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Russian Lumber Export Sets New Record

Russian Lumber Export Sets New Record | Timberland Investment | Scoop.it
With a rapidly declining rate of the ruble and falling domestic consumption, the Russian export of lumber is increasing to new record levels. Exports increased by 17% in November 2015 compared to same month of 2014. During January-November the export increased by 6% compared to 2014. This means an increased competition in some markets for among others; Swedish, Finnish and Canadian sawmills, says Jenny Wessung, CEO of research company Woodstat. Egypt is now the largest pine lumber market for Swedish sawmills and the exported volume is now nearly twice as large as the volume to United Kingdom.
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Russia Is Running Out of Forest

Russia Is Running Out of Forest | Timberland Investment | Scoop.it

It seems unfeasible that Russia, which holds a fifth of the planet's forests, could run out of wood. And yet it is happening, at least with commercially usable forests, environmental analysts say. The Russian logging industry will face lack of harvestable timber in 10 to 20 years, a short time by the standards of an industry naturally tied to slow tree growth cycles, according to their consensus.
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To keep the logging industry on the rails, Russia needs to go from extensive to intensive forest management — i.e. from clearing forests once and moving to new territories to replanting them, industry players and officials agree.


But the process requires massive reform and multibillion-dollar investment that would take decades to recoup — neither of which is likely to materialize anytime soon, given Russia's flagging economy and dismally unstable investment climate.
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Russia had about 8.8 million square kilometers of forests as of 2010, according to a 2012 study by the UN Food and Agriculture Organization, or FAO. This is 20 percent of the world's total and more than any other country. Brazil is second with some 5.1 million square kilometers. But Russia only accounted for some 4 percent of the global logging output, the FAO study said.


Easily accessible forests in Russia are shrinking rapidly, said Artyom Savko, a spokesman for Ilim Group, Russia's biggest papermaker with an annual output of 2.6 million tons.


The Russian logging industry was thriving from the 1940s through the 1970s, mainly on forest reserves in the central European part of the country. But those reserves are long depleted. In the northwestern Republic of Karelia, a former hotbed of the industry that housed more than a hundred logging settlements, only two such villages survive.
Russia's main sources of timber now are in Siberia, the Far East and the country's European North.


But the cost of shipping timber across hundreds and thousands of kilometers of roadless terrain can be too high to render logging profitable in large parts of those regions, said Savko, whose company's business is centered in the Arkhangelsk and Leningrad regions of northern European Russia and the Irkutsk region of eastern Siberia.

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China to Boost Timber Investment in Russia Amid Western Threats to Isolate Moscow

China to Boost Timber Investment in Russia Amid Western Threats to Isolate Moscow | Timberland Investment | Scoop.it

Chinese investors plan to launch the first phase of a major Siberian timber complex later this year, part of a push by Beijing to cement business ties with Moscow amid strained relations between Russia and the EU, a senior manager of the venture said Thursday.


A timber processing park in the Tomsk region of Western Siberia will be part of the first phase of the project, including three mills and a dedicated power plant for industrial needs, said Boris Kaznacheyev, Deputy Director General of Roskitinvest.


Investment in the project has already reached 9 billion rubles ($250 million), Kaznacheyev said. The overall investment in timber logging, processing and related infrastructure is expected to reach 30 billion rubles ($830 million) by 2022.

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Nicole Kearsch's curator insight, October 24, 2014 1:18 PM

This is interesting and also somewhat scary.  China has swooped in on Russia when the EU has turned their backs to Russia after the reunification of Crimea.  China is ready to set up shop in Western Siberia to create a thriving timber business.  Also they plan to create a renewable energy project in Crimea.  With China making these developments in Russia, Putin has also noted that some of Russia's gas lines would run into China as part of the deal.  The scary part of this deal is if it leads to more than just China and Russia working together on timber companies, gas lines and renewable energy.

Cyrena & Chloe's curator insight, October 27, 2014 3:53 PM

Economic: The article represents economic because China is trying to make a timber investment. The article discusses about the attempt of investment in Russia. China's first part of the plan is to create a few mills and a power plant for industrial needs in Russia. China has admitted 250 million USD in an expectation to procure at least 830 million USD by 2022.

Rachael's curator insight, October 29, 2014 2:33 PM

EQ: Why might the Chinese want to build a treaty with Russia to trade timber? What purpose does the timber have to the Chinese?

