Russian timber industry is to start reviving in 2010, experts say. In order to overcome low profitability experts suggest revising existing strategies, using more secondary raw materials, creating forest plantations, investing in developing markets and expanding product range.

As in most countries, woodworking sector is to be the first sector that will feel improvements in the Russian timber industry. However, there is a risk that a complicated situation in the logging sector aggravated with financial crisis and increased export duties on round wood, could lead to the lack of raw materials and raised prices on round logs. Unfortunately, logging sector could slow down recovery of the timber industry as harvesting companies will have to face a lot of difficulties, incl. legal and structural reform of forest management.

Logging volumes in the European part of Russia are more likely to reduce in 2010. According to analysts, this fact will be caused by the same reasons as in the previous year. Russia has a limited market of pulp wood, whereas woodworking mills manufacture products with low added value. Costs on logging and transportation in particular are also increasing against unfavorable climate conditions. Thus, many lend tenants refuse from lease agreements.

Petteri Pihlajamäki, Executive Vice President, Pöyry Forest Industry Consulting Oy, a part of Pöyry Group, considers that in order timber companies could reach more efficiency in 2010 it is vital, first of all, to adapt the market, industrial and raw-material policy to post-crisis reality. In particular, it is worth reconsidering which markets are target for the company, which strategy of raw material supply is more preferable due to complicated situation in the logging sector. One of the key factors for the Russian timber companies is using new market opportunities the Chinese and other Asian markets.

Secondly, it is important to focus on increase of production efficiency. Current low prices on raw wood, electricity and labor force are to rise in future and in order to keep a competitive prime cost there is no other way than to increase production efficiency.

Thirdly, woodworking companies are to improve a system of their products distribution in the Russian market, i.e. to cooperate with the Government, to develop the projects on timber house construction. Logging companies need a non-standard development strategy and are to promote their products in the domestic market instead of foreign one. 

Then it is worth paying attention to projects aimed at woodworking and manufacturing of the products with more added value. And, finally, companies should face completely new type of products and business opportunities – bio-energy and bio-fuel. Low energy tariffs in Russia slow down development of bio energy so far, however, the situation could change. 

The mentioned steps taken, Russia is to become one of the key regions of timber industry development in future.

Business Support Bureau "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! New edition in December 2009!