Export duty on logs will rise rise from €4/m3 to €10 in July, increasing to €15 in 2008 and €50 in 2009.
The Russian forest products sector believes that the series of hikes will eventually make log exports, currently running at 50 million m3 a year, unviable. However, deputy prime minister Sergei Ivanov fears that the domestic processing sector will not be able to cope with the rising supply of raw material. Unless processing capacity grows, by 2009, he believes, logs may in oversupply and simply have to be stockpiled.
Mr Ivanov maintained that significantly more spending on new plant is needed, and inward investment, notably from the Nordic countries needs to be encouraged and accelerated. He said that the impact of the duty increases on their log supplies may not have yet hit home with some Nordic businesses, which explained their delay in investing in Russian processing facilities.
But he also acknowledged that foreign investors were deterred from putting their money into the Russian industry by poor infrastructure. UPM Kymmene, for example recently commented on the difficulty of getting timber out of the forest because of the lack of maintained roads.