According to the UN Food and Agriculture Organization for 2022, more than 50% of all forest resources are concentrated in 5 countries: Russia, Brazil, Canada, the USA and China. Russia ranks 2nd in the world in terms of forest resources – 82 billion cubic meters. In Brazil – 126 billion, in the USA – 47, in Canada – 30 and in China – a little over 14. The actual volume of logging in Russia is significantly lower than the estimated cutting area, and the contribution of the timber industry to Russia's GDP is about one percent (0.99%).
The annual production value of timber industry in Russia is more than 2.8 trillion rubles.
Graph. 1. The volume of domestic production in timber industry, billion rubles.
The furniture industry has the highest production growth rate. Thus, in 2023, compared with 2022, furniture production increased by 20.7%. Accordingly, the production of chipboard and fiberboard showed an increase of 6.7% and 11.3%. Doors were also produced in 2023 by 7.1% more than in 2022, and wooden boxes by 6.7%. The output of other types of products of the timber industry has decreased, here the lowest indicator for wooden windows is a drop of 19.2%. The volume of paper and paper products production also decreased by 1.4%, wood processing and production of wood products by 0.2%.
Chart 1 - Production of the main types of wood products in volume
| Wood products | 2019 | 2020 | 2021 | 2022 | 2023 |
| Roundwood, mln m3 | 362 | 294 | 233 | 195 | 185 |
| Lumber, mln m3 | 44,8 | 42,4 | 32,6 | 29,8 | 28,5 |
| Plywood, mln m3 | 4,08 | 4,28 | 4,55 | 3,37 | 3,26 |
| Chipboard, mln m3 | 9,99 | 11,21 | 11,41 | 10,42 | 11,6 |
| Fiberboard, mln m2 | 682 | 720 | 740 | 658 | 703 |
| Wood fuel (pellets), th tons | 1950 | 2180 | 2380 | 2123 | 1456 |
| Wood pulp, th tons | 8250 | 8460 | 8820 | 8764 | 8554 |
| Paper and cardboard, th tons | 9131 | 9860 | 10042 | 10011 | 10000 |
| Windows and wooden frames, th m2 | 611 | 562 | 475 | 408 | 330 |
| Doors and wooden frames, mln m2 | 20,4 |
19,8 |
19,6 |
21,28 |
22,8 |
Source: report data Timber Industry of Russia: results of 2023
Export of wood products
The Russian timber industry is export-oriented. The domestic consumption of wood products is not significant and the existence of a full-fledged industry is impossible without export.
The main export products are plywood and softwood lumber. The export of pulp and paper products, wood-based panels, is at the level of up to 30% (the share of pulp exports is about 32%). In fact, the main export of these products (except lumber) go to the markets of post-Soviet countries, primarily Central Asia (former USSR).
According to the Federal Customs Service, exports of Russian wood products are declining. Thus, in 2023, Russia exported $9.9 billion worth of wood and wood products, as well as pulp and paper products, which is 29.7% less than in 2022 ($14 billion).
The total volume of exports of sawn timber and roundwood by the end of 2023 amounted to 25 million m3, for comparison, a year earlier it was 27 million m3 (a decrease of 7%). Exports of highly-processed products amounted to about 21-22 million m3.
Despite the negative forecasts after the losses of European markets, most businesses in timber industry managed to quickly replace sales markets from European to Asian. Today, the share of Asian countries in terms of lumber exports from Russia for the first time took 98%, whereas in 2021 it did not exceed 76%.
China remains the main partner, in 2023 about 13 million cubic meters of lumber were exported to the country, the same level as in 2022. Next partner is Uzbekistan with consumption of more than 2 million cubic meters of Russian lumber (an increase of 8%), Kazakhstan is in the top three – 926 thousand cubic meters, which is 17% higher than in 2022.
The top ten largest importers include only Asian countries, namely Azerbaijan – 516 thousand cubic meters, Tajikistan – 482 thousand cubic meters, Kyrgyzstan – 417 thousand cubic meters, Iran – 392 thousand cubic meters, Korea – 340 thousand cubic meters, Japan – 337 thousand cubic meters, and Hong Kong – 283 thousand cubic meters. In total, Russian sawn timber products went to 51 countries last year.
Most of the supplies came from the Irkutsk region, the Krasnoyarsk Krai and the Arkhangelsk region.
Siberia provided almost half of the lumber exports in 2023 (9.2 million m3, or 44.7%). The North-West accounted for a quarter of the supplies – 5.3 million m3. Far Eastern mills exported 2.8 million m3 (13.5%), Ural mills – 1.5 million m3 (7.2%), Volga mills – 1.2 million m3 (5.9%), the share of the Central Federal District is 1.7%.
