50 insights from Russian Wood & Timber 2013 conference

WhatWood News & Analytics collected a range of ideas and thoughts expressed at Russian Wood & Timber 2013 conference held on March 19-21 in Moscow – from analytic outlooks to expert opinions and ideas to boost profitability of forest industry enterprises.

Gerry van Leuween, Wood Markets, Vice-President, analyst (Canada):

“I’ve got some good news for you. American market is on the rise, lumber and OSB prices on the futures market are the highest since 2005, and the demand is forecast to remain high during the next three to four years as North American housing industry recovers from 2008-2011 depression. Load of capacities grew from 55% to 85%. Now why is this good news for Russia? Due to this rapid growth of demand and prices Chinese companies start to seek wood in Russia’s Siberia and Far East. Moreover, European companies also resumed to sell actively to the US and Japan, as before the crisis, so there is some room on European market for Western Russian mills also”.

“Chinese market is very chaotic, it resembles Russian a little bit. Almost the only thing the Chinese look at when buying is low price. Sawmills in China are very small, distribution is absolutely unorganized, companies often find clients through acquaintances. Standard solutions simply don’t work there. Home Depot actually closed all stores and left China. I am impressed, however, at how the Chinese are able to arrange sales through the whole delivery chain starting from production”.

Maksim Pisarev, Investlesprom, Commercial Director:

“We sold Kama pulpmill in order to focus on core products: paper sacks, plywood, and lumber as well as on logging. It was a tough decision, but LWC paper turned out to be a complicated market and technologically difficult product which requires sustaining extra quality constantly”.

“In Europe and North Africa there are some problems on paper sacks market, that’s why Segezha pulpmill also has troubles now. Generally, too many producers of paper sacks and lumber in Russia are oriented at politically unstable North African market, which is not good”.

Petteri Pihlajamaki, Poyry Management Consulting, Director (Finland):

“Swedish, Finnish and German mills raise prices now just to survive”.

“Domestic consumption will drive growth of OSB market in Russia and China. There will be also strong growth of particleboard sector in Russia and Eastern Europe”.

Pavel Starkov, MM-Holz Efimovskij, Sales Director:

“In the recent five years, Russia raised considerably home consumption and export to nearby CIS countries like Azerbaijan, Uzbekistan and Kazakhstan. Moreover, there is shift towards high value-added products in CIS countries”.

“Estonia enters woodworking market quite aggresively, Latvia and Lithuania are selling pallets to Europe. Russia is able to win this market niche in woodworking occupied by Baltic countries now”.

“In selling forest products distance is not that important as optimized logistics. In St. Petersburg port, for instance, there is misbalance in export and import, so you can get advantageous freight rates”.

“Lumber sales margin in China is competitive to that in Europe”.

“Innovations should be found not only in production, but in sales too. UPM sold planed products directly to DIY networks. If the market seems wild to you, find another one!”.

Arzum Arzumanyan, National Association of Door Industry, President:

“Major risks of WTO accession for our industry are poor capitalization of the Russian door industry and gap in technologies and standards”.

“EBITDA of the door industry last year was twice as low as in 2008. In general economy indicators, we are at the level of 2008, but the average product price was still lower. Economy-class products are popular on the market”.

“Global growth of the door industry this year will be around 0%, by 2016 it will reach 15%. In Russia, with annual GDP growth at 5-7% the door market is able to increment by 10-15%”.

“Russian-made doors make up to 90% of the home market”.

Eduard Akim, Professor at the University for Plant Polymers (St. Petersburg):

“In order to compete with other markets, Russia has to develop housing construction and new products like H-beams. The forest industry image needs changes and promotion of wooden housing and materials like LVL and composites”.

“I don’t agree with the thought that Russian forest industry is more corrupted than those in other countries”.

“Angara Paper project should be regarded as biorefinery in perspective, and it’s better to turn to the Russian market there”.

Semyon Goglev, Investlesprom, Glulam and Housing Department, Director:

“Poor transport network and infrastructure development hinder massive individual housing construction in Russia. Payable demand for wooden housing hangs back from supply. We hope that in New Moscow [new areas added to the city in 2012 – ed.] there will be economy class housing. This is a vast source for home market development”.

“We certified our products for the Russian, European and Japanese market at the same time, as during the crisis Russian market started to fall down”.

“Russian housing market is actually growing, but you have to understand that the starting point is nil”.

