Investment in Eastern Russia’s forest industry driven by demand in China

Timber harvests in Russia were close to 190 million m³ in 2017, as estimated by Wood Resources International (WRI) based on forest industry production, log usage and net exports of logs. The derived timber harvest was up approximately 6.2 per cent from 2016 primarily due to higher log consumption by the softwood sawmilling sector. Domestic log demand in Russia has been on a steady upward trajectory over the past decade, while the exportation of logs has declined. The largest log-consuming sectors in 2017 were softwood sawmills with 60 per cent of domestic log usage.

The provinces of Siberia and Russia Far East are the only regions in Russia where timber harvests have gone up during the past five years, according to the government agency Rosstat. This has been driven by substantial investments in forest industry production in the region, predominantly in the sawmilling sector. From 2013 to 2017, harvest volumes in Eastern Russia were up 30 per cent, while they remained unchanged in Northwestern Russia and dropped in the Central provinces of the country.

The expansion of the forest industry in Eastern Russia has been driven by demand for lumber in China. Although the Chinese forest industry has a history of importing logs for its raw-material needs due to a lack of domestic sources, the trend over the last decade has been towards the importation of softwood lumber rather than logs. Chinese importers have gradually shifted their historical preference for logs away from the Russian Federation towards New Zealand and instead are importing softwood lumber from their forest-rich neighbour in the north, according to the Wood Resource Quarterly. The percentage of lumber as a share of total log and lumber volume in roundwood equivalents have gone up from 58 per cent in 2014 to almost 80 per cent in 2018. 

In the coming years, it is expected that most of the investments in Russia’s forest industry will continue to occur in Siberia and the Far East to meet continued rising demand for lumber and plywood in China.