Forestry in Russia

According to analyst group of companies called the Lesprom Network, the Russian government's decision to raise export duty on roundwood in July 2007 by 20% and April 2008 by 25% resulted in a decrease in the competitiveness of Russian companies as exporters in the world markets. In the second half of 2008, amid the global economic crisis, the volume of construction fell sharply in Japan, China, and Western Europe, and as a result, production volumes also substantially declined in the major economic sectors that consume the wood. In 2008, the volume of timber in Russia decreased by 14.4% compared to the volume of the year before. Production growth in the area of wood specifically was 1.4%; in the pulp and paper production industry, the production growth for publishing and printing was only 0.8%.

The net profit of the Russian forest industry companies in 2008 fell sharply, evidenced by an annual ranking of the 50 largest companies data published by the magazine "Forest Industry". Total revenue companies included in the Lesnaya Industriya's Top 50 "Forest Industry" amounted to 216.34 billion rubles ($2.93 billion USD). The 10 largest companies accounted for more than 70% of total revenue, with the total net profit of the top 50 companies amounting to 6.26 billion rubles ($84.8 million USD). The share of companies that engaged exclusively in the processing of wood without pulp and paper production accounted for slightly more than 27% of total revenue, while the total net profit from these industries was around 26.8%.

Following the results of 2008, the average profitability ratio of Top 50 companies decreased to 0.7%, compared to 9.0% in the previous year. Woodworking companies’ profitability was slightly higher than that of pulp and paper companies (5.7% and 4.9% respectively), and only four of the Top 50 companies managed to reach a double-digit profitability ratio in 2008.

Zelenodolskiy plywood plant had the highest profitability ratio (17%) in 2008. The fastest-growing forest industry company in Russia was United Panel Group, whose revenue was 3.04 billion roubles ($41.3 million USD), up 89.5%. Ilim Group gained the largest net benefit in 2008 with a revenue of 1.67 billion roubles ($22.7 million USD) and was also listed in the Top 50 forest industry companies as having the largest revenue overall, at 37.92 billion roubles ($515 million USD). The Top 50 Russian Forest Industry rating is prepared and published by Lesnaya Industriya magazine on the base of companies’ accounting reporting and data provided by the companies.[7]

In Russia, there is no private ownership of forest land, which has been replaced by long-term leases of forest land for recreational and logging purposes. Comparatively, the US management of forest land allows for big business volume of more than $500 billion revenue from 500 million acres of forest land. About 53% of this land belongs to private owners who are not manufacturers. The remaining 30% of the land is in the public domain, 4% is owned by industrialists, and 8% is owned by financial investors.

In addition to country-specific factors, there are common features of development in the industry, such as increases in the market share of goods, substitutes, and a reduced share of wood and paper products in general. For example, the popularity of plastic packaging has reduced the consumption of paper, and the development of the internet has led to a reduction in the consumption of newsprint.

In connection with the declared policy of the Russian government to reduce the export of raw timber, companies are starting to increase the export of sawed timber. In the 1st quarter of 2010, the volume of exports of softwood lumber from Russia increased by 11% and export prices increased by 6%, as offered by the results of a published analytical service called Lesprom Network who handles export markets research. Another export to factor is pulp and paper. The two biggest destinations for Russia's export of pulp and paper are Northern Europe and Eastern Siberia.

Taiga in Kamchatka Krai, with Koryaksky volcano in the distance.

In Russia, the development of the biofuel sector is regulated by the state program. The goal of the program prioritizes "energy saving and energy efficiency for the period up to 2020," with goals for saving energy that stretch as far as 2030 in scope. However, as noted in the journal article "Forest Industry",[6] these goals are not sufficiently clear in the draft. According to these documents, by 2020, 4.5% of electricity in Russia must be made with the use of alternative sources, those being not consisting of lumber related products. Comparatively, in Norway, the figure for alternatively-sourced electricity is 67.5%, and in Sweden and Latvia the figures are 50% and 40% respectively.

Biofuel consumption grows in Central Europe as Germany, Netherlands, and United Kingdom increase the import of pellets. Brazil, Canada and the United States also have large reserves of biofuel feedstocks, making them direct competitors with Russia in the market of exporting wood pellets to Europe.

The most prominent venues for the production of raw wood materials in Russia are Arkhangelsk, Syktyvkar, Krasnoyarsk, Bratsk and Ust-Ilim, Irkutsk, Svetogorsk, Moscow, Balakhna (Nizhniy Novgorod region), Astrakhan (as a raw material - cane), Rostov-on-Don (as a raw material - cane), Amursk, Perm, and Solikamsk. The largest enterprises of the timber industry, combining all stages of the processing timber, are Arkhangelsk, Syktyvkar, Asino (Tomsk.), Krasnoyarsk, Lesosibirsk (Krasnoyarsk region), Bratsk and Ust-Ilim, Komsomolsk-on-Amur. This collection of groups is called the timber industry complex.