Wood Resources International LLC: WRQ Reports That Domestic Sawlog Prices in Russia Have Gone up 25% in Three Years, Despite Higher Log Export Tariffs

When Russia joined the World Trade Organisation (WTO) in August 2012 the government was forced to reduce these export taxes to 13% and 15%, respectively, for spruce and pine logs. Despite these tariff reductions, there is not likely to be a major increase in the flow of logs from Western Russia to Finland, the major destination for Russian logs. Finnish sawmills close to the Russian border will continue to buy mostly from the domestic market in Finland, using only marginal volumes from Russia when the costs are competitive.

Overtime, as lumber markets improve in Europe, exporting sawmills in Finland will need additional sawlogs, and it is therefore likely that Finland will increase its reliance on Russian sawlogs again. However, log trade between the two countries will never return to the same levels as before the implementation of the export tariffs because Finnish sawmills have now established other log sources. The decline in trade has been dramatic the past eight years, from a record high of 6.4 million m3 down to an estimated 600,000 m3 this year.

Sawmills in Western Russia have kept up production relatively well during the summer months this year despite the weak lumber demand in Europe because markets in Western Europe account for a fairly small share of the Russian export volumes. Instead, Egypt and former CIS countries are the major destinations for softwood lumber produced in the Western provinces of Russia, and these markets have stayed fairly healthy and even improved during 2012.

The steady demand for sawlogs by the sawmills in Northwest Russia coupled with the fairly tight log supply resulted in close to record-high price levels (in Ruble terms) throughout the year, a development in contrast to many log markets in Europe where log prices have fallen the past six months, as tracked by the WRQ.

Wood Resources International LLC (WRI), an internationally recognized forest industry-consulting firm established in 1987, publishes two quarterly timber price reports and have subscribers in over 25 countries. The Wood Resource Quarterly, established in 1988, is a 50-page market report and includes delivered sawlog prices, pulpwood and wood chip price and market commentary to developments in global timber, biomass and forest industry. The other report, the North Americam Wood Fiber Review, tracks prices of sawlogs, pulpwood, wood chips and biomass in Canada and the US.