CLICK to download a pdf of this article

Russian Timber Companies Plan to Increase Exports of Unprocessed Timber to the U.S. during the Next Several Years

By Eugene Gerden

At present, Russia ranks third in the world in terms of unprocessed timber exports. Since 2012 these volumes have been growing; however, its current volumes are still significantly lower than the pre-crisis figure of 82.6 million cubic meters in 2007.

Leading Russian timber companies plan to significantly increase exports of their unprocessed timber to the U.S. during the next several years, according to recent statements by an official spokesman of Denis Manturov, Russia’s Minister of Industry and Trade.

Due to the current economic crisis in Russia and devaluation of the national currency (the ruble) caused by Western sanctions, timber exports to the domestic market in recent months have become no longer profitable for Russian timber companies, which plan to increase the volume of supplies to the U.S. this year.

Russian exporters say the supply of Russian timber to the U.S. will take place directly, as well as through third countries, in particular China, which imposed a ban on the felling of forests about 10 years ago, due to ecology issues.

Focus on Pine

Part of the plan is a significant increase in exports of plywood and lumber, produced from Russian hardwood. It is also planned that pine will account for the majority of the exports.

According to Manturov, due to devaluation of the Russian ruble, prices for Russian timber in the global market are significantly lower, compared to the production of Russia’s main competitors in the U.S. market, such as Canada. This, the minister says, will provide a competitive advantage to domestic timber producers in the market.

Manturov has also added that Russia plans to gain significant benefits from the export of its timber to the U.S., due to the ever growing local demand for it, caused by increasing volumes of wooden house-building in the country, as well as lack of Chinese competitors in the market.

Subsidies and Tariffs

As part of the provision to support national timber producers, (which significantly suffered due to the current crisis in Russia) the Russian government has not ruled out the possibility of subsidizing part of pro-ducers’ logistics and transportation costs, associated with supplying their timber to the U.S. market.

In addition, the government may reduce the existing duty on the exports of Russian timber to the U.S., despite the fact that such measures will be contrary to Russia’s WTO obligations that were undertaken by the country several days ago during WTO accession.

Moving More Timber

Data from the Russian Ministry of Industry and Trade states that total exports of Russian timber to the U.S. in 2014 reached US$200 million, and there is a possibility that these figures may grow significantly this year. Overall, the annual export of timber from Russia is estimated at 30 million cubic meters, the majority of which so far, has been exported to the EU states; however, due to deterioration of relations between Russia and the European Union and weakness of the euro, caused by the stagnation of the EU economy, the majority of Russian timber producers plan to reorient their supplies to the U.S. and possibly Canada.

Russian Timber through China

According to state plans, part of Russian timber to the U.S. will be supplied via China, which currently remains the largest importer of Russian timber and has strong connections with the U.S. timber business, as many U.S. timber companies have established their production in China in recent years.

The Russian media reports that, Russian President Vladimir Putin held talks with President Xi Jinping of China, regarding obtaining assistance in strengthening Russia’s position in the North American timber market.

Attracting Foreign Interest

In addition to the increase of exports, the Russian government plans to create conditions to attract foreign investors, in particular those from the U.S., to invest in the national timber and woodworking industry. As part of these plans, the Russian government recently announced its intention to lease thousands of hectares of forests to foreign investors on preferential terms.

According to state plans, in return, foreigners should invest funds in the establishment of woodworking enterprises and pulp and paper mills in the territory of Russia.

Eugene Gerden is a forestry freelance writer working out of Russia.

July/August 2015

Russian Timber Companies Plan to Increase Exports of Unprocessed Timber to the U.S. during the Next Several Years