Leading timber industry companies
Today, there are approximately 44 thousand companies operating in the industry.
Chart 2 - The number of comapnies in the timber industry
| 2021 | 2022 | 2023 | |
| Woodworking | 17 707 | 17 117 (- 3 %) | 16 978 (- 1 %) |
| Paper production | 3 320 | 3 271 (- 2 %) | 3 338 (+ 2 %) |
| Furniture production | 13 481 | 12 999 (- 4 %) | 13 090 (+ 1 %) |
| Forestry and logging | 11 134 | 10 611 (- 5 %) | 10 320 (- 3 %) |
| Total | 45 642 | 43 998 (- 4 %) | 43 726 (- 1 %) |
Source: data from the Ministry of Industry and Trade
Despite the decline in the main indicators of the timber industry in Russia, the consumption of some products in the domestic market was still quite active. The financial performance of timber industry companies began to deteriorate from the third quarter of 2022, mainly due to the closure of European markets.
Graph. 2. Revenue of timber industry companies, billion rubles.
Source: Ministry of Industry and Trade
In general, according to experts, the revenue of timber industry companies in 2022 decreased by 10% year-on-year, to 2.6 trillion rubles. Net profit decreased by 35% year-on-year, to 307 billion rubles. The main indices characterizing the performance of the domestic timber industry began to revive in the first quarter of 2023 and moved to growth in the second. Revenue from sales of all wood products in the first quarter of 2023 increased by 1% compared to the fourth quarter of 2022, and in the second quarter this growth increased to 8%. But even taking into account the growth, the indicators are below the level of the first quarter of 2022.
The largest revenue growth in the second quarter of 2023 was recorded in the mechanical woodworking segment. Revenue from sales of lumber increased by 14% quarter-on-quarter, plywood - by 22%, particle board (including OSB) - by 9.5%, fiber boards - by 24%. The negative dynamics in revenue in the second quarter compared to the first quarter of 2023 was recorded in logging - 9%, which is about 19 billion rubles. And this negative trend in the logging industry has been maintained for five consecutive quarters.
In 2022, the total revenue of the 50 largest timber companies in Russia exceeded a trillion rubles.
Problems of pult and paper companies
The problems of the pulp and paper industry are global in nature, demand for products is declining, and prices are falling.
Wood-based panel production is outpacing the pulp and paper industry in terms of growth rates. If in 2000, wood-based panel production accounted for only 16% of the pulp and paper industry's output, now it is more than 34% in the comparable tonnage of products. And the trend for the growth of the panel industry will intensify due to the low saturation of the domestic market and the markets of Central Asian countries.
With an interval of 2-3 years, there a lot of discussions about the construction of a pulp and paper mill in Russia. Firstly, the decline in global demand for pulp and pulp and paper products and the satisfaction of demand by production in the countries of the "global south". Secondly, there is no "investment ruble" in Russia, there have never been investment-attractive bank loans for long-term projects in Russia over the past 20 years, and the main financing of the industry was carried out by foreign banks at rates linked to LIBOR, EURIBOR, etc. Thirdly, due to the low cost of finished products and high operating costs, an investment project with such a level of investment does not pay off in up to 10 years.
Wood-based panel maufactureres have profitability at the level of the best pulp and paper mills in the country. Investment entry into the production of panels is much cheaper, the risks are lower, the market prospects are more optimistic. Perhaps the domestic pulp and paper mills will find a new source for development, but so far the forecast is negative.
Investments in timber industry
According to Roslesinforg, the volume of investments made by timber industry companies from January to September 2023 exceeded 127.7 billion rubles. Thus, the investment activity of local producers continues to remain at a fairly high level. Despite a decrease of 11.3% compared to last year's record, current investments are 2% and 25.5% higher, respectively, compared to the same periods in 2021 and 2020.
Graph. 3. Dynamics of investments in timber industry for 9 months, billion rubles.
Source: Roslesinforg
The largest investment activity is demonstrated by paper manufacturers, woodworkers and wood processors. Two thirds of the investment was spent on new equipment. Irkutsk, Kaluga and Moscow regions are in the lead. Since the beginning of 2023, capacities for the production of 207.4 thousand m3 of lumber, 700 thousand m3 of particle board, 36.0 million m2 of fiberboard, 93.0 thousand m3 of plywood, 240 million pieces of tissue products, 175.8 thousand tons of cardboard, 7.3 million m2 of boxes and cardboard boxes have been put into operation in Russia.
