The forest industry in the Far East is in deep crisis and major companies are going bankrupt or close to it, says regional forest industry association Dalexportles in a petition to the president’s administration. The association’s members cover half of the wood harvesting in the Far Eastern Federal District and 80 percent of the wood processing.

According to Dalexportles, the industry will retain a quarter of its current capacity, personnel and turnover in 2020. Two of the five largest forest industry companies are already bankrupt (Asia-Les, Arkaim), Primorsklesprom is close to bankruptcy, the woodworking mills of Rimbunan Hijau are standing, and the financial situation of the RFP Group is bad.

Five million cubic meters of wood were exported from the Far Eastern District in January-August 2019, 20 percent less than the year before. Total wood exports may decrease 35 percent in 2019. In order to safeguard the activities of the forest industry, Dalexportles calls for canceling the increase in the wood export duties in 2020 and to reduce the export duty to 6.5% on all roundwood. From 1 January 2020, the export duty on Far Eastern tree species is set to rise to 60% and from 1 January 2024 to 80%. The exception is the export quota of 4 million cubic meters for wood processing companies, which now has a duty rate of 6.5%.

Different parties’ estimates for Kommersant:

  • Forest resources have been transferred under various excuses to meet the needs of the pulp mill project, but the planned Amursk pulp mill will not be built once Chinese and domestic investors withdrew from the project, says Alexander Sidorenko, director of Dalexportles. Dalexportles proposes to return forest resources to existing companies, reduce wood export duties and oblige companies to use their wood processing capacity. Wood that has no domestic demand could be traded for export through wood stock exchange.
  • Viktor Doroshenko, director of Primorsklesprom, confirms that the situation is critical. The company is trapped, on the one hand, with rising wood export duties and, on the other, a Japanese investor who is not allowed to buy share majority and invest in the company. The company must reduce staff.
  • Dmitry Valtfogel, director of the RFP Group, says the government’s strategy to increase domestic wood processing and increase roundwood export duties is self-evident, but the crisis cannot be denied. As a result of the USA-China trade war, the prices of major forest products have fallen by 20-30 percent in the Asian market. In the Far East, conditions are weaker than in other areas of Russia due to the lower density of forests and weak forest road infrastructure. In addition, the area lacks the pulp industry, so pulpwood and wood industry by-products have no markets.
  • WhatWood consultant Marina Zotova confirms that wood export from the Far East has collapsed this year and that wood processing has not increased. However, decreasing export duties does not solve the problems of wood processing.

According to Kommersant, the Ministry of Economic Development and the Antimonopoly Agency have already announced that it is possible to change the Far Eastern roundwood export quotas and duties. However, the question is under jurisdiction of the Ministry of Industry and Trade, which is supporting the increase of export duties. Wood processing in the Far East has grown, but 42 percent of harvested wood is still exported unprocessed, says Deputy Minister Viktor Yevtukhov. As wood processing cannot develop in an instant, the ministry has prepared suggestion to remove export duties on pulpwood, which currently has no processing capacity in the Far East.

Sources: Kommersant, Russian Timber Journal 11-2019


Earlier related to theme: 13.9.2019 Regulation on softwood exports