Commissioner says negotiations on Russian wood tariffs remain open

industry increasing purchases from Finland while using more coniferous wood for pulp

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Negotiations between the European Union and Russia on Russia's plans to impose export tariffs on raw timber remain open, said Peter Mandelson, the European Commissioner for Trade, speaking to Helsingin Sanomat on Friday.
      Mandelson, who was in Mafra, Portugal, said that the wood tariffs dominated the trade policy discussions at the summit between the EU and Russia.
      "It was our longest-lasting topic", the Commissioner said after the meeting was over.
      Russia would like to lift the tariffs only after becoming a member of the World Trade Organisation. The tariffs are seen as a burden to the Finnish pulp and paper industry, which has grown to depend on imports of raw material from Russia
     
The Commissioner notes that the EU and Russia agreed in 2004 not to impose any barriers to trade, such as export tariffs. In return, the EU promised to support Russia's bid for WTO membership.
      Now Russia is making the lifting of the tariffs conditional to being accepted as a member of the WTO.
      Mandelson emphasises that the core of the agreement of 2004 was that no new tariffs would be imposed. The goal is to achieve guarantees that trade could continue unhindered.
      European Commission President José Manuel Barroso said at a press conference for the Mafra summit that two obstacles remain to Russia's WTO membership, and that the wood tariff issue is one of them.
      Barroso says that Russian President Vladimir Putin has shown a constructive attitude in solving the problem. Putin himself did not mention the timber tariff issue in Mafra.
     
Finnish forest companies have launched preparations in case Russia does not back down on the issue. The worst problem is birch fibre, as Finland does not have enough birch to satisfy the needs of its pulp factories. To stave off the shortage of raw material, domestic wood acquisition has been increased, and pulp factories have started to use pine instead of birch.
      If Russia does not change its mind, Stora Enso is set to suffer the most. Last year the company imported seven million cubic metres of wood from Russia, but this year the amount is falling to less than five million. Most of it is birch.
     
The biggest need for birch is with the Stora Enso Kaukopää mill in Imatra, which produces cartons for packaging liquids. The product has a stable market, and the factory has kept the company going even in difficult times.
      To guarantee sufficient supplies of birch for Kaukopää, the company's other plants have been converted to allow the use of pine fibre.
      In addition to production changes, Stora Enso has increased wood purchases from Finland to the tune of three million cubic metres. "We have never taken such a big step in domestic acquisitions", says Matti Karjula of Stora Enso.
     
The Metsäliitto Group buys 17 million cubic metres of wood from Finnish forest owners in normal years.
      Each year Metsäliitto imports 2.5 million cubic metres of wood from Russia, and 1.5 million from the Baltic countries. "We will seek to establish long-term acquisition relationships, if the tariff situation in Russia becomes impossible", says Kari Jordan, director-general of the group.
      On Thursday, Stora Enso CEO Jouko Karvinen complained that the cost of "marginal wood" - the "last" consignments of wood bought by pulp and paper mills, were too expensive.
      "Russia and the Baltic countries are not marginal: our presence on their markets is strategic. They are long-term sources for us. If the tariff rises to EUR 50, the picture will naturally have changed", Jordan says.
     
Regardless of the tariffs, the price difference between imported wood and domestic wood has become great. According to customs figures, the price of imported fibre wood at the border is EUR 50-54 per cubic metre, while inside Finland, the price of a cubic metre of timber on the roadside is EUR 32-36.
      Jordan of Metsäliitto says that forest owners have not complained, at least to him, about how much more foreign suppliers are paid for their wood than for wood from Finnish forest owners. The Metsäliitto cooperative includes a total of 130,000 Finnish forest owners.
      Karjula of Stora Enso believes that the price difference between Finnish and foreign wood will remain. "People in Finland understand that the price of wood needs to be competitive. This stark situation has been understood."
      Antti Sahi, director of forestry at the Central Union of Agricultural Producers and Forest Owners (MTK), says that the price gap has grown surprisingly large. "WE have to remember that prices fluctuate powerfully in the Baltic states. It makes it more difficult to assess the situation."


Previously in HS International Edition:
  EU Commission: No speedy solution in sight in dispute over Russia’s timber export tariffs (25.10.2007)
  Wood shortage threatens pulp production in Kemijärvi (15.6.2007)
  EU links Russian WTO membership with wood tariff issue (11.6.2007)
  Russian export tariff could end timber imports into Finland (12.2.2007)

Helsingin Sanomat