Many timber and wood products companies around the world are looking to invest in Russia – but one of the main problems is accessing the vast tracts of timber.
For Stora Enso, this has meant planning a forest road development project in leased forest areas in the Leningrad region. It plans to build 500km of roads over the next five years to provide access to new wood resources for its two sawmills in Russia and others outside the country. At present there are only 2km of road per 1,000ha of Russian forest, but Stora Enso intends to increase that to 6km per 1,000ha.
But the plan comes at a price. According to one source, preliminary evaluations have concluded that one kilometre of forest road construction will cost about US$50,000.
The company has decided not to use Russian subcontractors for the work, and the contract will probably be put out to tender. “We are looking for reliable partners who are professionals in terms of price and the work which is done,” a spokesperson said.
Stora Enso recently received approval for a corrugated board mill in the Lukhovitsky district. The estimated €60m mill, due to open in 2008, will have a 130 million m2 capacity.
Another investor in Russia is Metsa-Botnia, which is responsible for the pulp business of the Metsäliitto Group. It has built a sawmill on the banks of the river Svir, 300km east of St Petersburg. Inaugurated in June, the €55m mill will have an annual capacity of 200,000m3 of dried sawn spruce. The main markets are central Europe, the Mediterranean, Great Britain, Japan, Finland and the Russian domestic market.
“The Svir Timber sawmill is an important part of Metsa-Botnia’s fibre strategy,” said president and CEO Erkki Varis. “The aim is to get experience from forest industry investments in Russia and to create a basis for possible future investments.”
Most of the employees are Russian and they have been trained at Metsäliitto Group and UPM‘s sawmills, where special attention was given to work and fire safety and environment care.
Furniture sector
Austrian company, the Egger Group has also put its money into Russia. The company, which manufactures chipboard, MDF, OSB, laminate flooring and finished timber components, has opened its first Russian production facility in the Ivanovo area in Shuya to satisfy increasing demand from Russia’s furniture sector.
The 81.5ha site will be used to manufacture raw and melamine-faced chipboard. Annual production capacity for the raw chipboard is 250,000m3, and for melamine-faced chipboard it is 100,000m3.
Speaking at the opening ceremony in May, Egger Group CEO Michael Egger made no attempt to gloss over the difficulties the project had encountered. “The factory was marred by delays caused by official approval procedures on the one hand, and the hard Russian winter and language barriers on the other,” he said.
That caused the original budget to be exceeded, and the company ended up investing a total of €100m in the plant – but Mr Egger said it was now on a sound footing and open for business. Around 325 jobs have been created and a further 1,000 jobs are expected to become available – with all employees intensively trained by an international Egger team.
Growing market
Mr Egger said Russia was a broad market that was expanding by about 10% annually. “Growth in quality is ensured by other large investments by the national and international furniture industry in the near future,” he said. “The new Egger plant in Shuya means a new chance to strengthen and expand the market position in eastern Europe. The positive raw material resources, a high market volume, economic growth and the steadily increasing demand for high quality products were the decisive factors for us to make an investment for the future in Russia.”
Meanwhile, a situation at the Finnish-Russian borders has been resolved. In March, the Russian government issued a decree that led to increased export duties on softwood at the end of May. At the same time, a new requirement demanding that imported wood must be classified according to diameter came into force.
This requirement caused confusion – and difficulties – at the border, according to Anneli Kotonen, department manager of industrial policy at the Finnish Forest Industries Federation.
But in June Russia withdrew the ruling. “According to the latest directions of the Russian Customs, imported wood does not need to be classified according to diameter,” said Ms Kotonen. “Wood imports to Finland are expected to be normalised gradually.”
She said imported wood accounted for well over 20% of the raw material used by the Finnish forest industries – and 80% of imported wood comes from Russia.