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Hedge fund downgrades stock over company's links to illegal logging in Russian Far East

Hedge fund downgrades stock over company's links to illegal logging in Russian Far East | Timberland Investment | Scoop.it

A hedge fund manager has downgraded Lumber Liquidators' stock over the company's alleged links to illegal logging in the Russian Far East, reports The Wall Street Journal.


Speaking at the Robin Hood Investors Conference on November 22, Whitney Tilson, the founder of Kase Capital Management, said Lumber Liquidators' stock price may be inflated due to purchases of illegally sourced timber from Russia, which is less costly than legitimately-sourced wood. He set a two-year price target of $53 for the stock, which was trading at $115 at the time. The stock plunged 12 percent after the presentation.


Tilson's remarks were based on a recent report published by the Environmental Investigation Agency (EIA). A multi-year undercover investigation by the green group found that Lumber Liquidators (NYSE:LL) has been buying illegally logged timber smuggled from Russia into China. EIA said the practice violates the Lacey Act, which holds U.S. buyers criminally responsible for buying illegal forest products.

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Turmoil in the Middle East creates a lumber buying buffet for China

Turmoil in the Middle East creates a lumber buying buffet for China | Timberland Investment | Scoop.it

Traditionally one of the main shipping destinations for Russian and European low grade lumber, Egypt’s Arab Spring, and the subsequent turmoil and chaos that have affected the country, has reduced lumber imports into the port of Alexandria to less than a third of what they were only a few years ago. Syria was also a major destination for low grade lumber until the current civil war overtook the country. Can you imagine going into a bank in Damascus or Alexandria and asking for a loan to buy lumber? It just isn’t happening. A tremendous amount of commerce is being put on hold in that entire region because of uncertainty and fear.


Russia alone was shipping close to 4 million cubic meters of lumber annually into Egypt. This year that volume may be a little less than 1.5 million cubic meters if the current trends hold true.

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Other countries with main shipping ports such as the United Arab Emirates, Pakistan and Slovenia are trying to fill the vacuum of Egypt’s declining lumber trade in the region. However, building a strong business relationship over new sales routes take time. You can visit the ports of Dubai, Karachi and Koper today where you can see lumber for use in reels, concrete forming, pallet, crating materials, and general construction from pretty much every major sawmill in Scandinavia, Central and Eastern Europe and Russia.


The total volume of lumber being sold into the region as a whole however is down dramatically.


What you are seeing now are sawmills or groups of sawmills which used to ship entire breakbulk vessels to Egypt now shipping dramatically less into the region overall and looking to China as an alternative market. Russian sawmills are now making headway into China as well. American and Canadian lumber suppliers are visiting customers in China and finding that they are suddenly competing against Russian and European lumber products.


The only issue that is holding Chinese buyers from increasing their purchases out of Europe is the fact that transit times compared to North American suppliers are 2 to 3 times longer and there are few common sizes produced in Europe. 

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One last note to ponder, if and/or when the lumber “super cycle” hits, China may have no other option to satiate their demand for wood fiber than to look to Europe and Russia for additional lumber supply. In my humble opinion, from what I have observed and researched, when we reach 1.2 million housing starts the US will need 100% of the volume of lumber that is heading to China out of North America. The Chinese buyers will have no other option but to look elsewhere for lumber supplies as well as many switching to importing logs and sawing them themselves, changing from lumber import distributors to sawmill distributors. Will North American sawmills continue to try to stay in the export markets to stay diversified for when the next market correction occurs? Or as domestic demand increases will they look at export markets as only spot based sales markets?

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Russia Plans To Commit $400 Billion Roubles To Boosting Forestry Industry, Putin Says

Russia Plans To Commit $400 Billion Roubles To Boosting Forestry Industry, Putin Says | Timberland Investment | Scoop.it

President Vladimir Putin said Russia will earmark 400 billion (£8.3 billion) roubles to boost its forestry industry and make the sector attractive for investment, Russian news provider RIA Novosti reported. Russia’s forestry sector has been plagued by poor governance, low forestry investment potential and illegal logging and timber sales.

Sam Radcliffe's insight:

By my arithmetic that's about US $12.65 billion.

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Russia blames al-Qaeda for European forest fires

Russia blames al-Qaeda for European forest fires | Timberland Investment | Scoop.it

Fires that devastated large parts of European forestry have been blamed on al-Qaeda by Russia’s security services who accuse the terrorist group of waging “forest jihad.”


Southern European countries including Spain, Portugal, and Greece suffered another summer of ravaging fires, with many fires the work of suspected arsonists. Now, the director of Russia’s Federal Security Service (FSS), Alexander Bortnikov, has blamed al-Qaeda for the fires.

