Development of the Sawmill Industry in Russia

Development of the Sawmill Industry in Russia 61st FEFPEB Congress 2008, Hamburg Sampsa J. Auvinen September 19th, 2008 Agenda • Short Profile of...
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Development of the Sawmill Industry in Russia 61st FEFPEB Congress 2008, Hamburg

Sampsa J. Auvinen September 19th, 2008

Agenda



Short Profile of Pöyry



How can Russia affect the European Packaging Industry?



Overview of Russia’s Forest Resources



The Russian Sawmill Industry



Future Development of the Russian Forest Industry



The Russian Packaging Market



Outlook

Pöyry in brief • Client- and technology-oriented globally operating consulting and engineering service company • Core operations based on three knowhow clusters: – energy – forest industry – infrastructure & environment

• Pöyry operates globally in 45 countries and employs a total of 7300 experts. • Global market leader in forest industry • Strong international position in energy, infrastructure & environment

Pöyry Group - Turnover 1985-2007 EUR Mio 800 700 Infrastructure & Environment

600 500

Energy

400 300

Forest Industry

200 12% annual growth

100 0 1985

1991

1997

2003

2006

2007

Worldwide Office Network

Vancouver

Oslo Stavanger Aberdeen Oxford London Horsham Paris Lyon Hamburg Dresden Mannheim Munich Lörrach Zurich Madrid

Montreal Appleton New York

Stockholm Helsinki St Petersburg Moscow Tallinn Riga Vilnius Lódz Cracow Brno Trenčín Vienna Milano Genoa Budapest

Tunis

Beijing

Seoul

Tehran

Shanghai New Delhi Kunming Guiyang Taipei Abu Dhabi Colcatta Dubai Muscat Hanoi Manil Bangkok a Kuala Lumpur Singapore Brunei

Riyadh Mexico City Dakar Valencia Medellin

Lagos

Bujumbura Jakarta

Lima Lusaka Poços de Caldas São Paulo Durban Buenos Aires

Auckland

Perth Melbourne

How can Russia affect the European Packaging Industry?

• Russia is one of the biggest forest areas in the world • The Russian government’s target is to force investments to the forest industry sector and to promote a domestic competitive forest industry • The whole sector is expected to face an investment boom during the next decade  Russia will emerge as one of the world’s largest producers and consumers of wood products in the medium and long term.

How can Russia affect European Packaging Industry?  Raw material being purchased in Russia  Russia as a target market for European industrial packaging products / services  Competition in Europe by Russian players

Overview of Russia’s Forest Resources • Forest Area • Wood Species Distribution • AAC vs. Actual Harvest • Roundwood Prices

Resources - Forest Area 808 193

706

Europe

Russia

436 North & Central America

635 832

283

Western & Central Asia South & South East Asia

1

Africa

- Million hectares -

206

1

South America

Oceania

• South America and Russia are the leading regions by forest area • More than 50% of Russia are forested

Resources - Wood Species Distribution by Region

North West Russia Ural

Russian Far East

Central Russia Sibiria South Russia & Volga

Total Growing Stock in Russia 72.5 billion m3 20% 32%

14%

Larch Pine Spruce Other SW

• With ~80% softwoods dominate the Russian forests • Overall, Larch is the most common wood species

Hardwoods 14%

20%

Resources - AAC vs. Actual Harvest by Region Note: AAC and harvest for final fellings, including fuelwood.

150 120

120

60

150

90

30

150

- Million m3 -

150

90

0

AAC Harvest

150

120

60

90

30

60

0

30

120

120 90 60

AAC Harvest

90

150

30

0

60

AAC Harvest 120

0

AAC Harvest

30

90 0

AAC Harvest

RUSSIA, TOTAL 60 30

Hardwood

0

AAC Harvest

Softwood

SW HW Total

AAC Harvest 297 85 211 32 508 117

• Underutilized harvest potential in nearly all regions – particularly of hardwood. • Largest harvest potential is in Siberia and the Russian Far East.

Resources - Roundwood Prices Austria, spruce Germany, south, spruce Germany, south, pine Finland, south, spruce Finland, south, pine Austria, pine Sweden, north, pine Sweden, south, pine Sweden, central, pine Sweden, north, spruce Poland, spruce Poland, pine Sweden, south, spruce Sweden, central, spruce Latvia, spruce Latvia, pine Chile, radiata pine European Russia, spruce Canada East, SPF European Russia, pine Portugal, pine USA South, SYP New Zealand, radiata pine Brazil, SYP South Africa, pine Argentina, SYP 0

- EUR/m³ sob 10

20

30

40

50

60

70

Stumpage Harvesting Transport Overhead * 1.Q. 2008 80

90

• The Russian price level for roundwood is low compared to the roundwood prices both in Central Europe and the Nordic Countries • Comparably high harvesting and overhead costs

Sawmill Industry • Supply & Demand • Top 10 Producers • Structure of Exports

Sawmill Industry - Sawn Softwood Supply & Demand

40

- Million m3 -

30

20

10

0 1995 1996 1997 1.998 1999 2000 2001 2002 2003 2004 2005 2006 2007

2015e

-10

-20

Exports according to statistics Estimated Production Production according to statistics

Estimated Consumption Domestic Consumption according to statistics

• Domestic consumption is by far higher than the numbers declared in official statistics • Sawn softwood exports have continuously increased over the last few years.

Sawmill Industry - TOP 10 Sawn Softwood Producers Investlesprom Lesosibirsky LDK No. 1 Novoeniseisky Ilim Drev Titan Group Swedwood/IKEA Continental Management Solombala UPM Sawmill No. 3 0

100

200

300

400

500

600

700

800

- 1,000 m³ -

• Major players with several sawmill sites have emerged over the last few years • Compared to Central European and Nordic companies, these groups are still quite small

Sawmill Industry - Structure of Exports 18.000

3

- 1.000 m 16.000 Others 14.000 Japan

12.000 10.000

China

8.000 North Africa 6.000 CIS-States

4.000 2.000

Europe

0 2000

2001

2002

2003

2004

2005

2006

2007

• Russia’s export focus has been on the European markets to a large extent • However, strong increases in its export to North Africa, Asia and the CIS countries have been recorded over the last few years • Shortage of port capacities limits export shipping

Future Development of the Russian Forest Industry Sector • Roundwood Export Duties • Investment Activity • Structural Change

Future Development - Roundwood Export Duties Date

Duty*

Min. duty

Duty

No duty

Pre 01.07.2007

6.5 %

4 EUR/m3

Birch >15cm, all spruce, all pine

Birch 15cm, all spruce, all pine Aspen

Birch 15cm, all spruce, all pine Aspen

Birch 15cm, all spruce, all pine Aspen

Birch

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