Russia. An Ever-Expanding Market

As the coronavirus is losing its strength, the Russian economy is rising. Not only has the Russian economy declined by 3.1 % —   less than the world average — it is also recovering faster than expected. Globally, the country is following worldwide trends to reduce carbon footprints and working to speed the adoption of electric vehicles. Domestically, the government is trying to solve specifically Russian problems. Among them: curbing raw timber exportation in order to boost the timber processing industry, which has been a significant challenge for many decades.

Elon Mask, the billionaire founder of Tesla, recently indicated that he might consider opening a Tesla plant in Russia. That won’t happen any time soon, but governors of   several Russian regions have already announced future tax benefits and intensive development of industrial infrastructure in hopes of making their destinations more attractive for such an investment.  The most appealing regions would appear to be Moscow, Kaluga regions and the city of Izhevsk, in Udmurtia.

As things stand now, the number of electric cars barely exceeds 10 thousand units — a tiny fraction of the 30 million cars driving about Russian roads. There are obvious constraints on demand for these cars at present, including   high prices and a shortage of charging stations. To address the latter obstacle, the government has proposed to spend   around 5 billion euros for the installation of 150.000 new charging stations in Moscow, St-Petersburg, Kazan, Sochi and Kaliningrad, to begin with. In Moscow, charging stations are already under construction, including in the city center – an exciting development I witness every day as a resident.

Apropos, currently there are as many as 600 electrical buses already serving passengers on Moscow roads, with plans to increase the fleet of these electric buses to 2,200 cars by 2030, making the entire public transport fleet in over- 12 million –populated Moscow totally “green”. In addition, a new assembly factory of KamAZ electric buses, with an annual yield of 500 vehicles, launched its production in Moscow last week. Even more assembly capacities are expected open and update in the city in years to come. With an increase of usage of electrical cars, it will be necessary to accelerate battery recycling as well. This will require and welcome technologies, equipment and ideas.

But everything described above seems to be a future. Now we are back to Russian reality and how to get the most of our overwhelmingly rich forest resources. The exportation of sawn timber from Russia has been growing for seven consecutive years. Russia is the second biggest exporter of raw lumber in the world, closing the gap with Canada, which leads the world. The main destinations for Russian raw timber are known to be China and Finland.

Tariffs are going to be a bigger part of the picture. From July, 1 to the end of 2021, the government has decided to raise export duties on certain types of roughly processed wood with a humidity level of more than 22%. In particular, and for the first time, an export rate of 10% will be set for softwood and oak, but not less than €13 and €15 per cubic meter, respectively. In addition, export duties on beech and ash will be increased to 10% (but not less than €50 per cubic meter), now amounting to €10 and €12 per cubic meter, respectively. And beginning in January 2022, in perhaps the biggest restriction of all: a total ban on raw timber exporting.

The implications should be clear for the industry — that even numerous small companies involved in timber export nowadays will have to move toward production of more complex products with higher margins, like glued beams or CLT. These companies would be wise to invest in drying equipment as well as in processing, which might be the momentum for Finnish manufacturers of drying or such machinery.

 

 

 

 


Julkaistu 31.05.2021