New report reveals mixed fortunes for timber industry

The timber industry has reported mixed fortunes with Russia increasing exports overseas but losing its position as the powerhouse of the Asia-Pacific region. New figures have shown raw timber exports rose by seven per cent year-on-year to almost 30 million cubic metres, making the country the third largest exporter in the world.

According to the Lesprom Network report, China was the biggest destination for the wood, accounting for 52 per cent of all sales, a rise again of four per cent on last year.

But in spite of a growth in the market, Russia has still lost is position as the leading exporter in the region when looking at imports to China, Japan and South Korea. Seven years ago Russia was the leading supplier to China but has now dropped to fourth place behind even New Zealand despite its more distant geographical position. 

And during the 1990s, Japan imported about eight million cubic metres of timber from Russia but, according to figures from 2013, that has now fallen to just 226,000m3.

It is a similar picture in South Korea, where imports from Russia used to reach as high as one million cubic metres but today does not exceed 100,000m3.

Nevertheless, the increasing sales to China have been welcomed, particularly at a time in which Russia has faced economic sanctions from the West over the Ukraine crisis.

Aleksei Bogatyrev, head of the Lesprom Network, said: 'Russia managed to increase its share in China's timber import because the share of Canada's exports dropped partly because of timber houses boom in the US.'

Mikhail Yulkin, director of the Environmental Investment Centre, said the growth of Asia's share in Russia's exports is related to external trade policy of Russia's government. He said: 'Russian authorities raised export tariffs to limit exports and to encourage the country’s own timber sector, and it caused a drop in exports to Europe.

'But the Chinese got tariff preferences. Cutting down forests has been banned in China for the past 10 years because of environmental concerns. For example, the forests around the Yangtze are important for preserving.'

According to the new report, Russia exported about $2.4billion-worth of timber in 2014, with China now buying more than half of it. The second largest importer was Finland, taking 36 per cent of Russia's timber, a small drop of two per cent since last year.

Raw timber exports in 2014 were at their biggest level since 2008 but did not quite reach the high of 82.6million cubic metres hit in 2007. In terms of Siberia, exports in 2014 increased by 3.6 per cent compared with 2013 year.

Only 25 per cent of the raw timber in Russia is actually exported, and according to Ivan Valentik, the head of Rosleskhoz, the sector accounts for 1.3 per cent of GDP. However, he said this could be doubled as the timber sector is not operating at full capacity.

But any thoughts of it becoming as profitable and successful as the oil sector have been dismissed.

Natalia Orlova, senior economist at Alfa bank, said: 'Obviously, the current economic situation encourages the development of other sectors of the economy, but even in case of large-scale development programmes in the timber sector, timber won't replace the oil sector - the amounts are incompatible.'

For comparison, according to the Federal customs service the oil exports in January 2015 brought Russia $7.854 billion.

In a major interview last year Foreign Minister Sergei Lavrov said Siberia and the Far East will reap the benefits of moves to align Russia to Asia. He insisted there was 'enormous potential' in closer ties with neighbouring countries, particularly China.

Vladimir Putin has actively tried to engage countries in Asia, particularly Singapore, China, and India, to overcome the impact of Western sanctions and stimulate the economy.

As evidence of the growing cooperation between Russia and China, 50 agreements were signed during a meeting between Mr Putin and the Chinese President Xi Jinping in May.