St. Petersburg Forest Summit left Finnish industry with mixed feelings

The Finnish forest companies in attendance at the Finland-Russia Forest Summit held in St. Petersburg on Sunday were left with only a vague idea of what kind of conclusions they should draw from the meeting.
     
The Finns were not satisfied with the concession made by Prime Minister Vladimir Putin, who said that Russia would not be introducing the planned increase in export duties on roundwood from the beginning of next year, and that it was possible the moratorium could extend into 2011.
      The most concrete conclusion was that the duty-exempt top diameter of birch roundwood would be raised from 15 centimetres to 24 centimetres. According to the information obtained by Metsäliitto it was a rumour, while UPM said that it was a fact.
      Following this vague information, the Finnish pulp and paper manufacturers are likely to reduce rather than expand their activities in the east.
     
Between January and July this year, the exports of Russian roundwood to Finland were 3.3 million cubic metres, showing a decline of 50 % compared with the corresponding period last year.
      The most important grade of wood for Finnish processors continues to be birch pulpwood, the exports of which to Finland were 0.5 million cubic metres.
      In 2008, the volume was six times larger.
      Birch pulpwood may be exported to Finland without duty if its maximum top diameter is less than 15 centimetres. The idea is that thicker logs would be directed to Russian plywood factories.
      Russia does not need smaller birches as the country does not have any pulp mills that would process birch.
     
The directive on the maximum top diameter causes a lot of extra work for exports.
      All wood that is to be exported to Finland has to be separated in piles according to the 15cm directive, which in practice leads to big problems.
      If one single log that is thicker than 15cm is found during the inspection on the border, the entire cargo could have to be unloaded.
      Another problem is that the quality of birch varies a great deal.
      Even a thick log may be decayed inside. It can also be curved and have thick branches, which is why it would be good enough for a pulp mill but not for a plywood factory.
     
The exports of softwood to Finland have not been affected by the export duties as much as those of birch pulpwood have.
      The reason for this is that Finland is suffering from a shortage of strong conifers, and the proportion of the wood tariff of the roundwood factory price is lower than that of the pulpwood price .
     
The postponement of the planned increase until the distant future is likely to affect the Russian forestry and the country’s raw material logistics most of all.
      The small enterprises felling timber should know in advance for how many years they will have contracts. Putin did not give any reply to that question on Sunday.
      It does not pay to invest in expensive tree felling machines, if an entrepreneur can expect to have work only for some months.
      If there are no buyers for birch pulpwood, it is not profitable to fell only roundwood.
      However, in such a situation Russian sawmills processing conifer roundwood and plywood factories working on birch roundwood are left without raw material.
     
The large Finnish pulp and paper manufacturers are reducing their activities in Russia.
      The roundwood imports of Stora Enso used to be 8 million cubic metres at their best, while in 2009 the imports are likely to remain below one million cubic metres.
      Stora Enso once employed some 2,000 Russian felling workers, but the number has declined to 600.
      UPM-Kymmene imported 5 million cubic metres of roundwood to Finland in 2008, but in 2009 the imports are expected to remain at 1.5 million cubic metres. A significant part of the imports consists of chips.
      UPM used to employ more than 1,000 workers in Russia, while at present the company is employing only 230 Russian workers.
     
Metsäliitto, too, used to import from Russia approximately 4 million cubic metres of wood at the high point.
      In 2009, the imports are expected to remain below one million cubic metres.
      Previously Metsäliitto had six supplier companies which employed more than 1,000 workers.
      Only one such enterprise remains, employing fewer than 300 workers.


Previously in HS International Edition:
  Russia to postpone export tariffs on roundwood (26.10.2009)
  Putin promises speedy decision on wood tariffs (20.10.2009)
  Russia postpones wood tariffs again (3.9.2009)
  Commissioner Mandelson: EU cannot pressure Russia into removing wood tariffs (18.2.2008)
  Russian export tariff could end timber imports into Finland (12.2.2007)

Links:
  UPM-Kymmene
  Stora Enso
  Metsäliitto Group