Russian timber harvesting industry: how probable is a decline in timber harvesting over the next few months?

The Russian harvesting industry closed the year 2021 with good performance. The harvesting volume grew by 4%, up to 225 million m³. This is +8 million m³ compared to 2020. Such a growth is explained by the fact that after the pandemic year 2020, when plants suspended operations because of coronavirus-related restrictions and the output reduced, the demand for construction products recovered completely in 2021. Harvesting volumes grew accordingly.

In 2021, harvesting activity also manifested in a greater number of signed or re-issued forest areas lease contracts. In 2021, the AAC volume under signed or re-issued forest areas lease contracts was almost 2 million m³ higher than in 2020, reaching 11.6 million m³.
Contracts for the greatest volume of AAC – about 105 million m³ – were signed in 2007. Over the past 10 years, contracts for approximately 10-12 million m³ were signed or re-issued annually.

A trend has emerged in recent years: greater amounts of unprocessed wood are being processed within the country and the export is reducing. In 2021, the export from Russia in general dropped by 1.7 million m³, down to 14 million m³. This reduction is certainly affected by customs and tariff regulation measures adopted by the Government of the Russian Federation:
– In 2017, the Government of the Russian Federation introduced quotas and established duties on exporting roundwood of Far East species (decrees of the Government No. 1521 and No. 1520 dated December 12, 2017).
– In 2021, a decision was made that from January 1, 2022, unprocessed softwood and precious hardwood (oak, beech, ash) may only be exported through two railway crossing points: Lyttä (on the border with Finland) and Khasan (on the border with North Korea and China).
– In April 2022, the Government of the Russian Federation banned roundwood export to “unfriendly countries” until the end of 2022.
In 2021, about 7 million m³ of softwood and hardwood roundwood was shipped to China; about 5 million m³, to Finland. The share of other countries is insignificant.

Notably, the volume of roundwood export from the Khabarovsk and Irkutsk Regions to China is comparable to the export volume from the Vologda and Leningrad Regions.

That is why the 5th package of sanctions adopted by the European Union which effectively imposes a complete ban on Russian timber products supplies starting from July 2022 will affect Russian exporters that sell roundwood to Finland. The Government of the Russian Federation has previously banned the export to “unfriendly countries”. And if we also take into account the volume of chips exported from Russia to Finland, the bias will be considerable.

Finland is the main consumer of Russian birch pulpwood and veneer logs. In 2021, about 5 million m³ of those were exported from Russia. The key consumers are Stora Enso, UPM and Metsa. Supplies of this group of size classes from Russia were particularly great.

Not much softwood roundwood was exported to Finland, so losing these volumes will not affect timber enterprises in the Russian North-West as much as closing export markets for birch veneer logs will.

The downward trend of roundwood (particularly softwood) exports to China is obvious: they dropped by almost three times over 6 years. The situation with birch veneer logs, however, is quite interesting.

In 2018, the birch veneer logs export from Russia to China reached its peak at 1.8 million m³. After that…

Read the full article in the issue Russian Timber Journal 04-2022.