Last year the value of Russia’s timber and paper products exports rose 19% to US$4bn, according to the ministry of industrial science. Preliminary figures for the first quarter of this year suggest a similar level of business with timber exporters reporting income of US$1bn.
Timber industry profits in 2000 were up by around 30%, or Rb18bn, on 1999, as the throughput of timber also rose. Around 55.7 million m³ of timber was produced last year – a 12% rise on 1999 – while the harvesting level of 91.6 million m3 of timber was an increase of 1.3% on the previous year.
Production volumes also rose, in particular plywood which was up 11.8% at 1.5 million m³ and market cellulose which rose by 14.2% to 2 million tons.
According to the ministry, all large vertically integrated timber holdings have increased production volumes this year – in particular, stock companies Kondopoga (Karelia), Arkhangelsk pulp and paper mill, Kotlass pulp and paper mill (Arkangelsk region), Syktyvkar timber industrial complex (Komi republic), and Volga.
Volume increase
The ministry forecasts a 5% increase in the volume of Russian timber production this year and paper exports are expected to rise in response to favourable prices on the world market while the price and exports of market cellulose are expected to fall.
State subsidy of the forest products industry continues as many of the pulp and paper mills were built 30-40 years ago and do not meet modern technological and environmental requirements. Today only Kondopoga, Volga, Svetogorsk (Leningrad region), Solikamskbugprom (Perm region) and Baykal pulp and paper mill have paper production facilities that meet these modern demands.
A government report produced last month on the round timber export market suggested that revenue could potentially rise five to seven times. Exports of round timber account for 32% of timber export revenues – much higher than in other countries which prefer to export value-added products. The report estimates that in 1999 Russia missed out on Rb12.7m in potential profits.
The report’s authors suggest that one of the main reasons for the low profitability of Russian wood exports is the less than fair price for standing wood. They suggest an increase in the price for standing timber of up to 20% of the total value of 1m3 of round timber. They also propose discussion about establishing an independent federal structure to realise state control over the exploitation of forest resources.
Around the same time as the report was published, the selling price for standing timber doubled from about Rb20 to Rb40/m³. Although it is still less than the 20% suggested by the report, this increase will raise Rb2bn which will provide more effective forest management and fire protection.
Insufficient investment
Investment in the timber industry last year totalled Rb16.5bn – up 9% on 1999 – and 80% of money was invested by the companies. Russian companies bought foreign-made equipment to the sum of US$600m last year (growth of 10%). However, while profits were up 30% on 1999, according to Miron Tatsun, president of the Wood Industrialists and Wood Exporters Union, the level of investments is still insufficient. For example, each pulp and paper mill requires investment of US$200-300m.
