Financial indicators of timber companies in Russia reached their peaks in 2021, which was due to the recovery of consumer demand after the covid 2021, extraordinary prices for lumber and the growth of housing construction.
But already in 2022, according to the agency's estimates, the decrease in revenue of the enterprises of the timber industry of Russia amounted to 10%. At the same time, it is worth noting that this decline is caused by the high base of 2021 and it is not catastrophic, since this indicator is still higher than the indicators of 2019-2020. Profit from sales also decreased, but at a higher rate - by 35%, but this figure is also higher than in previous years.
Exports decreased by $3 billion and are due to the closure of European markets from the second half of 2022. In the context of countries, we can see that exports to European countries decreased by 2.8 times, while exports to China in monetary terms showed an increase of 8%.
For the production of lumber, the peak of world production occurred in 2018. The main manufacturers in the world are China, the USA and Canada. Russia's share in the global production of lumber is about 8%. The WhatWood agency expects that in 2023 the global slowdown in the consumption of materials in the world will continue and the decline will be about 3% or about 15 million cubic meters.
Since 2019, there has been a decline in lumber imports in China. In 2022, this decrease was 7% and was due to a decrease in imports of softwood lumber, while imports of hardwood lumber increased by 1%. Russia is the main supplier of softwood lumber to China, but in recent years there has also been a decline in lumber from Russia to this country. There remains a lot of uncertainty regarding consumer demand in China in the near future, due to the uncertain situation in the construction market of this country. At the moment, China has a high level of inventory and a fairly low price level.
According to WhatWood, in April 2023, the average price of Russian spruce (not planed, CFR Shanghai, #1-4SF) lumber to China was $230/m3, prices for pine (CFR Shanghai, #1–4SF) - $240/m3, which is $25/m3 below the level of March 2023. The downward price trend is expected to continue in May.
In 2022, against the background of declining demand for Russian materials from Europe, a strong ruble and logistics problems, Russian companies were forced to reduce production and tried to sell more to the domestic market. According to the agency's estimates, in 2022, the production of lumber in Russia in volume terms fell below the level of 2017 and amounted to 39.9 million cubic meters. Sawmill capacity utilization was at the level of 71-73%.
At the same time, the production of lumber decreased slower than the reduction in exports, which may indicate that Russian lumber found markets within the country. According to WhatWood's estimates, economic uncertainty will remain in Russia in 2023, both within Russia and around the world, so a rapid recovery of markets is not expected. According to our estimates, the reduction of lumber production in Russia in 2023 will continue and amount to about 4 million cubic meters.
The share of lumber sales in the Russian market has not decreased below the level of 25% in recent years. But in 2022, as a result of a reduction in export supplies, the share of consumption in the domestic market increased to 41% and amounted to 16.4 million cubic meters. It should be noted that there are different opinions on the market, where are 16.4 million cubic meters? According to the agency, part of this volume is in the warehouses of manufacturers. The increase in domestic consumption is primarily due to the development of wooden housing construction. The Government is working on options for the use of wooden structures for the construction of houses as part of the resettlement of emergency housing.
It should be noted that in 2022-2023 there was an increase in the consumption of imported lumber. As we know, the sanctions affected only Russia, but also Belarus, which began actively selling its lumber in Russia. The increase relative to 2021 was 12 times and the trend is to increase supplies to the Russian market.
China remains the main export market for Russian lumber producers. Its share, after the departure of domestic producers from European markets in 2022, increased to 41% against 31% in 2021, and the agency assumes that China's share in the sales structure of Russian producers will continue to grow regardless of the overall decline in lumber consumption in this country.
In general, in 2021, as everyone knows, there was a phenomenal increase in prices in general in all markets of the timber industry in the world. In the first half of 2022, this trend continued, but in the second half of the year prices went down sharply. And according to WhatWood forecasts, prices will be at a stable level throughout 2023.