“WTO accession will unlikely affect us, we are competing even on the European market. Participation of Western market players will even help growing popularity of LVL”.

Timo Karjalainen, Professor, Forestry & Agriculture, METLA University (Finland):

“In order to develop intensive forest management you have to expand energy use of wood”.

Oleg Konyushatov, Lesnaya Sertifikatsiya LLC, Executive Director:

“Wood certification boosts sales prices only in terms of active marketing programs; its absence, however, decreases both sales volumes and prices”.

Igor Ponomarenko, Honeywell, Sales Director:

“Companies may boost profitability with installing machines converting wood waste into second-generation, liquid biofuels. We are implementing a pilot project of turning biomass into engine oil”.

Elena Vavilova, Minister for Natural Resources and Forest Industry of Krasnoyarsk region:

“We do not lack specialists, the problem is how to attract them to such remote regions. They have to work in shifts”.

“In the perspective, WTO accession will drive Russian companies to raise competitiveness”.

Mikhail Azanov, Angara Paper, CEO:

“Our vision of the industry in the region is completely different from what Minister Elena Vavilova says. Industry development in Krasnoyask region is almost exclusively limited to sawmilling with small further processing sector”.

“We will possibly shift third stage of the project, which is TMM and coated board, to Baikal pulpmill site or Ust-Kut”.

“All pre-development works on the site are finished, as the snow melts, construction will begin”.

“Ecology students to open online conference room at our company, where Japanese, Swedish, and Russian specialists will answer questions”.

“Biorefinery option is obvious, but the Chinese market is more interesting for us than the Russian one in this aspect”.

“On the market, Angara Paper will replace dissolving pulp capacities of the closing Baikal pulpmill”.

Ali Kilic, Kastamonu, Deputy Director (Turkey):

“Apart from the site in Tatarstan, we also bought some land in Krasnodar and search for a site near Moscow, maybe Tula or Kaluga region”.

Aleksandr Churkin, Vologodskie Lesopromyshlenniki, CEO:

“There is steady demand for softwood logs and peeler logs, especially in Europe”.

Lukas Casey, Principal Investment Officer, International Finance Corporation (USA):

“Investing in Russia, you should have patience and long-term perspectives”.

“When deciding on investments into projects, banks now look at the infrastructure, proximity to sales markets, production costs and scope of possible profits”.

Aleksandr Totsky, UPM, Plywood Sales Russia Director:

“Plywood prodiction in Russia exceeds demand twice: in 2012, three million cubic meters of plywood were made, with half of this volume exported. In the middle term, plywood consumption in Russia will grow”.

“Capacities oriented at old square-format plywood are now shifting to large-sized plywood for export”.

Evgeny Tyurin, Head of Forest Industry, Graphic and Packaging committee, Chamber for Industry and Commerce:

“The forest industry should focus on new products. In Belgorod region, there is a nanocellulose plant which processes sugarbeet wastes”.

“The growing points of Russian forest industry in the coming years will be intergrated forest complexes and new biomass products”.

Franz Marx, International Paper Russia, Director:

“Now, after WTO accession there will be some short-term fight on the market, but in the long-term, WTO will be useful for the industry”.

Evgeny Schwarz, WWF Russia, Nature Conservation Director:

“The ones who win are those who act on the local level with bearing in mind global trends”.

Aleksandr Gibezh, First Vice-Minister for Industry and Transport Development, Komi Republic:

“Komi lacks low-grade wood processing capacities”.

Maksim Gulko, Nature Use Department of Ministry for Russian Far East development, Deputy Director:

“All Far Eastern banks believe that the forest industry is prone to serious risks due to unclear state policy”.

Boris Tarasyuk, Investlesprom, Deputy Director, Forest Procurement:

“Centralization of forest procurement due to large delivery volumes allows to cut final price by 15%”.

Results of interactive polling among conference participants:

To raise profits, companies need intensive forest management and making new products upon market needs.

Tatarstan, Krasnoyarsk region and Komi are the best regions in terms of investment climate.

75% of the participants are convinced that large investment projects in the industry will be implemented, but not in full.

Most poll participants are not ready to invest into the forest industry on public-private partnership basis, as they have never seen effective work of this mechаnism in practice.

WhatWood News & Analytics was the information partner of Adam Smith Russian Wood & Timber 2013 conference and did a live Twitter broadcast in Russian and English.