Export prices for Russian timber have almost halved since early 2022, with volumes crashing 25%, with the Ukraine War taking a toll on one of its most significant export industries.
It comes as sanctions – which have not only seen trade bans but all Western Companies’ exit from Russian assets, a freefall in Chinese demand (now responsible for 85% of exports), and a weakening of the ruble against the dollar lead to a perfect storm.
In a new report published by Wood Resources International this week, the prices for Russian exports have decreased from an all-time high of US$310/m3 in early 2022 to US$163/m3 in the third quarter of 2023.
The declines are most pronounced in Russia’s Northwest, followed by the Far East and Siberia (the location of Russia’s extensive trade through China).
It means that Russian timber volumes, the world’s largest softwood exporter in the two years leading up to the Ukraine War, have dropped from 31 million cubic metres in 2021 to 21 million cubic metres this year.
The drop is tied to sanctions imposed by the West led by the EU, North America and Asia-Pacific, with trade now isolated to just ten countries – including China, Kazakhstan, Belarus, Uzbekistan, Iran, Kyrgyzstan, the United Arab Emirates, Azerbaijan, and Tajikistan.
In addition, the decision by PEFC and FSC to suspend Russian and Belarussian certificates makes it impossible for Russian and Belarussian timber to carry PEFC and FSC claims in the global market.
That decision immediately saw FSC-certified forests contract almost 35% since March 2022 and PEFC by around 15%.
At the time of the suspension, it represented almost 25% of the world’s dual-certified forest area – with more than 20,000 Chinese FSC or PEFC certificates potentially exposed to Russian timber.
In addition, Wood Central reported last month that IKEA sold its final asset in Russia, with Western companies deciding to exit the economy and leaving a massive hole in production.
In January, Wood Central reported that IKEA used 20 million cubic meters of wood in its products, packaging, and communication materials in the 12 months leading up to the war, whilst Metsä Group and Stora Enso also produced up to 1 million cubic metres of wood in saw timber, wood chips and pellets through Russian mills.
According to Wood Resources International, many of these so-called “lost shipments” came from sawmills in the Northwest, which cannot be redirected to the block of countries that still trade with Russia.
Adding to Russia’s woes, domestic production is also weak, with little foreign investment helping to fund the modernisation of its ageing plant and equipment.
This has resulted in timber production for the domestic market dropping nearly 20% over the past two years, with corruption adding to inefficiencies in its supply chains.
However, WRA adds that demand for most forest products has dropped in the Russian domestic market, which has also weakened – leading to an estimated lumber production decrease of nearly 20% over the past two years.
These shortages have had knock-on effects on the packaging industry. Managing director of paper packaging industry analysts NOA, Neil Osment, noted that Russia’s war on Ukraine had led to lower demand for corrugated and folding cartons.
More recently, Russia’s all-time high for wood chip and log imports to Finland in 2020 declined in the third quarter of 2022, with Finland, once one of Russia’s top 3 export markets, joining the boycott of Russian goods and services.
