1H 2021 timber transportation market review: Growth due to increased demand for forest and pulp & paper produce

According to TransLes analytics center, during 1H 2021 railway timber transportation experienced growth due to an increase in demand for timber and pulp & paper products both in external and domestic markets. As a result, the total volume of timber and sawn timber loading, including container transportation, increased by 3% over the specified period to 22.6 million tons year-on-year.

The main growth driver in domestic traffic, which amounted to 6% to 10.6 million tons, was the transportation of unprocessed wood for the needs of Russian processing companies: 10.2 million tons were transported, an increase of 7% year-on-year, including transportation of sawlogs (+4% to 2.9 million tons), veneer logs (+24% to 2 million tons, timber for the production of wood-based panels (+41% to 1.4 million tons), pulpwood – decreased by 6% to 3.7 million tons due to an increase in the volume of water transportation.

The growth was due to an increase in demand of Russian companies for raw materials for the production of finished products. Accordingly, for the specified period, year-on-year production increased for: sawn timber (+3%), plywood (+15%), particleboard (+30%), fiberboard (+26%).

These statistics confirm the high market conditions in 1H 2021, the significant growth dynamics, among other things, is due to the effect of the low base of the last year. A positive role is played by the results of the implementation of the state policy to increase the production of products with a high degree of processing and the development of non-resource exports.

Export railway transportation of timber and sawn timber in 1H 2021 remained almost at the level of the previous year and amounted to 12 million tons. The eastern direction transportation had the main impact on export volumes: restrictions on land border crossings due to additional sanitary control by the PRC and competition with other types of cargo for the throughput of the railway infrastructure did not allow the Russian export potential to be fully realized. Consignors were in search of alternative market outlets and directions of transportation, which led to a redistribution of cargo flows. Thus, supplies to the ports of the Far East increased by 28% and amounted to 1 million tons.

In 1H 2021, 7.1 million tons of sawn timber were transported, which is 6% less than the indicators of the same period last year. One of the objective factors that influenced the decrease in volumes was the shortage of foreign labor at the sawn timber enterprises.
Despite the fact that round timber shipments grew by 13% to 4.9 million tonnes, sawn timber exports retained their dominant position: its exported volume is almost half as more than the volume of exported unprocessed timber. Sawn timber main recipients were China (2.6 million tons, an increase of 18%) and Finland (1.9 million tons, an increase of 6% year-on-year).

In H1 2021 good conditions merged both for the Russian and the world markets, which was characterized by high demand and price levels for timber and pulp & paper products. In short term, the positive demand dynamics for timber industry products in the world will continue, but a price correction is possible. One of the factors will be the intensification of competition for the supply of sawn timber to the United States against the backdrop of a strong market environment and the rapid saturation of this market.
Another factor that may have an impact on the market will be the introduction of anti-dumping duties for Russian plywood producers by the European Union. They began to operate in mid-June and now account for 15.9% of the cost per cubic meter of product. Until the end of this year, the question of the effect of duties for the next three years will be decided.

Cross-country competition continues to intensify in the supply of raw and sawn timber to China, which remains the world’s largest importer. According to Chinese customs statistics, with an overall 13% increase in timber supplies to China, Russia’s share fell by 6% to 22%. This is mainly due to the revision of the export policy for softwood unprocessed and roughly processed timber. China replaces the volumes not coming from Russia with other exporting countries. Thus, supplies from New Zealand and Germany increased by 6% to 22% and 15%, respectively.