At the recent B . C . Council of Forest Industries ( COFI ) annual convention in Vancouver , WOOD MARKETS ’ president Russ Taylor delivered an overview of the Russian forestry and sawmilling industry , detailing the means by which it has become a major competitive force in log and lumber export markets . Interestingly , much of the information and analysis seemed to come as a surprise to many attendees . The most common queries were related to Russia ’ s expanding and competitive sawmilling industry , its high profitability , and its increased export market share in China .
Russian Industry Overview : For background , Russia is one of the world ’ s dominant log and lumber producers and exporters . Consider the following :
• Softwood timber harvest : Russia has a 12 % market share of global output and surpassed Canada in 2014 for the # 2 spot ;
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• Softwood lumber production : Russia represents 10 % of global lumber production and that level is growing . It is the third-largest country producer ( after the U . S . and Canada );
• Softwood log exports : Russia has a 15 % global market share and is second only to New Zealand ; and
• Softwood lumber exports : Russia represents 21 % of global lumber exports and has been growing its share steadily . It is now the second-largest country exporter ( after Canada ). The trends in the Russian timber harvest ( softwood and hardwood industrial roundwood ) reveal steady gains since 2009 ( when the Russian log export tax reached 25 %). The Russian export tax subsequently reduced log exports to China , and exports to other countries dropped to almost zero . The exception was Finland : pulpwood exports persisted following changes to the export
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tax ( in 2012 ) when Russia was admitted to the WTO . A summary of total Russian log and softwood lumber exports shows a dramatic fall in log exports and an increase in lumber exports . The Russian log export tax and , more recently , the devaluation of the ruble , have created a high-margin sawmilling industry that is processing more sawlogs within Russia , and exporting more lumber / fewer logs .
Outlook : As we have been saying for more than two years , the Russians are coming . This is a result of competitive costs coupled with major capital investments into logging , sawmilling , value-added processing and logistics . With a competitive advantage , due to the devalued ruble , Russian mills will continue to gain lumber market share in China , especially as they increase their volume of kilndried and higher-grade lumber . Also of note , Chinese mills at the
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border are adding sawmill and value-added equipment to process Russian logs and produce highvalue kiln-dried lumber that can be shipped much further afield . Furthermore , with FSC-certified timber and lumber , Russian producers are learning about the economic returns of providing customers with the sizes and grades of lumber they need / want — a big change from ten years ago .
The simple fact is that Russia poses a growing threat to all other countries exporting lumber to China . The country ’ s influx of investment into forestry and sawmill capital improvements has greatly enhanced its costcompetitiveness , and it would be perilous to underestimate the extent of the country ’ s growing dominance .
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