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Timber tariffs decrease investors' interest in Russian forest industry

Timber tariffs decrease investors' interest in Russian forest industry | Timberland Investment | Scoop.it

In Uronen's opinion, Russia has many opportunities, but the risks are considerable. "They apply to wood acquisition and logistics."


"The timber tariffs and the behaviour linked with them will certainly not increase confidence. Hopefully the whole thing will go away, but it does have an impact on the willingness of companies to invest", Uronen says.

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Russia looking to double lease terms of forest areas to attract investors

Russia looking to double lease terms of forest areas to attract investors | Timberland Investment | Scoop.it
The head of the Federal Forestry Agency of the Russian Federation, Ivan Valentik, would like to have lease terms with tenants increased from 49 to 98 years, as a way to increase investment in Russia’s forestry sector, according to an article published by Lesnaya Industriya, a Russian trade magazine for forestry sector professionals and businesses working in logging, woodworking, furniture production and wooden home construction.
Alexei Bogatyrev, CEO and founder of the Lesprom Network, says that the move to increase the leasing agreements is a good long-term measure that could create a positive effect for the industry in Russia, which is needed to increase investment in areas such as new resource roads and updated equipment for logging and sawmilling operations. However, in the short-term he doesn’t expect this to generate any major shifts on the international market.
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Japanese firms importing illegal Russian timber

Japanese firms importing illegal Russian timber | Timberland Investment | Scoop.it

Significant quantities of illegal timber products from the forests of Siberia and the Russian Far East are flowing into Japan, according to a new report by the US-based nonprofit Environmental Investigation Agency (EIA). While the United States and European Union have recently enacted new policies that prohibit the import of illegally sourced wood and wood products and require companies to conduct heightened due diligence in their sourcing practices, Japan’s failure to enact similar measures makes it an open market for illegal timber products from around the world.


The report, The Open Door: Japan’s Continuing Failure to Prevent Imports of Illegal Russian Timber,[i] details supply chains for illegally cut Siberian pine, bought by Chinese traders and imported to China, manufactured into wood products and sold on markets all over Japan. In undercover interviews, officials from San Xia, one of the largest Chinese importers of Russian timber, detailed how they purchase this timber from illegal loggers deep inside Siberia and launder this timber across the border using documentation from their forest concession. In factories across northeastern China, San Xia transforms this timber into edge-glued lumber, 90% of which is sold to Japan for housing construction.

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Comment: The Crimean crisis and the possible repercussions for the European timber market

Apart from the political aspects of the tensions between Russia and Ukraine, there are some concerns over the stability of the European and global timber market.


Russia is the world’s largest log exporter and the fourth softwood lumber export country in the world. Moreover, Russia covers more than one fifth of the global forests and accounts for almost 5% of the worldwide timber trade.

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What could worry most the timber industry in this case is a trade embargo Russia/Western countries that might dis-balance the entire global timber trade functionality.


There some tight connections between Russia and the EU concerning the wood industry. First of all, many major European timber companies have operations in Russia, especially the Northern European companies. Plus, Russia is the second extra-EU wood products exporter to the EU, after China. By November 2013, Russia exported wood products (under HS code 44) worth EUR 2,7 billion and has at the present a market share (excluding EU member states) of 15% on the EU market. The EU also exports wood products to Russia of nearly 1,2 billion per year.

Overall, the EU-Russia timber trade is over 4 billion annually. If the Crimean crisis deepens, a possible trade embargo (partial or total) scenario will become very feasible, which could have disastrous consequences for the European timber industry.

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In Russia's Vast Far East, Timber Thieves Thrive

In Russia's Vast Far East, Timber Thieves Thrive | Timberland Investment | Scoop.it

Forests cover about half of Russia's land mass, an environmental resource that President Vladimir Putin calls "the powerful green lungs of the planet."


But Putin himself acknowledges that Russia, the world's biggest exporter of logs, is having its timber stolen at an unprecedented rate.


The demand for high-value timber is fueling organized crime, government corruption and illegal logging in the Russian Far East. The hardwood cut in the endless forests often ends up as flooring and furniture in the United States, Europe, Japan and China.


At a meeting on timber management earlier this year, Putin said that illegal logging has increased by nearly 70 percent over the past five years, and he added that timber thieves have no problem selling their product.


Illegal loggers are often linked to violent organized crime, and together, they undermine what officials say could be sustainable forests and contribute to Russia's endemic corruption by paying off local officials.

