Russia softwood timber market developments

1.

RUSSIA SOFTWOOD TIMBER
MARKET DEVELOPMENTS
Sviatoslav Bychkov, ILIM TIMBER
DANA 2021 NZ Forest - Wood Products Outlook Conference
Auckland March 16th 2021

2.

RUSSIA SAWMILLING INDUSTRY ON A GLOBAL SCALE
GLOBAL SAWN SOFTWOOD
PRODUCTION
2019
1
Region
Europe
‘000 m3
1%
5%
11% 3%
1%
34%
15%
119,439
31%
2
North America
107,880
3
Asia
51,101
N.America
Russia
Europe
Africa
4
Russia
39,492
Asia
Oceania
5
South America
18,537
S.America
CIS
6
Oceania
8,812
7
8
CIS
Africa
3,519
3,519
Total 352,299
Source: FAO UNECE
4%
GLOBAL SAWN SOFTWOOD
CONSUMPTION
2%
3%
30%
3%
2%
26%
29%
2019
Region
‘000 m3
1
North America
104,529
2
Europe
100,038
3
Asia
90,285
4
South America
13,742
5
Russia
10,600
6
Africa
10,100
7
Oceania
7,872
8
CIS
6, 453
Total 343,619
Page № 2

3.

RUSSIA SAWMILLING INDUSTRY ON A GLOBAL SCALE
TOP-8 SAWNWOOD EXPORTERS
GLOBALLY
2019
Region
‘000 m3
1
Russia
31,474
2
Canada
27,714
3
Sweden
12,601
4
Finland
8,955
5
Germany
8,787
6
Chile
6,980
7
Austria
6,090
8
Belarus
3,987
5% 3%
1%
1%
11%
15%
31%
34%
Russia
Canada
Sweden
Finland
Germany
Austria
Belarus
Chile
Total 108,893
Source: FAO UNECE
Page № 3

4.

RUSSIA AND FSC CERTIFICATION GLOBALLY
24%
26%
204 MLN GA
7%
42%
Russia
Canada
USA
Others
Source: FSC
Page № 4

5.

RUSSIA FOREST RESOURCES
MAJOR SOFTWOOD HARVESTING REGIONS
SIBERIA
33% SAWN TIMBER
NORTH WEST
PRODUCTION
27% SAWN TIMBER
PRODUCTION
FAR EAST
9% SAWN TIMBER
PRODUCTION
+9%
250
-7%
219 mln m3
200
150
100
217
236
219
50
0
2017
Source: Rosleshoz
2018
2019
Siberia
72
North West
Far East
59
Other regions
68
Other regions
31%
2019
20
2019
33%
Siberia
9%
Far East
27%
North West
Page № 5

6.

RUSSIA SOFTWOOD SAW LOG
PRODUCTION AND EXPORTS
RUSSIA SOFTWOOD SAW LOG PRODUCTION MLN. M3
+5%
RUSSIA SOFTWOOD SAW LOG EXPORTS MLN. M3
-1%
80
12
11
79
12
1
-55%
11
1
10
80,0
8
79,0
77
10
1
9
78
79,0
78,0
7
11
7
10
9
6
5
76
0
2016
2017
2018
Source: Russian Customs, China Customs, Rosleshoz
ROW
CHINA
2019
2020
0
1
5
6
1
4
2016
2017
2018
2019
2020
Page № 6

7.

SOFTWOOD TIMBER EXPORTS TO CHINA
SOFTWOOD SAW LOG EXPORTS TO CHINA
BY COUNTRY MLN. M3
20,4
20,6
NZ OCEANIA
7,0
15,2
EUROPE
RUSSIA
5,6
4,4
N.AMERICA
5,1
3,8
OTHERS
SOFTWOOD SAWN TIMBER EXPORTS TO CHINA
BY COUNTRY MLN. M3
4,7
4,5
N.AMERICA
+117%
EUROPE
-21%
S.AMERICA
-25%
4,0
3,1
OTHERS
2019
Source: China Customs
17,1
14,8
RUSSIA
-13%
-4%
2,7
3,3
0,9
0,9
2,4
1,5
2020
Page № 7

8.

RUSSIA SOFTWOOD SAWN TIMBER EXPORTS
VOLUME, SPECIES AND ORIGING MLN M3
+44%
31
Larch
-5%
30
29
3,3
11,4
Spruce
14,2
Pine
28
27
26
30,8
29,4
25
24
26,8
23
16%
27,6
FAR EAST 10%
2020
24,3
22
0
OTHERS
44% SIBERIA
22,4
21,4
2014
30%
2015
Source: Russian Customs
2016
2017
2018
2019
2020
NORTH WEST
Page № 8

9.

RUSSIAN EXPORTS
SOFTWOOD SAWN TIMBER BY REGION, ‘000 m3
-5%
19 370
CHINA
-10%
17 444
30 804
3 690
EUROPE
4 373
3 821
CIS
MENA
OTHERS
4 344
2 217
1 569
+19%
2019
TH. M3
2020
+14%
OTHERS
MENA
6%
5%
-29%
CIS
15%
2020
1 705
1 628
EUROPE
2019
Source: Russian Customs
29 357
15%
59%
CHINA
2020
Page № 9

10.

