Scarcity of birch logs in Russia, mainly driven by the country’s rapid birch plywood capacity expansion and significant birch log export growth, has already been discussed between the domestic industry and the government officials for a couple of years. It seems that the dialogue has finally resulted into concrete actions. Though pending for official approval, birch log export limitations are expected to take effect from January 1st, 2018.
Following the poor log availability, rapidly increasing export volumes and prices together with fierce competition for premium quality logs Russian plywood industry has been lobbying changes in birch log export policies. And finally, they have succeeded. According to Russian Federation Governmental Decree, starting from the beginning of 2018 there will be special limitations implemented in birch log exports from Russia. Here is a short summary of the main issues, described in the above-mentioned document:
- What products fall under the regulations? Birch (Betula spp.) logs, with the low-end diameter above 15 cm and length exceeding 1 m. Current customs code – 4403 95 000 1.
- What is the new export mechanism? Export limitations are implemented through quotas. Quota amounts to 567 000 m3 for the first half of 2018. In fact, this volume corresponds to birch log exports in first half of 2014.
- How and to whom the quota volumes are granted? The quota will be implemented by granting export licences to qualified companies. The licenses are to be issued to the companies, who have been involved in birch log exports in 2014-2016 and in the amount proportional to their previously exported volumes.
- Who grants the quota? Ministry of Industry & Trade
- Which importing countries will be affected? All countries outside the Eurasian Economic Union (EEU). Member countries of EEU are Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia.
- How long the regulations are valid for? From 1.01.2018 to 30.06.2018.
As mentioned earlier, the new policies are not official yet and lack approval from the government of Russian Federation.
What are the consequences?
Firstly, regulations should provide short-term relief for Russian birch plywood producers – the availability of the logs should improve, and prices can decrease. In fact, poor harvesting during the summer season caused idleness or decline of capacity utilization rate of the operating plywood mills.
Secondly, as there is no mentioning of affected regions within Russia, one can make a conclusion that regulations will be countrywide. Out of top birch log exporting regions, only two are located within the sourcing area of Russian birch plywood mills.
And finally, the effect for plywood industry, harvesting companies and other stakeholders looks questionable in the long-term. More details are in in the Insight 1 referred to above.