Growth in output from Russia’s timber industry this year has been more than double that of other industries, according to the wood department of RF Minpronauka (Ministry of Industrial Science).

Industry figures for the first eight months of 2000 show that timber businesses increased their output of timber and paper products by nearly 20% compared with the same period in 1999.

In the domestic and world markets, 1.32 million tons of cellulose were sold – 23% more than in 1999 – and the production of paper increased by 15% (2.2 million tons) including 1.12 million tons of newsprint. The production of board reached 1.23 million tons (an increase of 26%).

According to Minpronauka, timber businesses harvested more than 60 million m³ of merchantable wood from January to August, inclusive, which is 12 million m3 more than in the same period last year. Output of sawn timber was 12 million m³ (up 11.5%) and output of plywood was more than 1 million m3 (up 17%).

Unfavourable market

However, in spite of these increases in production, unfavourable market conditions mean the situation in the industry has not improved fundamentally: the number of unprofitable companies remains considerable (46.5% in January-March, rising to 50% by mid-way through the year), and is higher than average figures in other industries.

More than 60% of Russia’s timber and paper products were exported, generating an income for exporting companies in excess of US$2.2bn, according to preliminary data. But the structure of exports changed very little compared with the previous year: more than 30% of exports were raw material in the form of round timber.

At the same time experts point to some growth of exports of sawn timber, plywood, cellulose, paper and board as a positive tendency. The proportion of finished timber and paper products of the total export volume reached nearly 50% in the first half of the year. In 1998-1999, this figure stood at about 40%. In 2000, Russia will export US$3.3-3.4bn-worth of timber and paper products, according to Minpronauka’s specialists.

The market movement and some improvement in the financial situation of the timber industry resulted in a surge of investment activity. Investment in the industry in the first half of 2000 added up to more than Rb8.6bn (against Rb10bn for the whole of 1999).

In the first six months, foreign investments reached US$143m, or 3% of the total volume of foreign investments in the Russian economy. Investors from Finland, with US$35m or 24.3% of the total investment in the industry appeared to be the most active, compared with Belgium (US$24m or 17.1%), Germany (US$22m or 15.5%) and Sweden (US$18m or 12.6%).

One of the biggest investment projects to be realised in the industry in the near future is that of Ilim Pulp Enterprise Ltd (St Petersburg) which intends to invest US$140m in the development of the Bratsk timber complex during the next two years. The corporation controls the production of 40% of all Russian cellulose and board and 65% of its production is exported. The joint owners are Fintsell Ltd and Swiss firm Intertsez SA.

More immediately, the American company International Paper, which holds the controlling interest in the Svetogorsk pulp and paper mill, plans to launch its investment of US$80-100m in the mill. As part of this programme International Paper intends to continue to lease forests in the Leningrad region in order to develop production and to increase its own capacity to generate the supply of raw material.

World Bank loan

Meanwhile the committee of directors of the World Bank approved the granting of a guaranteed loan of US$200m to support the coal and timber industries in Russia; US$50m of this sum is reserved for timber projects. The guarantees are given for five years, and the loan is in addition to the pilot project of sustainable forestry (total volume US$60m) that is financed by the World Bank.

The purpose of this project is to provide for the future of Russian forests by way of encouraging private investments that are economically prospective and answer international environmental demands.