SAWN TIMBER CONTAINER SHIPMENT TO CHINA.
RAILWAY AND SEA TRANSPORT
EXPORT BY LAND
Russia—China 2019-2020 H1*
Zabaikalsk – 327 036 TEU
Naushki – 307 528 TEU
Dostyk – 73 556 TEU
Grodekovo – 50 792 TEU
St. Petersburg
Moscow
Nizhny Novgorod
Ekaterinburg
Novorossiysk
Zabaikalsk
Naushki
Dostyk
Manchukuo
Changchun
Shenyang
Zamyn-Uud
Beijin
g
Shílóng
Chendu
Wuhan
Chongqing
Border crossings/Ports
*Source: MCC of the Russian Railways
Dalian
Incheon
Quingdao
St. Petersburg – 240 268 TEU
Vladivostok – 233 480 TEU
Novorossiysk – 1 396 TEU
Representative office of
RZHD Logistika, OAO
Grodekovo
Vladivostok
Irkutsk
EXPORT BY SEA
Russia—China 2019-2020 H1*
Krasnoyarsk
Novosibirsk
Nanking
Suzhou
Shanghai
Yiwu
Changsha
Freight consolidation points
Page № 10

11.

ONE BELT, ONE ROAD
EXPORT BY LAND
Russia—China 2019-2020H1*
• Krasnoyarsk
(Bazaiha st./Krasnoyarsk st.)
2 968 TEU
• Irkutsk (Batareynaya st.)
2 156 TEU
• Novosibirsk
(Inya-Vostochnaya st. /Klechiha st.)
840 TEU
• Kirov (Luza st.)
176 TEU
THE GROWTH OF CARGO TURNOVER AT THE BORDER
CROSSING IN ZABAIKALSK WILL BE 71% BY 2025.
INVESTMENT IN MODERNIZATION OF THE RAILWAY HUB
AMOUNTS TO 21.9 BILLION RUBLES
Kirov
Krasnoyarsk
Zabaykalsk
Novosibirsk
Irkutsk
Manzhouli
16 days for
container train
Naushki
Zamyn-Uud
Beijing
Tianjin
Suzhou
Shanghai
Chendu
Chongqing
Shipping points
Delivery points
*Source: MCC of the Russian Railways
Border crossings
Page № 11

12.

GOVERNMENT INCENTIVES AND LEGISLATION
INDUSTRIAL DEVELOPMENT
Russian Government have approved in
February 2021 updated Strategy for the
wood processing industry development up
to
2030
(cluster
approach,
further
processing, pulp and paper production
development,
intensive
reforestation)
targeting:
• Double the share of forest based
industries in GDP
Annual harvesting 286 mln m3
Sawn timber domestic consumption
24 million m3 and 43 million m3
exports
Resolution #1509 from 21.09.2020 legalized
logging at abandoned agricultural lands
(about 100 million hectares across Russia,
primarily in NW regions)
Resolution #496 from 18.09.2019 offers
federal subsidies for the forestry based
industries to cover partly logistic costs for
exports
CONTROLLING FUNCTIONS
Federal Law No. 3-FZ of February 4, 2021
«On Amendments to the Forest Code of the
Russian Federation and Certain Legislative
Acts of the Russian Federation in Terms of
Improving the Legal Regulation of Forest
Relations» (full enforcement from July 01,
2021)
Total tracking of round wood and
sawn goods for timber supply chain
including stocks in the logging area
Digitalization of all documents for
timber turnover in Unified State
Information System
Registration of all transactions with
timber
including
commercial
contracts with pricing
Assignment of
harvesters
to
dedicated cutting areas and satellite
tracking
of
all
transportation
vehicles in logging areas
RECENT INITIATIVES
Development
of
the
new
regulations to set additional
export duties for green lumber
(more then 22% moisture content)
including changes in HS codes
and Customs duties. Planned to
be enforced starting 2022
Package
of
new
initiatives
(customs
regulations,
border
crossing points, railway tariffs) to
enable further limitations on
round wood exports targeting
softwood and hardwood saw log
exports from Siberia and Far East
regions. Planned to be enforced
starting 2022
Page № 12

13.

CONCLUSIONS
• China remains the key market for Russian sawmills in all major lumber
production regions. «One Belt One Road» strategic initiative will give more
opportunities for Russian exporters
• Russian saw milling industry achieved maximal historic export volumes in
2019. The availability of saw log became a major limiting factor for further
growth in production capacity utilization
• Russian State in past 10 years has successfully promoted investments in
saw milling and is taking next steps to stop saw log exports completely in
order to increase share of further processing
• Recent Government incentives will drive modernization projects at existing
sawmills. The share of kiln dried sawn goods in Russian exports will
increase as well as further processed timber in the domestic market
Page № 13

14.

ILIM TIMBER CORPORATE PROFILE
OPERATIONS
Ilim Nordic Timber
GERMANY
RUSSIA
Ust-Ilimsk branch of Ilim Timber
Head Office, St.
Petersburg
Ilim Timber Bavaria
Bratsk branch of Ilim Timber
Business Units: Russia and Germany
Company headcount: 3000 people
Sales organizations:
EU, USA, China, Russia and NIS, MENA
Species: Pine, Siberian larch, Spruce, Douglas fir,
Sitka spruce
Annual production capacity: 2,65 million m3
of sawn timber and 230 000 m3 of plywood
Long-term contracts with strategic log suppliers
Page № 14

15.

ILIM TIMBER CORPORATE PROFILE
SALES AND PRODUCTION VOLUMES
BU Russia
BU Germany
Key markets* m3
Russia
Europe
USA
CIS
MENA
China
13%
6%
9%
54%
18%
Europe 54%
China 18%
MENA 13%
Russia & CIS 6%
RoW 9%
Total production: 2.300.000 m3
Total sales: 650 million USD
*incl. sales of plywood
Page № 15

16.

THANK YOU
FOR YOUR ATTENTION!
Page № 16