Starting from the second quarter of 2022, the financial indicators of timber companies have been steadily falling by 13-16% quarterly and falling back to the level of three years ago. Preliminary estimates of the industry - the total revenue of timber companies decreased last year to two trillion rubles, i.e. by 8-10%.
Indicators for the shipment of timber industry products for large and medium-sized companies have been steadily sliding down since April-May 2022.
The harvesting of round timber, in almost all regions, has slipped into the zone of negative values. Preliminary data for 2022 allow us to conclude that the reduction in the volume of harvesting will be at least 15% and the total volume of harvesting will be at the level of 190-200 million cubic meters, which is 20-30 million cubic meters less than in 2021. The most difficult situation has developed at the companies of the North-Western region, which traditionally focused on sales to Europe.
The situation with the fall in logging volumes was aggravated by the lack of an opportunity to encircle birch logs to Europe. China also bought birch round materials, but logistics restrictions and a limited number of border crossings also complicated the movement of wood to Southeast Asia. To date, companies in Russia are experiencing serious difficulties with the implementation of birch logs, since they are not much in demand in the Russian Federation, and in order to avoid an overabundance of this assortment, loggers simply do not enter the deciduous plots. The data show that in 2022, as a result of the closure of export markets and a reduction in sales of finished products, there is a reduction in the consumption of timber within the country and is estimated at around 17-20 million cubic meters. The largest decrease was recorded in the softwood sawmill segment of about 11 million cubic meters. Prices for untreated wood have fallen to the level of 2019-2020. The imbalance of supply and demand in the market has persisted for most of the year and continues to this day.
At the beginning of the year, there were expectations in the lumber market for a decrease in production and exports, and all these expectations were met. The decrease in production volumes by the end of 2022 amounted to 11%. By the end of the year, the rate of decline was already 17-20%. The largest decrease was recorded in the North-Western Federal District - about 19%. The average load of sawmilling capacity in 2022 was at the level of 71-73%. According to preliminary estimates of WhatWood experts, the volume of softwood and hardwood lumber production amounted to about 39 million cubic meters, and in 2022, the rate of decline in lumber exports significantly exceeded the rate of production reduction.
According to WhatWood estimates, the growth of lumber consumption in the domestic market amounted to 5% and is estimated at 15 million cubic meters. The domestic lumber consumption market was supported by good results in the development of wooden housing construction. In 2022, 79 million square meters of housing were produced, which is 17 million square meters more than the previous year, the percentage increase was 27%, and the individual housing construction, which is the largest consumer of lumber, accounted for 62% of the commissioned housing. But, unfortunately, starting from September, the demand for lumber in the domestic market began to significantly decrease.
The export of lumber is the most important item of income in the Russian timber industry and the number of countries where Russian companies previously supplied their lumber over the past decade was at the level of 105-110 countries. In December 2022, the number of Russian export countries sharply narrowed to 30 countries. WhatWood estimates the volume of lumber exports from Russia to be approximately 24 million cubic meters. This is the lowest indicator since 2015-2016 and everyone understands that Russian companies, unfortunately, have not been able to fully replace European markets. China remains the main trading partner - the mono-market for Russian lumber.
But it should be noted that China's share in supplies is declining. A number of other areas also showed a decrease, growth was noted only in a few areas, such as Iran, Iraq, Turkey, Lebanon. But it is worth noting that these countries are not sales-forming areas.
If we talk about the price situation, there was a downward trend in all Russian lumber markets, which began in the second quarter of 22 years. In the Russian main market – Chinese, the decrease was 20%. In the fourth quarter of 2022, prices approached the minimum level and Russian companies offered products at a price of $ 200-230 per cubic meter of softwood lumber. Obviously, $ 200 is not a passing level for all Russian factories at the exchange rate that was at that time. But on average, the price in 2022 in the Chinese market was higher than in 2018-2019.
If we talk about prices on the domestic market, they also decreased relative to 2021 to an average annual level of 15,600 rubles per cubic meter without VAT. That is, the price reduction was approximately 17%, which is nevertheless higher than the previous periods of 2018-2020.
At the end of the year, the volume of production of woodbased panels of all types, including veneer and plywood, decreased by 15% to 17 million cubic meters, thus production sank more than during the lockdown period due to coronavirus restrictions. The most affected segment was the plywood market, whose exports were 30% dependent on the European market. Plywood production decreased to 3 million cubic meters or by 27%, chipboard to 7 million cubic meters or by 6%, OSB to 1.5 million cubic meters or by 22%. And fiberboard up to 3.5 million cubic meters or 11%. Prices for woodbased panels in retail have rolled back from the peak values of 2021 for all types.
Pellet production, as a derivative of the sawmilling sector, also showed a decline in 2022 in all indicators. The reduction in production is noted at the level of 18% to 2.5 million tons, exports by 25-26% to 1.8 million tons. After the sanctions were imposed, Turkey became one of the main export destinations of Russian pellets. Deliveries began in July 2022, however, by the end of 2022, an increase of 200 thousand tons can be called significant. However, hopes for Turkey as a saving hub can be called premature. If we talk about the geography of exports, then in the first half of 2022, our traditional destinations – Denmark, Belgium and Britain - certainly prevailed. Then from the second half of the year already South Korea and Turkey.
The paper products segment turned out to be the most resistant segment to economic difficulties due to its lower dependence on exports. Although Russia exported 40 percent of these products in the paper and cardboard segment in 2021, in any case, this dependence is less than in lumber, pellets and plywood. The volume of pulp for cooking of all types almost remained at the level of last year - 8.8 million tons, a decrease of about 1%. There was also a slight decrease in the production of paper and cardboard of all kinds, we can say that this indicator remained at the level of 10 million tons.
