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Timber Industry of Sverdlovsk Region Sparks Interest of Investors

On 15th of February industry business breakfast “Timber Industry in Russia: Business Season 2017” took place in the Representative Office of Sverdlovsk Region in Moscow. The business breakfast was hosted by the Government of Sverdlovsk Region, Development Corporation of Middle Ural and the Union of Timber Manufacturers and Exporters of Russia with support of the Ministry of Industry and Trade of the Russian Federation. Consulting company Poyry, leading Industry publications “LesPromInform” and “Lesnaya Industria”, a Timber Industry Analytics Agency “WhatWood” became partners of the event. 75 Russian and foreign companies from the Timber Industry participate in this business breakfast. The companies have discussed current situation in the industry, new regulations, measures of the State support, particular manufacturing practicalities as well as the investment potential of the TImber sector of Sverdlovsk Region. Business leaders had an opportunity to question officials of the Ministry of the Industry and Trade of the Russian Federation as well as representatives of industry association.

As the Official Representative of the Governor of Sverdlovsk Region to the President of the Russian Federation Mr. Alexander Ovcharov put it in his opening speech, “Forest resources of Sverdlovsk Region are ample enough not only to satisfy both current and future requirements of the Region in timber but also to expand an export of it. Currently one of the key factors which will help to increase the volume of forest lumbering is improving the techniques of utilizing the forestry and its deep, one hundred percent processing. In Sverdlovsk Region we work to expand processing facilities to deal with small-scale wood and firewood which are practically not in demand on the regional market now”.

A Head of the Department of Forestry, Pulp and Wood Processing of the Ministry of Industry and Trade Mr. Anatoliy Arteev mentioned in his speech about the upcoming changes of Forestry regulations and particularly the Government decree № 419 by 30.06.2007 on “Priority Investment Projects in Wood Processing”. According to this decree it is planned to increase the minimum level of investments from 300 million roubles to 750 million roubles in woodworking and from 300 million roubles to 500 million roubles in logging in order to acquire the status of the Priority Investment Project (PIP). The Ministry of Industry and Trade has evaluated projects and found out that the most of unfinished ones had an investment budget from 300 million roubles. Certain companies have acquired forest plots and “froze” the projects afterwards therefore ineffectively “holding” the forest which could’ve been utilized more fruitfully by other companies. Aforementioned measures are introduced specifically to create a barrier for these kind of investors acting in a bad faith.

According to the speaker the Ministry of Industry and Trade and The Ministry of Natural Resources and Environment of the Russian Federation are currently completing the development strategy for the Timber Industry by 2030. Creation of new pulp processing manufacturing facilities and development of wooden houses in Russia will become priority areas of industry growth.

The Vice President of the Union of Timber Manufacturers and Exporters of Russia, the Director General of “CenterLesExpo” Mr. Timur Irtuganov spoke on under-utilization of resources and unrealized potential of the Russian Timber Sector. “Aged wood in Russia is not harvested at the required volume, only 10% of this kind of wood are processed. The same situation is in the forest industry. This industry is only 1,27% of GDP, 3,9% of the volume of dispatched products, 1,7% of the export revenue in foreign currency. The volume of production of pulp and paper industry in Russia is lower than in other countries possessing significantly smaller forest resources”, - commented Mr. Irtuganov stressing the raw-material oriented profile of Russian economy. 

Development of forest roads, protecting it from fire, stimulating investors to develop manufacturing facilities to process wood as well as introducing measures of the State support for projects of recycling wastes (waste papers) which are currently in absence - these are current priorities of the Regional Government.

Sr. consultant of the Poyry company Mr. Alexey Beschastnov has summarized the industry results of the last year and presented the forecasts for the next year. According to the company, the Timber Sector demonstrated growth in 2016 after downgrade in 2014. OSB subsector and the export of the birch plywood have shown the best dynamics. Also there are good perspectives for cellulose production.

The representative of JSC “Russian Export Center” (REC) Mr. Dmitry Trebukhin highlighted available measures of support for export activities of local companies. He motivated business community to use the export support tools more intensively especially this support is provided by the REC on the free-of-charge basis. The support includes consultations, particularly on export credit,  and assistance in search for business partners. It is worth to point out that the Timber Industry is among those few ones which have managed to increase export along the devaluation of Russian rouble.

Mr. Yury Kuznetsov, Deputy Director of the “STOD” LLC, shared his practical experience in manufacturing. Few days ago his company has opened the Second Phase of the woodworking plant worth of 20,7 billion roubles of investments. Currently this is the largest manufacturing facility in Europe to produce OSB boards and LVL. Mr. Kuznetsov particularly discussed with industry colleagues the practicalities of acquiring the Priority Investment Project status for wood processing.

The Government of Sverdlovsk Region and the Development Corporation of Middle Ural presented the opportunities associated with the forest resources of the Region. The Timber Industry is one of the most perspective investment niche in Sverdlovsk Region. The Minister of Investments and Development of Sverdlovsk Region Mr. Dmitry Niskovskikh declared the readiness of the regional authorities to provide versatile support for projects in the Timber Industry. He also highlighted the existing industrial infrastructure of the Region - Industrial Parks and the Territories with a special economic regulations.

In 2016 the Advanced Development Territory (ADT) with a core industrial platform - “Bogoslovsky” Industrial Park - has been founded in the Northern part of Sverdlovsk Region. The Government of Sverdlovsk Region is eager to offer investors forest plots in the radius of 100-150 km around the Park with a total estimated volume of 2,5 million m2 of logging per year; most of forest plots are located near the year-round roads. “Bogoslovsky” Park is equipped with all the necessary infrastructure also offering residents free-of-charge initial connection to the utilities.

Mr. Ilya Pachkay, Head of Relations with the Timber Industry at the Development Corporation of Middle Ural, pointed out a well developed transportation network, particularly, a narrow-gauge railway specifically designed to transport timber, as a competitive advantage of Sverdlovsk Region. Also there is Ural State Forest Engineering University (USFEU) located in Ekaterinburg. There are only three specialized educational institutions in Russia preparing human resources for the Timber Industry, the University in Ekaterinburg is the most Eastern one. Apart from educating and re-educating forest engineers USFEU can assist investors with research and market analyses.

As Mr. Pachkay put it, “The risk of natural disaster for the Forest Resources of Sverdlovsk Region is low. The amount of forest fires outbreaking in the Region is significantly smaller comparing to other Russian provinces. Consequently, logging operators do not suffer any losses. Types of woods include coniferous forests on the Northern areas of the Region, where the manufacturing of the sawn timber and boards could be profitable to locate; there are also large areas of birch in the Eastern part”.

During the business breakfast one of the participants approached the Development Corporation of Middle Ural with a idea to establish the manufacturing of deep wood processing in Sverdlovsk Region. The manufactures of boards as well as pulp and paper are located in Sverdlovsk Region collaterally producing balance waste which could be utilized to produce wooden pallets. Interested parties agreed to meet soon and elaborate the details of the project.

16 February 2017, 18:00
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