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Nicole Kearsch's curator insight, October 25, 2014 1:28 AM

I never thought that timber would be something that was a top priority on any thieves list.  It almost makes sense though.  People with the permits to harvest the wood in east Russia and they happen to harvest a few pieces here and there and create a huge market for discounted lumber.  The problem not only lies legally but environmentally as well.  An excess of trees which produce oxygen are being cut down, but the homes of the SIberian Tiger are being taken away.  Legally this is becoming a big problem for companies such as Lumber Liquidators, known widely throughout America for its cheaper prices on wooden flooring.  This company has been the target of investigation because of the fact that it has been potentially knowingly been buying its lumber from illegal sources.  This whole operation needs to be stopped.  The corruption of governments taking money from companies needs to be controlled and there needs to be a plan put in place to stop this illegal logging. Legally it is a problem but very importantly it is an environmental issue that is going to end up affecting everyone. 

Kaitlin Young's curator insight, October 27, 2014 8:44 AM

Russia’s large forests are one of its most viable resources, considering the size and climate of the country. Russia exports large quantities of high quality wood to the United States, China, and Japan, but at what cost? The value of this industry has sparked government corruption, illegal logging, and organized crime. Legality issues in any natural resource based industry usually results in a major decrease in sustainability. One of Russia’s most well-known animals, the Siberian Tiger, is being affected through loss of habitat and destruction of the food chain at a lower level. Beyond environmental destruction, lumber is being illegally harvested and exported to companies that do not realize that the wood is illegally obtained. Russia must find a way to control logging while enforcing sustainable practices in order to maintain one of their greatest resources.

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Grim outlook for Russian timber industry

Grim outlook for Russian timber industry | Timberland Investment | Scoop.it

Timber output in the Russian Far East could rise by a third, and timber processing more than double by 2016, according to Viktor Ishayev, the Far East development minister in the Russian government. The timber industry itself insists, however, that such a scenario would require a sharp rise in demand in the domestic or foreign markets.


Experts say, meanwhile, that Russia’s share of the global market for raw and processed timber continues to shrink, and domestic demand in the Far East is growing too slowly for such targets to be realistic.

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Tim Sydor's comment, August 23, 2013 4:59 PM
"To increase our output by 45 per cent, we will need to find a new market, or boost domestic demand. At this moment, the main market for our timber of China, and I don't see any significant room for growth there," he adds.
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Cathay Forest Products Corp. to Liquidate Timber Holdings in China and Russia

Cathay Forest Products Corp. to Liquidate Timber Holdings in China and Russia | Timberland Investment | Scoop.it

Based upon its activities to date, the new board believes that it is in the best interests of the Company and all its shareholders and other stakeholders to effect an orderly disposition of all of the Company's direct and indirect assets as expeditiously as reasonably possible while generating the maximum proceeds reasonably attainable, and to use the proceeds received by the Company to satisfy its liabilities with any excess being distributed to the Company's shareholders.  The timing of completing such dispositions, the proceeds that will be realized and the amount, if any, that will be available for distribution to the Company's shareholders remains unknown at this time.

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Timber trade threatens Russia protest leader

Timber trade threatens Russia protest leader | Timberland Investment | Scoop.it

The timber industry in the vast forests of Russia's Kirov region, far from prying eyes in Moscow, has long been easy prey for unscrupulous businessmen.


Locals say it is so murky that the country's most charismatic opposition leader Alexei Navalny will have a hard time fending off charges levied last week of stealing wood from a state company while advising the governor there in 2009.


Navalny says politics lie behind the case, which may also tarnish the governor, Nikita Belykh, a liberal whose appointment by then-President Dmitry Medvedev may grate with the more conservative previous and current Kremlin leader Vladimir Putin.

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Outside Kirov, a city of 500,000 named after a Bolshevik revolutionary whose assassination in 1934 was used by Soviet dictator Josef Stalin as a pretext to purge his opponents, the river winds into forests that stretch as far as the eye can see.


The region, which is bigger than Hungary, covers 120,000 square km and almost two thirds is state-owned forests.


"We have so much woodland that it's simply impossible to closely control it all. Somebody just starts chopping timber somewhere, takes it and that's it," said Vladimir Zhuravlyov, a member of the local parliament who works closely with Putin's ruling United Russia party.


"The forest in Kirov is like oil in the rest of Russia. It's stable and easy money, you just come in and take it. It's also quick money, you can make fortunes on it in no time at all."

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