The situation on the wood-based panel market can be described as a transition from one crisis to another. According to the results of 1-3 quarters of 2023, the volume of production of fiberboard almost returned to the indicators of 2021. The volume of production decreased slightly, by 6.6%, which, in the current situation, can be considered a good result. The average indicative prices for fiberboard for 3 years correlated with production volumes. So, in 2021, in connection with Covid-19, prices were quite low, after which there was a 52% price increase and stable prices were established without serious fluctuations in 1-3 quarters of 2023.
If we look at the balance of production and consumption of fiberboard, then production in 2023 will amount to 635 million square meters, exports will amount to 107 million square meters. Imports will amount to about 40 million square meters, mainly from Belarus and China. Russia's main exports are to Uzbekistan, Kazakhstan and Azerbaijan. In the structure of exports of fiberboard, untreated panels makes up 39%, the rest is polished, laminated, in the form of floorings. Russia has the potential to increase the production of fiberboard and the most promising markets are, first of all, the CIS markets.
In the chipboard and OSB markets, the situation in 2023 turned out to be better than in the fiberboard markets. By the end of 2023, there is a slight increase in the production of panels, the main driver of which is the growth of furniture production. The increase in demand also leads to an increase in prices, which is well observed in 2023. By the end of the year, Russia will produce 8.9 million m3 and export almost 2 million m3. The main consumers of Russian chipboard are Kazakhstan and Uzbekistan. The main external markets for OSB are China, Kazakhstan and Kyrgyzstan. At the same time, China itself is the largest manufacturer of construction materials.
In general, there is a recovery in the wood-based panel market. The markets of chipboard (including OSB) and fiberboard are close to recovering to values before the introduction of Western sanctions. The main sales markets are the domestic market, Central Asia, and Transcaucasia.
The positive dynamics of recent months demonstrates an increase in production and an increase in prices. However, it is impossible to restore prices to last year's values, even without taking into account inflation. The saturation of sales markets makes it possible to predict consumption growth, but there are limitations on actual demand.
At the same time, Belarusian manufacturers compete with Russian manufacturers in the same markets, including the Russian one. At the same time, the Government of Belarus is trying to protect the domestic market from external supplies: by Resolution No. 300 of May 10, 2023, the Council of Ministers of Belarus extended the licensing of imports of chipboard, fiberboard, OSB, certain types of paper and cardboard, including imports from the EAEU countries.
At the same time, in Russia, the high key rate of the Central Bank of the Russian Federation limits the growth prospects of the construction industry. Therefore, we can expect a reduction in housing commissioning and a reduction in the purchase of furniture and finishing materials, which may cause a recession or stagnation in the chipboard and fiberboard markets in 2024.
It is also necessary to focus on the vulnerability of transport routes in Russia. In particular, the blocking of the transportation of wood-based panels through Kazakhstan in October 2023 showed the vulnerability of the transit route to Uzbekistan, Kyrgyzstan, Turkmenistan and Tajikistan.
The plywood market in Russia has been the most affected in recent years. Production volumes fell by 27% compared to 2021. Against the background of falling production and restrictions on plywood sales markets, plywood production was expected to switch to veneer exports to third countries (China, Turkey, Vietnam, etc.) with further re-exports to the USA and the EU. The increase in veneer production and exports, relative to plywood production, was observed only in May-September 2022.
The situation with the price level is comparable to the general trend in production. The price dropped by almost 39%. The low price is a consequence of the loss of Western sales markets, where a sales infrastructure has been created for many years. It is expected that 3 million cubic meters of plywood will be produced in 2023 with a domestic consumption of 1.4 million cubic meters. The main consumers are China, Turkey, and Egypt. Moreover, the Egyptian market has a low solvency. Part of the supplies to Egypt goes to the construction of the El-Dabaa nuclear power plant.
Russia also supplies about 180,000 cubic meters of plywood to the United States, or about 13% of all Russian exports, despite a 50% barrage of import duties. There are other channels for indirect plywood exports to the USA (via Vietnam, China, etc.).
Plywood and veneer shipments to China increased by almost 50% in 2022. The stagnation of the Chinese housing construction market restricts the supply of plywood and wood-based panels, the bulk of plywood is re-exported to third countries.
The volume of plywood supplies to Turkey increased almost 3 times over the period 2022-2023. The direct import of plywood is limited by high duties (27%), but the bulk of supplies goes through Free Economic Zones with zero import duties. After the "refinement", plywood is exported to the EU and the USA.
Shipments to India are not significant due to regulatory disagreements, high import duties (30%) and unsettled logistics.
In general, Chinese manufacturers compete strongly in foreign markets for Russian plywood, while OSB manufacturers compete in the domestic market. Therefore, domestic plywood manufacturers have suffered greatly from the loss of the European market, as they cannot find comparable sales markets in terms of marginality.
If we talk about promising markets, then China, for wood-based panels is not the one. China itself is the largest manufacturer of panels in the world. In addition, the construction market is currently stagnating there.
In addition, the North-South transport corridor is in its infancy due to high tariffs, lack of financial logistics with Iran, and a fundamentally different approach to business in Iran. It is difficult to predict whether this corridor will work in the near future due to the commissioning of the railway line with Azerbaijan. At the same time, in general, the region is very interesting and provides access to the markets of India and the Persian Gulf countries, of particular interest among which are Saudi Arabia and the United Arab Emirates, as well as Egypt if it manages to solve problems with the balance of payments deficit.
Morocco and Algeria could also become promising markets. Scandinavian manufacturers are quite active in these markets, and Russian companies are poorly represented there. Speaking generally about Arab countries, especially those that produce oil, there is a clear correlation between oil prices and the volume of purchased timber products, while there is no correlation between population growth in Arab countries and purchases of timber products.
