Russian Wood Industry Has Potential – but also Challenges

June 6, 2019

The Russian wood product industry is one of the world’s most dynamic ones thanks to its increasing domestic processing of roundwood and production of higher value-added products oriented towards exports. The Russian wood product industry produces sawnwood and different wood-based panels. In 2018, these valued almost USD 10 billion, over 1/3 of the total Russian forest industry output. European part of Russia is the leader in wood-based panels production, while Siberia is the largest producer of sawnwood.

The key factor in Russia’s wood industry competitiveness is the low cost of raw material. Russia has one of the lowest log costs among the main competing suppliers. For the last couple of years, the soft log cost has been between USD 40-50 per m3. For example, this is about 25% of the price level in China. Part of the favourable development when compared to the main competing countries, is caused by the low value of the Rubble. In local currency, however, the prices have increased considerably, and are continuing to climb. Labour cost is also low, and the wood product sector is still heavily labour intensive in Russia, still among the most intensive among the main competing countries.



The sawnwood output in Russia, mainly softwood, has more than doubled since 2000, and has been almost 40 million m3 in 2018. Most of the producers, especially large-scale ones, focus their sales on the export market. China, Central Asia and the Middle East account for over 80% of total export volume. Despite the low raw material costs, there are several challenges on sawnwood production. Unlike in many competing areas, stumpage value in Russia is low, and log cost consists mainly of harvesting and transports. Thus, market drivers that may decline the stumpage prices have a smaller impact to the log cost than in competing countries. Road infrastructure will continue to pose a challenge, and capital investments in forest infrastructure are needed.

The sawnwood industry should aim at improving the labour productivity, investing in infrastructure, increasing the value of its products and utilising by-products more efficiently. The current good-quality raw material allows the production of higher value products, such as planed, machine stress rated (MSR), modified/treated products, CLT, EWPs, etc. There is a growing demand for these types of products, especially in view of the global tendency of using more renewable construction materials. For example, high-rise wooden residential construction is increasing rapidly in many of the competing countries. Russian producers may have a share in this market, but it calls for investments into the sector.

CLT Panel

Wood-based Panels – Plywood

The wood-based panels sector is developing quite rapidly in Russia. The production volumes almost doubled over the last 5 years and reached around 18 million m3 in 2018. Main causes for the increase were strong production and high domestic demand for particleboard, a growing share of MDF and OSB, and well-established, world market-driven plywood manufacturing. Russia is the biggest producer of birch plywood and the local companies are increasing their presence in the global market. Since 2010, plywood output increased from 2.3 million m3 to more than 3.5 million m3, which corresponds to about 3 million m3 increase of domestic birch logs consumption.

In the long-term, global birch plywood consumption is expected to grow from the current 4,5 million m3 to nearly 6 million m3 in 2030. Most of this increase is expected to be satisfied by Russian plywood. Currently, there are more than 10 announced birch plywood production projects in the pipeline, both expansions of existing facilities and greenfield sites, initiated by already operating plywood companies. If all publicly announced projects materialise, the total domestic birch plywood log consumption will grow by nearly 30% and may increase the birch log deficit already tormenting the sector. There are several reasons, why the availability of high-quality raw material is a challenge:

  • increasing birch plywood production,
  • greenfield investments in medium and large plywood facilities,
  • emergence of small birch log processors (sawnwood, veneer, plywood),
  • increasing birch log exports, especially to Asia (currently more than 80% of the total birch log export goes to China),
  • shortages in supply of birch logs.

All these factors lead to birch log price increase. One option to reduce the cost burden on birch logs could be an entry to softwood plywood business, resulting in synergies in raw material procurement and in an opportunity to expand the product portfolio to Laminated Veneer Lumber (LVL), which is a high-strength EWP based on integrated production of veneer. It is used primarily for structural applications. LVL is comparable in strength to concrete and steel, but renewable and is manufactured by bonding together rotary peeled or sliced thin wood veneers under heat and pressure. Typically, initial investment in LVL production is higher than for example for CLT, which can be produced with market sawnwood. The existing veneer producers could consider entering the LVL business with a smaller incremental investment.

Examples of LVL

Outlook and Expectations

A world-wide trend is to promote economic and industrial sustainability through the increased use of renewable bio-based products and materials. Wood and wood-based modern products (e.g. for construction purposes) play a significant role in the bioeconomy, and their demand will only grow. As a country with over 20% of the total world wood stock and as one the biggest producers of roundwood (even though only about 30% of the total AAC of 700 million m3 is currently utilised), Russia has significant opportunities to satisfy these demands. Are the Russian producers and companies able to reply timely on the possible changes and the opportunities?

The exchange rate development has given some competitive advantages to Russian wood industry producers, but this will not be enough in the long run, and modernisation might open up new avenues for improving competitiveness. Russian wood industry producers clearly enjoy good prospects to increase their product attractiveness both in the local and global markets. Currently, more than 70 projects, supported by the national investment programme, are at the implementation stage in Russia with a total volume of over USD 6.5 billion. Over half of them focus exactly on the sawnwood and wood-based panels product segments. In addition, the Strategy of Forest Sector Development 2030 also projects strong growth for these industries. Thus, the sector looks rather promising in terms of its future development and commercialisation.

Current Wood Industry Investments in Russia

This article is based on the presentation of Indufor’s Mr Sergei Senko, at Ligna on the 29th of May 2019.

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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Sergei Senko

Senior Consultant

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