Wood Resources International LLC WRQ reported that domestic sawlog prices in Russia have gone up 25% in three years despite higher log export tariffs. Will they climb even higher now that Russia is a member of WTO? Source: Timberbiz
Log costs for Russian sawmills did not fall as the Russian government intended when it implemented a 25% log export tariff in 2008. Instead, sawlog prices have increased by 24% the past three years and the supply of logs has been tight in 2012, as reported by the Wood Resource Quarterly.
When Russia joined the World Trade Organisation (WTO) in August 2012 the government was forced to reduce export taxes to 13% and 15%, respectively for spruce and pine logs.
Despite these tariff reductions, there is not likely to be a major increase in the flow of logs from Western Russia to Finland, the major destination for Russian logs.
Finnish sawmills close to the Russian border will continue to buy mostly from the domestic market in Finland, using only marginal volumes from Russia when the costs are competitive.
Overtime, as lumber markets improve in Europe, exporting sawmills in Finland will need additional sawlogs, and it is likely that Finland will increase its reliance on Russian sawlogs again.
However, log trade between the two countries will never return to the same levels as before the implementation of the export tariffs because Finnish sawmills have now established other log sources.
Sawmills in Western Russia have kept up production relatively well during the European summer months this year despite the weak lumber demand in Europe because markets in Western Europe account for a fairly small share of the Russian export volumes.
Instead, Egypt and former Commonwealth Independent States (CIS) countries are the major destinations for softwood lumber produced in the Western provinces of Russia, and these markets have stayed fairly healthy and even improved during 2012.
The steady demand for sawlogs by the sawmills in Northwest Russia coupled with the fairly tight log supply resulted in close to record-high price levels (in Rubles) throughout the year, a development in contrast to many log markets in Europe where log prices have fallen the past six months, as tracked by the WRQ.
