WhatWood: Pulpwood trade balance and logging cost structure in North-West Russia

Pulpwood balance in Vologda region is around +3.14 million m3, according to estimations of WhatWood analysts that were published in the special section of Russian Forest Industry Annual Review 2013. This is the highest rate among North-West Russia regions. Arkhangelsk and Leningrad regions, at the same time, are the most wood-deficit (-5.06 and -1.85 million m3 respectively).

In the North-Western federal district, more than 49 million m3 of roundwood is harvested every year, out of which an estimated 20 million m3 is pulpwood. Taking into account exports of raw wood, it is not enough to meet the demand of local pulp and paper industry. This imbalance is covered by deliveries from the nearby regions within North-West or from other federal districts. However, there is some free volume of sawdust, chips etc. on the market (375,000 m3 in Karelia, for instance).

According to calculations published in WhatWood’s Annual Review, the cheapest logging services (in the case of using harvester & forwarder complex) are provided by contractors of the Vologda region and the Komi Republic.

Stumpage price in Russia is quite low and is divided into two components, payment per wood volume and per area unit. Small pine logs in Vologda/Arkhangelsk region, under bark, with 50 km distance of removal, would cost 35.57 RUR (€0.7) per solid m3, in addition, payment for forest area in Vologda region would amount to 2140 RUR (€42.0) per hectare per year, in Arkhangelsk region – 2675 RUR (€52.6). Since 2009, stumpage rates both for volume and area have not changed, and the state has plans to lift it.

Delivered prices for logs are higher in regions located close to Russian-Finnish border, as loggers often prefer to export wood rather than sell it to local companies which sometimes have significant liquidity problems.

In the mid-term, fuel component of logging costs is likely to appreciate in line with inflation rates. Administrative costs will grow due to newly adopted Forest policy which introduced electronic trade control system and complicated logging documentation.

Booming biofuel industry may become one of the key price drivers for delivered logs, as pulp and paper, panel and biofuel industries will fight for biomass in the region. Bioenergy has recently started to attract state support, which is visible in Arkhangelsk region and Komi.

The special section on wood trade balance, logging cost structure, export duties, legislation and outlook on the wood harvesting industry in Russia was included into WhatWood’s Russian Forest Industry Annual Review 2013. The publication is available for order at the agency’s website.