Capital investments into Russian forest industry fell 17.4% in 1Q 2013

Volume of capital investments into Russian forest industry in the first quarter of the year shrank by 17.4% to RUR 20.5 billion.

In the pulp & paper sector, Irkutsk region was the leader. Here, large project of Ilim Group is being finalized, Big Bratsk with the total cost of RUR 18.7 billion. In 1Q 2013, total investments into Irkutsk region pulp & paper industry amounted to RUR 6.5 billion.

In the woodworking, RUR 4.2 billion were allocated in the first quarter, out of which one billion went to North-West and 1.5 billion to Far East. Khabarovsk region was the leading investor in 1Q with RUR 1.5 billion.

In the forestry & logging, capital investments amounted to RUR 4.7 billion, which is 67.4% lower than in Q1 2012. A year ago, most investments fell within Vologda region (RUR 12.5 billion).

Investments into Russian forest industry are mainly allocated into the projects which received top priority status from the government. This list was approved and is constantly expanded by the Ministry for industry and trade on the base of Regulation #419. Major criteria of getting on the top priority list are innovation character of the project, complexity and integrity of further processing and environmental friendliness. For those investors who plan projects costing over RUR 300 million there is priority for obtaining forestland in lease for 49 years without holding auctions, as well as twice-lowered payment rate for forestland lease. Investors also receive regional perks: postponement of tax payments, subsidies offsetting part of the interest rate payments at investment credits, allocation of industrial sites for mills.

As said earlier by deputy director of the Department of Forestry and Light Industry of Ministry for Industry and Trade Valery Prilipov, investments in 118 priority investment projects in the forestry industry are estimated at RUR 419 billion; as of 1 April, RUR 231 billion of investments were allocated into the priority projects (including RUR 8 billion in the first quarter of this year). Therefore, investments in priority investment projects in the Russian forest industry are already disbursed at 55%. This year five to seven new projects will be finalized.

One of the major problems of investment projects programme is low wood availability and lack of forest roads development plan. DOK Kalevala which started OSB production recently still has not managed to secure its raw material base in full scope. At the same time, there are regions where large volumes of hardwood and wood waste are not used – in particular, Volga and Urals. Due to this, many companies have recently started to regard this region as perspective base for wood-based panel projects.

Full list of top priority investment projects in the forest industry is available at the website of the Ministry for Industry and Trade.