World Market for Forest and Lumber: Trends and Forecasts

Analysis of the lumber market in 2019

Today, there are more than 10,000 timber producers in Russia, most of them small private enterprises. The income from timber production in our country is much lower than in foreign countries. But in spite of it, Russia occupies leading positions among suppliers. 

Amendments to the Forest Code of 2008 had a positive impact on the development of the industry - the procedure for obtaining the forest lease was significantly simplified and auctions were actively conducted. The changes are aimed at increasing market volumes, optimizing the process of timber production and processing.

Trends in market development

Improvements in technology

Transition from frame sawing technology to more advanced and efficient ways of cutting wood, which will lead to increased production. Learn about a completely new wood drying technology here.

Price Increases

Coniferous timber remains one of the most in demand due to its low cost, ease of processing and availability. Prices of deep-processed materials are predicted to rise. This will increase the cost of the Russian domestic market to the European level. 

Development of forest processing complexes

Nowadays most of the production is produced by small private enterprises, then in the future there is a high probability of their merging into full cycle production complexes. Thus, the enterprises will carry out all stages of production: from billets to waste disposal.

Decrease in export level

The number of roundwood products manufactured will grow significantly in the coming years. For example, from the figures for 2013 of 145 million m3, the amount of produced products will increase to 300 million m3 in 2030. 

Increasing domestic consumption

A reduction in the export of Russian lumber products and an increase in domestic consumption are predicted. This will be facilitated by the state program of low-rise house-building development. This program will increase the number of houses made of factory-made wood to 2.8 million m2 by 2020. And by 2030, the volume may reach 69 million m2.

Besides the development of wooden house-building, the program of forest roads construction is actively developing. The lack of full access to the territory reduces the number of possible resources. The program envisages the development of new forest areas by private and state enterprises. 

Recycling of waste

Caring for the environment has become a sign of quality production enterprise. The development of non-waste production allows not only to take care of the environment, but also to make waste disposal a profitable business. For example, it is possible to produce fuel briquettes or pellets from pressed waste. In Europe such pellets cost €150-200/tonne, in Russia the cost is lower, but the market is developing and the price will grow accordingly.

The prerequisites speak for the development of the Russian lumber market and an increase in its volumes to 40 million m3. During the previous year, products worth USD 22 billion were produced without furniture and building structures, logistics costs, VAT and other costs. The export volume of the total production was 55%. 

The problem of this market is "black loggers", in 2018 alone more than 7,000 attempts at illegal logging were recorded, which amounts to 470,600 cubic meters. The major part (65% of the total volume) falls on the Irkutsk Region. 

That is why it is very important to support official organizations for logging at the legislative level. 

Forecast

Analysts differ in their forecasts for the current year, but assume an increase in prices for lumber and an increase in demand for coniferous products. The question arises as to whether this will lead to an increase in prices for sawn timber intended for construction of houses, which will affect the cost of real estate. The dynamics of the construction industry have a direct impact on market volumes, especially in China, USA and Japan, which are most dependent on imports.

European countries are developing more effective solutions, expanding their markets and actively reaching out to the Asia-Pacific region.

Finland is the second largest importer of Russian timber in terms of volume. Recently, however, it has been actively increasing the cutting of its forests and developing programmes to develop its own market. This may lead to increased competition for Russian products in the Japanese and Chinese markets.

No dynamic changes in price indices are expected on the European market, one of the reasons is Brexit.

Sawn timber is one of the most popular products manufactured in Russia. It is more oriented to export - 71% goes abroad. The main consumer of Russian sawn timber is China, which accounts for about 61% of the total volume.