Total income of timber industry enterprises decreased by 74% in QI-QIII 2008, despite revenue growth reaching 20% within the analogous period. Decline in demand for timber products was fixed starting from the second half of 2008 which resulted in decreased prices with net costs increasing mostly due to advanced prices on energy resources. Thus, harvesting turned out to be unprofitable with revenue in pulp and paper sector decreasing by 20%.

Harvesting volume decreased by 14.4% in 2008 as compared to 2007. Production growth in woodworking made up 1.4%, that of pulp and paper, printing and publishing sector – 0.8%. Government regulation on increasing of export duties on round log (by 20% in July 2007 and by 25% in July 2008) led to decreased competitiveness of Russian companies on the world market. 

Due to existing financial situation the second half of 2008 watched a significant decline in construction volume in Japan, China, and Western Europe, production output have significantly decreased in main economic sectors using timber as well. As a result, demand for timber products started decreasing which became critical point for many export companies that have no diversification of production and other sales markets or are situated in areas remote from country borders.

Thus, companies faced financial difficulties; many of them took decision on assortment expansion by increasing share of products with added value, and the other decreased production output and reconsidered production plans for 2009. 

Business Support Burea "Runa" www.runa.info

For more information about Russian timber industry, please see MOST  (Market Overview. Statistics. Trends) - regularly updated digest of the situation in the Russian timber industry!