Russian Forestry in the Global Timberland Space

September 23, 2019

The Russian forest sector is an important player in global timberland space and continues to offer opportunities for further development. Russia has the biggest forest area in the world and is one of the top roundwood producing countries. However, the overall standing stock includes large areas that are not economically available; thus, most of the forest remains under-utilised due to limited infrastructure.

Mr Jarno Seppälä, Head of Forest Industry Consulting at Indufor, presented the Russian forest sector and its importance and dependencies in the global context at the “Who Will Own the Forest? Timberland Investment” Conference in Portland, Oregon, on September 18, 2019.

Russian forest resources fall under federal ownership, and currently, there are no options for the privatisation of forests. The government has leased about 20% of forest lands. The leasing time is up to 49 years, while the average rotation period for coniferous forests is 80 years. Interestingly, the largest Russian forest leaseholders (e.g. Segezha, Ilim Group and RFP) are among the world’s largest forest owners/leasers. There are also significant foreign leas holders in Russia of which most are from western Europe. However, there are also numerous Chinese leaseholders, especially in the Russian Far East.

Exports account for under 10% of the total harvest, and China is by far the largest export destination of roundwood. The volume of Chinese imports has amounted to about 13 million m3 during the last years. However, there has been a major decline in volumes in 2019. This is partly due to the export limitations on birch logs during the first six months of 2019. Further export limitations on softwood logs from Russian Far East will be due in October 2019. The continuation and expansion of export ban(s) / quota(s) to China are expected to be the most likely near-term disruption related to Russia’s role in the global roundwood trade. The impact will be seen the most in China.

Another major phenomenon that can influence the balance between domestic roundwood processing and trade is the Forest Sector Strategy 2030 which calls for opportunities to develop value-added forest products and wood processing industries. The strategy also aims to redirect roundwood to be utilised in local consumption rather than for exports. In the baseline scenario, the domestic roundwood use would increase by over hundred million m3. The strategy foresees declined roundwood exports volumes. Over half of the ongoing and planned forest sector investments focus on the sawnwood and wood panels product segments. Consequently, Russia is looking to encourage more significant investment in the forest sector as a whole.

Local production estimate as in the Forest Sector Strategy 2030.

 

“Who Will Own the Forest?” is a 3-day conference held in Portland, Oregon, offering perspectives on institutional timberland investing and a platform for timberland owners and forest sector players.

Indufor is a global leader in Natural Resources Management, Investment Advisory, and Strategic Industrial Development consulting. We support our customers to compete and sustainably grow in international markets. Indufor has offices in Finland, New Zealand, Australia and the United States, and representation in China. We have close to 40 years of experience in more than 100 countries. Our services support our clients to make the world more sustainable and greener.

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Jarno Seppälä

Head of Forest Industry & Bio Solutions Consulting

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