Vladimir Putin’s proposal to completely ban the export of coniferous round timber from 2022 divided the timber market into two camps. If in large corporations, which often face a shortage of raw materials, the measure is considered useful, then companies that do not have processing facilities call it deadly for themselves. The government promises to support the players. But experts doubt that a sharp halt in exports will benefit the market, which in any case will not have time to reorganize in a year.
The decision of President Vladimir Putin to ban the export of coniferous and valuable hardwood round timber from Russia from 2022 will help increase the volume of scarce raw materials within the country, but will require the state to help many market players, especially in the Far East, say sector participants interviewed by Kommersant. On September 30, the President, following a meeting on the development and decriminalization of the forestry complex, announced that the export of unprocessed or roughly processed timber would be banned from 2022.
The ban has been debated for years.
Sources of Kommersant close to the government confirm that “this has been going for a long time, putting things in order in the sector was one of the key tasks of the renewed cabinet of ministers.”
Last year, the speaker of the Federation Council Valentina Matvienko suggested stopping the export of round timber, but only temporarily, while the new Forest Code is being developed. And the head of the Ministry of Natural Resources Dmitry Kobylkin proposed to stop supplies only to China, which accounts for up to 70% of timber exports from Russia.
Segezha Group, one of the largest forestry companies, has a positive assessment of the export ban. Nikolai Ivanov, managing director for the implementation of state programs and forest policy of the company, explained to Kommersant that support for timber processing is necessary, and the shortage of raw materials, except for deciduous pulpwood, is obvious. So, although Segezha is 70% self-sufficient in raw materials, the company admits that the introduction of a ban on exports may expand the possibilities of purchasing them on the side.
At the same time, Nikolai Ivanov calls for a clear definition of the concept of “roughly processed wood”: it is important that the export of packaged kiln-dried sawn timber is not banned. He also expresses concerns about the too short transition period: “I believe that not all market players will have time to reorganize. This is especially true for the Far East, small and medium-sized businesses. “
The Ilim group notes that the steps to put things in order in the forestry sector look “certainly right”. They also believe that the ban on the export of unprocessed timber will increase the amount of available raw materials for domestic timber industry producers. “At the same time, in our opinion, it is also important to develop a set of measures to stimulate the development of internal processing,” the company adds.
But many players in the sector consider a complete ban on roundwood exports a dangerous move that could negatively affect the operation of the industry, especially in the Far East. Local companies are already complaining about negative business margins due to restrictive export duties on unprocessed timber.
So, after Russia’s accession to the WTO in 2012, export quotas were formed, which can only be used by processors (according to quotas, the duty is 6.5%). Outside the quotas, rates have increased from 25% to 60%, and in 2021 they will already be 80%. In 2019, the volume of roundwood exports from the Russian Federation decreased by 25%, to 4.5 million cubic meters. m. Association “Dalexportles” asked Prime Minister Mikhail Mishustin to reduce duties for all companies to 6.5%, but to no avail.
A complete ban on exports, say Kommersant’s sources in the market, will lead to the opposite effect: it is impossible to arrange processing within the period allotted by the president, so that most of the timber will become “even more gray”, and budget revenues will fall.
The government, however, is going to help enterprises. In particular, Vladimir Putin has already ordered the launch of a program of concessional loans from January 1, 2021. Deputy Minister of Industry and Trade Viktor Yevtukhov told Kommersant that “there will be a special program of state support for the rearmament of the timber industry.” At the same time, he believes that the companies already “had a sufficient period to create processing facilities” and given that there is a year left before the export ban, “there are no risks for producers, including in the Far Eastern Federal District.”
At the same time, the government is aware of the problem of a potential increase in gray round timber exports.
This is evidenced by the intention to introduce an information system for monitoring timber harvesting from the plot to the final sale – LesEGAIS. According to Deputy Prime Minister Victoria Abramchenko, who oversees the forestry industry, “together with the customs authorities and the tax service, we will control the movement of every transaction – from the plot to the warehouse, from the warehouse to processing and beyond”. If the consignment of timber does not have confirmation of the legality of origin, then all transactions with it are blocked. The system will be launched in pilot mode from January, and without fail – from July 2021.
WhatWood analyst Maria Frolova does not consider the forthcoming export ban an unexpected decision. But, she believes, “such drastic measures, introduced in such a short time, are likely to negatively affect the situation in the industry.” She explains that the export market for coniferous roundwood and valuable hardwood is already limited by quotas and duties. Ms. Frolova recalls that in the Far East, the increase in duties and the introduction of quotas paralyzed the work of a number of enterprises. Most likely, she says, a longer period is needed for the adaptation of industry participants, primarily loggers. At the same time, the expert adds that Chinese consumers are already coping without Russian raw materials, focusing on unprocessed wood from New Zealand and windblown wood from Germany.