Russia’s timber production volume fell 5.4% during the first half of 2023 as the world’s most forested country grapples with sanctions.
According to data obtained from Russian data agency Rosstat, a 35% slowdown in Chinese demand for processed logs has slowed Russian timber harvesting to a crawl.
In May, Wood Central reported that the foreign trade of Russian timber plunged 20% to 4.5 million cubic meters during the first quarter of 2023.
The drop came after the EU introduced sanctions against Russia over the war in Ukraine. The EU had previously been amongst the largest importers of Russian timber.
Impact of sanctions on Russian and Belarussian timber
In 2022, PEFC and FSC suspended Russian and Belarussian certificates – making it impossible for Russian and Belarussian timber to carry PEFC and/or FSC claims in the global market.
In the case of FSC, the decision to suspend Russia and Belarus resulted in the total supply of FSC-certified forests contracting by almost 35% since March 2022.
For PEFC, the number is around 15%.
Russia was the world’s largest softwood export market before the Ukraine invasion, with more than 20m hectares of Russian forest area dual-certified by FSC and PEFC.
This represents 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.
Yesterday Wood Central spoke to key figures connected to forest certification.
With multiple reports of Russian and Belarussian timber entering global markets via China, “the key is to vigilant with the FSC and PEFC formal claims process.”
“This means checking your supply chain and ensuring they have the correct claim on the packaging, invoice or delivery docket.”
Russia’s reliance on Chinese supply chains for export
More than 83% of Russia’s timber export goes through Chinese supply chains, sparking fears that Russian timber is entering global supply chains via Turkey, Kazakhstan and China.
Russian export of unprocessed timber saw a staggering decline during the first six months of 2023.
The volume of exported unprocessed timber dropped from 2.5 million cubic metres in the first half of 2022 to just 1.18 million cubic metres.
Besides China, most Russian logs are exported to a block o nine countries, including Kazakhstan, Belarus, Uzbekistan, Iran, Kyrgyzstan, the United Arab Emirates, Azerbaijan, and Tajikistan.
The exports of logs to China saw a sharp contraction, with reports that China is experiencing major economic headwinds.
Last week the Chinese National Bureau of Statistics reported that China’s GDP for April-June was 6.3%, lower than the economists’ forecast of 7.3% in a Reuters survey.
According to Nobel laureate Paul Krugman, there are fears that China could be heading for a 1990s Japan-type stagnation.
The volume of log exports dropped by 32.2% year-on-year, now standing at 958,000 cubic metres.
The value of these exports followed a similar trend, decreasing by 34.8% to USD 118.5 million.
Western companies leave a hole in Russia’s production capacity
In January, Wood Resources International reported that the decision by Western companies to leave the Russian market would lead to a drop in production.
Western companies began to exit from Russian assets immediately after Russia invaded Ukraine.
The exodus from Russia was associated not only with political but also with economic reasons.
As a result of the sanctions, Russian factories that supplied products to Western markets found themselves without sales.
Ikea, Metsä Group, Stora Enso, Krono Group, Egger, Mayr-Melnhof Holz and Kronospanhave exited from Russian assets during the first half of 2023.
This leaves the Russian industry especially vulnerable to a contraction in China’s economy.
Chinese downturn is having a major impact on Russia’s production levels
Without sales to Europe, sawmills in North-West of Russia rushed to serve the Chinese market, where they faced competition from Siberian and Far Eastern sawmills.
The Chinese downturn affected the production of windows and wooden frames, which witnessed a sharp decline of 29.2%, with the output reaching 152 thousand square metres in the first half of 2023.
Similarly, the production of doors, wooden frames and thresholds also experienced a slight decrease of 0.4%, amounting to 10.4 million square metres.
Production volumes in steep decline as domestic consumption drops
Production volumes have been in freefall, with Rosstat reporting that plywood production fell 41.3% in January 2023 after dropping to a decade low of 3.241 cubic metres at the end of 2022.
According to the latest data, the total volume of harvest for the first six months was 64.5 million cubic metres.
The harvesting of softwood logs amounted to 40.2 million cubic metres, reflecting a 5% reduction, while hardwood log harvesting decreased by 5.4% to 19.1 million cubic metres.
The harvesting of fuelwood experienced the sharpest decline, dropping to 5.2 million cubic metres, an 8.8% decrease from the previous year.
According to Lesprom Analytics, the average price of logs recorded a 3.8% slide to USD 123.9 per cubic metre.
Belarus witnessed a severe decline, with a threefold decrease in unprocessed timber imports from Russia.
Uzbekistan also recorded a significant downturn of 1.8 times, and Tajikistan experienced a 1.5 times reduction in its imports.
