Lose-lose situation for everyone but China

“The EU needs Russian lumber. When there was a shortage last year, Russia increased exports by 20% to 4.5 million m³,” Aleksin says, illustrating the importance of his country.

“For decades, we have been supplying European processing companies which need Russian raw wood. If the EU decides to impose a ban on lumber imports, it will be difficult for these customers to compensate for this sudden lack of goods.”

China as a possible alternative to the EU

Aleksin sees European lumber prices rising to €600/m³ “if the Russian lumber is shipped to China and Ukrainian goods are no longer exported to Europe at all”. All countries, with the exception of China, would find themselves in a lose-lose situation.

“If further sanctions are imposed, we will be forced to turn to the east. We have the necessary railway connections and ports for this step. I assume that there will be an oversupply of lumber in China in the medium term,” Aleksin says. What is true for spruce and pine wood applies even more to Siberian larch: “China will buy everything – and always at the lowest possible price.”

Current ban on exports irrelevant

Aleksin is not worried about the stop to timber exports until the end of 2022 which Russia has already imposed: “For the most part, this measure affects cellulose and birch veneer wood as well as wood chips. Finland stopped buying these products a while ago.”

Aleksin also puts the Russian government’s announcement into perspective according to which foreign companies are going to be expropriated if they shut down production. “Certainly, no one will be expropriated just because they have to suspend operations due to logistical difficulties or a shortage of raw materials. This measure is only aimed at companies which want to leave Russia permanently.”

However, Aleksin predicts that the ban on exports will have repercussions on the log harvest in the northwest of Russia. “When smaller volumes of hardwood are harvested, softwood logging will decrease as well.”

The winter harvest season ended ten days ago. Aleksin assumes that the sawmills, which are owned and operated by Western European timber companies, will hardly buy any more log wood due to the uncertain situation. There are five such sawmills in northwest Russia which have an annual demand of at least 2 million m³. The log price is said to have fallen to the level of 2019.

No ships coming in – de-facto ban

International shipping companies are hardly coming into the port of St. Petersburg anymore, something which Aleksin sees as a de-facto ban. However, his company still ships containers via the far east route from Vladivostok to China and is exploring options for exporting goods to other overseas markets.

VLP ships around 15% of its lumber to Egypt. In this case, too, transport is the biggest problem. If St. Petersburg switches to break-bulk cargo, VLP could continue to ship its goods to Egypt. Shipping via the ports of the Black Sea would be the other option.

Either way, China will profit the most from the current situation. Last year, there have been problems with open-top wagons in railway transport. However, Aleksin believes that this problem has been solved by now.

Lumber wagons parked somewhere

Several Central European importers of Siberian larch complain that wagons with goods they had ordered have been parked somewhere along the 6000 km journey. “At the moment, foodstuffs and medicines have priority,” Aleksin explains. “As long as the EU does not impose a trade embargo, the goods will arrive.”

VLP’s sawmills use SAB and USNR lines for cutting. “We don’t know yet how to ensure the supply of spare parts in the future, but we already have to prepare for maintaining the saw blades ourselves. We are not worried, tough. Where there is demand, there will be supply eventually,” Aleksin says, referring to Russian flexibility.

Russian plywood indispensable

One product, which is indispensable on the global market according to Aleksin, is birch plywood. “2 million m³ a year are a lot. The automotive industry in particular will feel the shortfall.”