Summary
• The final increase in duties levied on Russian roundwood exports has been postponed until January 1, 2010.
• A little under a fifth of the timber used by the Finnish forest industry has been secured from Russia.
• Imports into Finland have been made up of timber grades that are not domestically available to a sufficient degree.
• Finnish government measures will promote the use of domestic roundwood.
• Domestic production can cover any decline in import volumes in Finland.
Since the turn of the decade, Russia has been attempting to diversify its industrial sector and reduce its exports of raw materials.
As far back as June 2006, it raised the export duty on softwood timber from €2.5/m³ to €4/m³. In February 2007, the government issued decree No. 75, which resulted in duties levied on unprocessed exported timber (apart from birch with a diameter of less than 15cm) increasing to €50/m³ by the start of 2009.
Decree No. 982, published last December, has postponed the final duty increase, but it is still due to come in on January 1, 2010. Export duties on certain hardwood species (oak, beech, ash, maple, cherry) will also rise to €100/m³ a month after the decree’s publication.
In theory, birch pulpwood with a diameter of less than 15cm is duty-free. In practice, however, the sorting of trees according to diameter would increase the total costs of wood so much as to make importing it unprofitable.
Finnish companies have invested to the tune of around €1bn in the Russian forest sector over the last 15 years and a wealth of valuable experience in sourcing Russian wood raw material has been accumulated.
Duty response
However, higher export duties will erode the cost competitiveness of Russian imports for Finland’s forest industry. To help the sector cope, the Finnish government has taken measures to promote the use of domestic roundwood. These include infrastructure investments, such as road and rail repair projects. It has also improved training for forest owners and is cutting taxes imposed on timber sales revenues. For their part, individual companies have also expanded and strengthened their domestic wood procurement structures.
According to latest official calculations, Finland’s wood reserves are now bigger than at the beginning of the 19th century and annual forest growth continues to exceed harvest and natural reduction. It also has more strictly protected forests than other European countries – on average 8.9% of the total, or over 2 million ha.
As a result, with the exception of birch pulpwood which is not available in sufficient quantities in the country, Finland is confident it can surmount the challenge posed by Russian duty hikes. In fact it believes it can almost completely replace imports with domestic wood.
