Russia has found an alternative to selling lumber to Europe

In 2023, not a single European country remains in the top 10 countries importing Russian lumber. Russian timber merchants replaced sales markets with Asian countries, their share in exports increased to 98%

The volume of exports of Russian lumber in 2023 decreased by 10% compared to the previous year and amounted to 20.7 million cubic meters. m, follows from the statistics of the federal forest accounting institution Roslesinforg, which RBC reviewed. In 2022, the volume of lumber exports amounted to 23 million cubic meters. m.

Contrary to sanctions and forecasts, Russian timber merchants were able to quickly replace European markets with Asian ones, states Roslesinforg. The share of Asian countries in purchases of domestic lumber increased by 11 percentage points. and amounted to 98%. For comparison: in 2021, the share of Asian countries in the EXPORT structure was 76%.

The main lumber, including those supplied abroad, are timber, edged and unedged boards made of spruce, pine, and larch, Roslesinforg clarifies. To a lesser extent, these are sawlogs (raw materials for the production of boards), pulpwood and veneer logs, from which, as a rule, veneer is made for making plywood, and sawn timber from planed hardwood.

How sanctions have affected the export of lumber and which countries buy them from RUSSIA instead of Europe - in the RBC material.

How exports have changed due to sanctions

In April 2022, the European Union included restrictions against the Russian timber industry in the fifth package of sanctions against Russia after the start of a special military operation in Ukraine . A ban was introduced on the import of Russian wood products and products made from it. The European Commission estimated the value of forest products subject to restrictions at €3.16 billion, or 2% of total imports of Russian goods into EU countries .

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Europe has never been the main export market for Russian lumber, Alexey Bogatyrev, CEO of the timber products marketplace Lesprom Network, explained to Vedomosti: in 2021, this market accounted for 14% of all Russian supplies of these products abroad. But there is no second market like the European Union for Russian lumber producers, he told RBC Pro later.

At the end of 2022, countries recognized as unfriendly reduced purchases of softwood and hardwood lumber from Russia by half, noted Roslesinforg.

Which countries now buy Russian lumber?

In 2022, the largest importers of processed wood included CHINA , Uzbekistan , Kazakhstan , and from European countries - Estonia and Finland . In 2023, Finland and Estonia dropped out of the top 10 and only Asian countries and Iran remained among the largest, according to Roslesinforg data.

China remains Russia's main partner for lumber exports. Over the past year, timber merchants exported about 13 million cubic meters. m of lumber - the same as in 2022. Next comes Uzbekistan - more than 2 million cubic meters. m, the increase was 8%, Kazakhstan closes the top three - 926 thousand cubic meters. m, which is 17% higher than in 2022. The top ten largest importers also included Azerbaijan  - 516 thousand cubic meters. m, Tajikistan - 482 thousand cubic meters. m, Kyrgyzstan - 417 thousand cubic meters. m, Iran - 392 thousand cubic meters. m, Korea  - 340 thousand cubic meters. m, Japan  - 337 thousand cubic meters. m and Hong Kong - 283 thousand cubic meters. m. In total, last year Russian timber merchants imported products to 51 countries.

Most actively in 2023, Russia increased exports of processed wood to Turkey - 2.3 times (up to 254 thousand cubic meters). Deliveries to Kyrgyzstan also increased by 36%, Korea by 28%, Egypt  by 18%, Kazakhstan by 17%, Hong Kong by 16% and the UAE by 11%. In addition, there was an increase in supplies of boards and timber to Lebanon, Vietnam , Afghanistan, Georgia, Armenia, Israel, Tunisia and India.

What timber traders say

The largest exporters of lumber, according to Roslesinforg, include Segezha Group, ULK, Titan, Vologda Timber Industrialists, and Luzales groups. After the introduction of sanctions in 2022, Russian companies announced a total disruption of supply chains. According to a Strategy Partners study conducted among timber industry companies in mid-2023 (the survey focused on their expectations), more than half of the companies surveyed expected a decrease in revenue, and 33% assumed that the decrease would be about 10-20%. Every fifth company surveyed announced that its investment program was frozen, and every third company announced a reduction in investments by more than 30%. Against the backdrop of a “structural transformation of sales markets” in the first quarter of 2023, the forestry company Segezha Group’s revenue decreased by 42%, to 18.7 billion rubles, OIBDA - by 91%, to 1.1 billion rubles, and profitability fell from 37 to 6%.

However, in the second half of 2023, the logistics situation began to improve. Thus, in June it was reported that Segezha Group agreed with the FESCO transport group on multimodal container transportation of timber cargo in domestic Russian directions and for export. The agreement covered transportation from the North-West, Central, Volga and Siberian regions to the countries of Southeast Asia, the Mediterranean Sea, Turkey, India and China. Due to EU sanctions, which have banned supplies of Russian timber since last July, Segezha Group had to redirect its exports. The Vologda Timber Industry Group of Companies reported in July 2023 that the market was recovering, changing the export vector to the east . “The market situation is gradually stabilizing. If in the second half of 2022 logistics flows were disrupted and enterprises shipped products at very high prices, which made the products unprofitable, then in 2023 new flows are gradually being established. Today we are loading a lot of products to the east along new routes,” said Alexander Churkin, chairman of the board of directors of Vologda Timber Industry.

Roslesinforg noted that Russian products are in demand among partners from friendly countries, and the effectiveness of government measures played a major role in reconfiguring the supply chain. “First of all, we are talking about a subsidy for the transportation of products through the seaports of the Northwestern Federal District,” the department clarified. A representative of the Vologda Timber Merchants told RBC: “The political situation has forced us to reconsider our sales markets and to develop new ones with even greater zeal.” In 2022, the group’s share of shipments to European countries was 22% (supplies in the second half of the year stopped due to sanctions, but in the first half of 2022, the share of lumber deliveries to European countries amounted to 40% of total shipments for that period). At the end of 2022, the total volume of lumber shipped was 319.1 thousand cubic meters. m.

But already in 2023, the volume of exports from Vologda Timber Industry increased to 409.9 thousand cubic meters. m, says a company representative. “To achieve this, throughout the year we actively presented ourselves and our products on international platforms, worked in new countries both independently and jointly with Russian and regional export centers. We paid working visits to Egypt, Vietnam, Iran, Turkey, the UAE, India, Uzbekistan, and Belarus. We are considering Japan in the future,” said RBC’s interlocutor.

In 2023, the majority of lumber, namely 68%, was shipped by Vologda Timber Industry to China, another 19% to other countries, and 13% accounted for the domestic market. In the middle of the year, the first batches of lumber went to the new market for the company in India, Uzbekistan and Vietnam, Vologda Timber Industry added.

Over the nine months of 2023, the overall decrease in exports of softwood lumber from Russia amounted to 12% year-on-year, according to the Segezha Group report for the third quarter. A decrease in exports was observed in the direction of Japan (-37%), MENA (countries of North Africa and the Middle East, -22%), CIS (-4%). The main direction where supplies increased was China (growth was 2%). The decisive influence on the recovery of export shipment volumes was the improvement of the situation in the Chinese market in August-September 2023, the company notes: there was a decrease in the level of warehouse stocks (from a record 1.7 million cubic meters in the port of Taicang in the first quarter of 2023 to 1 million cubic meters m at the end of September), increased demand and an upward price trend. Sales of lumber to the Egyptian market in the third quarter of 2023 for Russian companies did not change: large factories continued to ship products to the region on a residual basis, the report noted.

A representative for Luzales declined to comment. Segezha, ULK and Titan did not respond to RBC’s request.