Most of the capital investments were spent on the purchase of equipment – 91.6 billion rubles. or 71.7% of the total volume. Slightly less than a third (35.4 billion rubles, 27.7%) invested in infrastructure facilities (buildings, structures, power supply systems, water supply, sanitation, gas supply, communications, outdoor lighting, etc.). 10.1 billion rubles were invested in transportation and logistics. (7,9%).
About 86.9 billion rubles, or 68%, has been invested in the production of paper and paper products. Woodworking is in second place – more than 22.4 billion rubles, or 17.5%. 12.5 billion rubles or 9.8% were allocated to forestry and logging activities, and 6 billion rubles or 4.7% were allocated to furniture production.
Compared to the previous year, investments in the production of paper and paper products increased by almost a third (30.6%, 20.3 billion rubles), and 0.9 billion rubles more (18.2%) were directed to furniture production.
Most of the forest investments were attracted in Siberia – 51.2 billion rubles. or 40.1% of the national total, and the increase compared to last year was 1.5 times.
Among the regions of the Russian Federation, the Irkutsk region became the champion in terms of forest investments – 46.1 billion rubles, 36.1% of the total.
The main investor here is JSC Ilim Group, which has completed the construction of a pulp and cardboard mill in Ust-Ilimsk, which will produce up to 600 thousand tons of cardboard per year. In addition, Ilim is implementing eight more projects on the territory of the region.
Kaluga Region is in second place – 12.1 billion rubles. (9,5%). Several large projects are being implemented in the region: the line for the production of decorative paper and CPL plastics "Ultradekor Rus" has been launched, a plant for the production of tissue products of LLC "Arkhbum Tissue Group" is being built, the company "Hayat" has launched a line for the production of professional sanitary and hygienic products, there are plans to expand production by 30%. The products are manufactured under the Papia, Familia and Focus brands from Russian pulp.
The Moscow region has invested 7,525 billion rubles in the timber industry, most of which went to the reconstruction of production facilities for the production of paper packaging products. This year, L-PAK plans to complete the construction of a complex for the production of corrugated cardboard and packaging products, as well as a waste paper recycling plant. The reconstruction of four workshops of the Arkhbum JSC factory for the production of pulp and cardboard has been completed.
It should be noted that the growth of investments in timber industry is noted in 37 regions. Investments increased the most in the Irkutsk region, in the Perm Region the increase amounted to 2.6 billion rubles (an increase of 2.5 times), in the Moscow region they invested 2 billion or 35.8% more than in 2022.
The scale of investment activity in the timber industry is considerable. 58 priority investment projects are being implemented in the country, with an investment volume of 594.7 billion rubles.
By 2024, it is planned to implement more than 80 timber industry investment projects worth more than 1.1 trillion rubles.
In general, back in 2022, almost all Russian timber producers faced a new reality: export markets in the Western countries were closed. The Russian timber industry is traditionally an export–oriented, and when the usual logistics routes and partnerships were disrupted, the industry found itself in a complicated situations. Nevertheless, in 2023, Russian companies reoriented their sales markets from European to Asian. High performance in the timber industry was achieved due to the highly competitive ability of the products of our timber producers and their demand among partners from friendly countries. The effectiveness of government measures played an important role. First of all, we are talking about subsidies for the transportation of products through the seaports of the Northwestern Federal District. According to the decree, in 2023-2024, exporters of timber industry will be able to compensate up to 80% of the costs (up to 50% of the supply volume) for the transportation of their products if the delivery is made through seaports on the territory of the Northwestern Federal District (Decree of the Government of the Russian Federation dated 07/28/2023 No. 1347).
According to experts, it is important to continue stimulating the consumption of wood products in the domestic market. In 2023, a positive trend was recorded: 5-7 years ago, the capacity of the domestic market for lumber consumption was estimated at 10-12 million m3, and now this level is 16-17 million m3. The demand for lumber ensures the growth of the housing construction market. In 2023, 110 million m2 of housing were built, more than half of this volume is residential housing. The growing demand for the construction of houses using frame technology, where a large amount of lumber is used, has a positive effect on demand in the domestic market. To maintain the rate of consumption at the level of 2023 and increase it, government support measures are needed: preferential mortgage programs; a separate program for preferential mortgages for residential housing with lower rates; programs to support low-rise residential wooden construction. Among the most promising areas for investment in timber industry are projects aimed for import substitution (for example, some types of paper and cardboard, certain types of wood-based panels or structural materials). The scenario of maintaining the volume of investments at the level of 2023 looks realistic.
