According to Lesprom, Russian lumber manufacturers face several challenges at the same time. Due to the sanctions imposed by the EU, Russia loses the important European export market. The EU did grant Russia a transitionary period, which applies to contracts that had been signed before the sanctions came into effect. However, this period expires on July 9. Sawmill companies in the north-west of the country in particular are feeling the effects of the sanctions.
In addition, exports to China are also decreasing sharply (-20% compared to last year). Lesprom sees the closure of ports and a sluggish construction sector as the main causes for the decrease.
The Russian domestic market will be more than saturated already in June.
In the past few years, Russia produced around 40 million m³ of lumber a year of which only around one quarter is needed on the domestic market. As a result, increasing volumes are produced to fill the warehouses. According to Valerie Pisarev, Managing Director at lumber producing company LHK Cherepovetsles, his company had to move around 40% of the lumber, which was supposed to be exported, to warehouses already in February.
The continuous increase in value of the ruble (which is currently well above pre-crisis levels) adds fuel to the fire. Falling lumber prices have already impacted profitability, with lumber being sold for less than the cost price. “No company will keep up production when it means accumulating nothing but losses. It is more sensible to stop production temporarily until the market isn’t saturated anymore,” Alexander Konyukhov, Deputy Head for Production at SevLesPil, a leading Russian lumber producer, says about the precarious situation.
