As sales to Western countries are nearing an end, VLP – as well as the entire Russian timber industry – is focusing more on the East and South, that is mainly China and the Near and Middle East.
Avalanche of wood in the east
Despite the record production of softwood lumber in Russia, smaller volumes of lumber reached China in 2021 due to logistical problems in ports and on the railway. According to Aleksin, these problems have now been solved, however, “you can’t organize the entire logistics for the shipment of these additional quantities to the east within two months. There are no extra wagons, locomotives or trucks available on call.”
When VLP ships wood to China now, at least transport times have halved. Shipments from St. Petersburg need three months to reach China via Antwerp. By rail or via the Russian ports in the Far East, it takes one to one and a half months according to Aleksin.
As if Sweden was on lockdown
Chinese demand is currently very sluggish as a result of the coronavirus pandemic and the measures taken by the government to fight it. The lockdown in Shanghai is particularly painful. This city alone has a GDP of €650 billion (Sweden: €670 billion).
China unattractive compared to the EU
Aleksin puts the current difference between prices in China and those in the EU at €90/m³. He therefore expects that Europeans will withdraw from China. “Russians will provide these quantities,” Aleksin says, who points out that China imported 14.5 million m³ from Russia last year, which is half of Russia’s total exports.
The EU for its part bought around 8.5 million m³ of softwood lumber from Russia, Belarus and Ukraine last year. Since these trade flows will likely dry up, Aleksin expects a shortage of lumber in the EU. “Certain qualities, types of wood and dimensions won’t be available anymore immediately,” he predicts. Planed timber and unsorted wood are examples which first come to his mind. He already sees his western sawmill colleagues adapting the cutting patterns – to increase the yield in terms of value, but at the expense of quantities.
In North Africa, Egypt is said to be a market with strong competition between Russia and the Scandinavian countries. What is true for China also applies there: “Europeans can sell their products with more profit on the domestic markets.”
Supply challenges for Baltic states
Aleksin sees some challenges ahead for Baltic processing companies. “They won’t be able to replace the Russian quantities with wood from Scandinavia and will probably have to buy lumber from Germany or other European countries,” he assumes.
The changes on the global softwood lumber market with substantial shortfalls at a local level will also keep the price above US-$1,000/1,000 bft (around €620/m³) in the US, according to Aleksin.
Railway connection required for exports to China
The Russian sawmill group has its doubts about the sale of Stora Enso’s two sawmills. “Some believe in buy-back clauses,” Aleksin says. Furthermore, when it comes to sales, both sawmills are designed to meet the needs of the West, and only one has a railway siding for possible exports to China. “I have no idea how the two are supposed to be operated.”
MM the Russian number one in Japan
According to Aleksin, Mayr-Melnhof Holz also faces some difficulties in Efimovskij. “It is the strongest Russian company in Japan – but it doesn’t have a railway siding for the export of lumber either.”
Operations at the Svir sawmill, Metsä Group’s only production site in north-western Russia, have been suspended. “They would’ve also had very limited possibilities to export wood to the East,” Aleksin points out.
After July 10, there won’t be enough lumber available in the EU because of the interruption of the trade flow from Russia. Prices will rise in Europe. As a result, exports to the MENA region or China will decrease.
* see also the interview "Lose-lose situation for everyone but China"
