Friday, September 02, 2016

Russian sawmills face challenges

Russian sawmills have an advantage in wood and personnel costs due to devaluation of ruble. However, they also face challenges in increasing of logs procurement and getting credits, according to Jukka Halonen, project manager at StepChange Consulting during 6'th Global Softwood Log and Lumber Conference in Vancouver, Canada. In his view, Russian wood harvesting is suffering from lack of economic and legislative reforms.

The Russian Regions

Andrey Bessonov of Ilim Group confirmed that his company is currently working on improving the efficiency/productivity of its logging operations, optimizing logistics, and adopting intensive silviculture practices, with several net objectives targeted by 2030:
  • Dramatically increase the company’s timber harvest by 20%–30% through intensive forestry management;
  • Increase logging productivity growth by 30%;
  • Reduce log delivery costs by 10% (in real terms); and
  • Increase the sawlog versus pulp log share by at least 25% by 2030.
Mr. Bessonov went on to explain how the devaluation of the Russian ruble has significantly reduced logistics cost for log shipments from Russia to China.

For example, comparing 2013 (before the devaluation) to 2015 (with the ruble devalued by about 50%), the following changes in transportation costs occurred:
  • Siberia to Manzhouli (mainland crossing in Northern China): US$40/m3 to US$20/m3;
  • Russian Far East to Manzhouli: US$56/m3 to US$30/m3; and
  • Western Russia to Manzhouli: US$95/m3 to US$50/m3.
With logging costs also reduced by about half due to the ruble’s devaluation, and given much lower logistics costs, Russians now occupy the low-cost position in terms of delivered log and lumber costs to China; this will solidify its market position in China for some time to come.

With such close and low-cost proximity to the world’s second-largest economy, increases in Russia’s export-oriented production are expected to be a key initiative for its log and wood products sector.

The 6'th Global Softwood Log and Lumber Conference in Vancouver, Canada is organized by International Wood Markets Group. The two-day conference has brought together hundreds leaders of global wood industry.

Source: Pulpaper Newscom, FridayOFFCuts

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