Russian Forest Industry during the pandemic

The Russian timber industry slowed down in 2019, but not as much as it could have decelerated in such circumstances. However, export earnings of the Russian timber industry in 2019 decreased by 8.36% totaling $12.27 billion. The output of the forest sector in ruble equivalent declined by only 0.73%, while the key products lost in value by 25-40%. The drop in prices was mitigated by the growth in shipments. Exports of sawn timber from Russia grew by 4.52%, of OSB – by 4.08%, plywood – plus 2.65%, wood pellets: +28%, etc.

The current situation as of the beginning of 2020 is characterized by an extreme uncertainty in terms of the demand for forest products, their consumption, and prices, which was conditioned by the ‘black swans’ in the form of COVID19 and slumping oil prices. At the moment, Russian timber enterprises are already benefiting from the strong ruble devaluation. The Russian currency collapsed in mid-March by 25% to the exchange rate of 80 rubles per US dollar. But the determinative impact on the global economy by the end of 2020 may result that of the coronavirus. The US economy may already find itself to be in recession. The main concern for Russian timber enterprises is, of course, the situation in China since it ensures 35% of foreign currency earnings from exports of Russian forest products. Operational macroeconomic data are causing concern: in Q1 2020, the production sector has collapsed by 13.5% YoY (while the growth of 1.5% was expected), retail sales have fallen by 20.5% (when they were forecast to rise by 0.8%), investments have fallen by 24.5% (the predicted growth: +2.8%).