, Egger has opened a 350,000 m3 line at its factory in the Smolensk region. Roskitinvest mill in Tomsk region, Siberia (Russian-Chinese JV) is running in test mode, supplying panels in Russia and Uzbekistan and is preparing for the official opening in the summer of 2017. Igorevsky DOK (part of the group Russky Laminat) also intends to start production in 2017. The Kronospan group has announced plans to start production of MDF in Ufa after the installation of OSB equipment there.
The demand for MDF is closely dependent on the state of the furniture market, and the difficulties in the Russian economy directly affect the situation in the industry. With the launch of new capacities, competition has significantly increased, and manufacturers have cut prices in a fight for the client.
However, in the future, MDF can partially replace particleboard in the market and totally displace the old hardboard (wet-process Soviet capacities), and favourable rouble rate gives the opportunity to supply products for export: Kastamonu found consumers in China, CIS, Iran and the Balkan Peninsula, Zavod MDF – in Iran, Egger group increased deliveries of laminated chipboard, flooring and MDF in Eastern Europe and the Baltic States.
The OSB market in Russia is also gradually becoming saturated with capacities. Within just a few years, Russia has established its own production of this panel grade, which radically altered trade flows and almost brought to halt imports of OSB. Large manufacturers are DOK Kalevala and Kronospan Egorievsk, and it is also reasonable to add to the list Kronospan factory in Belarusian Mogilyov with a capacity of 405,000 m3, which sells products to the Russian market in rouble terms and within the borders of Customs Union, and therefore, significantly influences the situation. At the beginning of 2017, production of OSB was also launched at the mill Talion Terra in the Tver region.
Among the big announcements in this segment are possible installation of a second line at DOK Kalevala and the project of Kronospan in Ufa.
New data and fresh look at the Russian market of plywood, MDF, OSB, and starting from this year also particleboard, will be available in March 2017 in the coming updates of industry reports prepared by WhatWood agency.