CONTACTS: CONTENT St.Petersburg, 196084 Ligovsky pr., 270 Russia RUSSIAN FOREST INDUSTRY: A SNAPSHOT Phone: +7 (812) 703-38-44, 703-38-45, 447-98-68 The Russian Timber Industry: Past, Present and Future ...... 8 Fax: +7 (812) 703-38-44, 703-38-45 On the Threshold of Great Changes ...... 16 E-mail: [email protected] Timber Corporations to Become a Way Out ...... 22 WWW.LESPROM.SPB.RU Valery Saykovsky: “Russia is Following in the Steps of Finland and Sweden” ...... 26 Alexander Belyakov: “We Don’t Need a New Forestry Code” ...... 30 Achievements: 4 years of unmitigated success! EDITORIAL BOARD: RUSSIAN FOREST INDUSTRY: A SNAPSHOT General Director Circulation: 9 times per year, 140 colored pages covering Yarovaya Svetlana Russian Forests ...... 34 [email protected] high quality information about: Forest Certification: Russia Among the Top Actors ...... 42 Project Manager Prudnikov Oleg Forest Code: Choose or Loose ...... 49 [email protected] Over the Past Five Years, the Area of Certified Forests has Increased Some 20 Times ...... 52 Chief Editor Vershinina Anna WOODWORKING [email protected] Old Equipment Won’t Last Long: The Future of Russian Sawmilling ...... 64 PR-Manager Chugunova Elena Long-Trump holders Loose? ...... 72 [email protected] The Biggest Manufacturer of Wood-based Panels in Russia ...... 78 Designers Zabelin Andrey & Pavlova Anastasiya Global Edge: 15 Years of Success ...... 80
Distribution Department WOODEN CONSTRUCTION Tikhonova Olga Wooden House-Building in Russia ...... 84 [email protected] Audience: 15,000 readers throughout Russia, including: OFF-SCREEN The End of Urbanization? ...... 92
Reporters: Kranogorskaya Ivetta, BIOENERGY Alyoshina Tatiana, Grevtsov Alexandr, Rodionov Andrey, Solovyova Mariya. Possibilities and Threats for European Business
Translators: Natalya Sevryukova, Nadia in the Russian Bio-energy Sector Under its Current Condition ...... 94 Shouktomova and Marina Kosenkova PULP AND PAPER INDUSTRY The Russian Pulp and Paper Industry: Situations, Problems and Perspectives ...... 108 Partnership and Consolidation – the Way of the Russian Forestry Industrial Complex ...... 126 Investment Crisis ...... 131 Editor, RUSSIAN REGIONS WWW.LESPROM.SPB.RU English Version: Adam Cushman The Timber Industry in the Leningrad Region ...... 134 The Vologda Region Forests ...... 142
RUSSIAN FORESTRY REVIEW Karelia Republic: Habitat of the Forest ...... 154 is a supplement of LesPromInform journal Novgorod region: the Land of Birch ...... 170 More than 60 branch exhibitions per year in the RF, Circulation 5,000 samples Arkhangelsk Region: Past, Present and Future ...... 174 CIS countries, Baltic and European countries actively spreading Komi Republic: Under Airplane Wings Stretches the Green Plain of a Parma ...... 188 RUSSIAN FORESTRY REVIEW LesPromInform is issued one time per year The Timber Industry Complex of the Irkutsk Region ...... 196 It is printed in a “Premium-press” typography office, St.-Peterburg. Some of the Enterprises Presented in Russian Forestry Review ...... 211
denotes paid advertisement articles. “LESPROMINFORM” JOURNAL IS YOUR BEST AND SMARTEST CHOICE Mass Media Projects for the Russian TIC: Briefly about Us ...... 216 TO BE WELL KNOWN IN RUSSIA! Prices ...... 219 The founder is “Ecoline” Ltd. The license is PI # ¹ 2-6519, dated on April 2003. Table of Profile Exhibitions ...... 220 It is registered by the Northwestern circuit interregional territorial administration of the Ministry of printing of the RF, broadcasting (+7 812) 447-98-68, 703-38-44, 703-38-45 and mass media. The editorial board is not responsible for the subject matter of advertising Russia, 196084, St.Petersburg materials. Any reprinting of informational ma- #270, Ligovskiy pr., 2nd floor terials may be carried out only with the written consent of the editorial board. www.lesprom.spb.ru, [email protected] Gentili Signore ed Egregi Signori, Dear ladies and gentlemen, Sehr geeherte Damen und Herren!
Buon giorno da parte della redazione della rivista principale We welcome you on behalf of the editorial paces and to various extents so are all of its Die Redaktion der f⁄hrenden russischen Fachausgabe russa settoriale del Complesso Industriale del Legno – board of the leading professional publication in industries, including the timber industry. We ⁄ ber Forst- und Holzwirtschaft - die Zeitschrift LesPromInform. Sono ormai 4 anni che la nostra rivista the Russian timber industry – LesPromInform believe that these positive developments were LesPromInform begr⁄sst Sie. Unsere Zeitschrift nimmt partecipa attivamente all’informatizzazione del mercato del magazine. For the last 4 years our magazine has noted and appreciated and in some ways led schon 4 Jahre die aktive Teil an der Informatisierung der Complesso Industriale del Legno della Federazione Russa ed been actively involved in the informatisation the member countries of the WTO to begin Holzwirtschaft Russischer Föderation. Als unabhängige essendo un massmedia assolutamente indipendente e di alta of the timber market in the Russian Federation, negotiations about the possibility for the und qualitative Massenmedium hat die Zeitschrift die qualita’ ha acquistato il prestigio ed ha aåtirato una grande and being an absolutely independent media Russian Federation to join this organization. Autorität und Aufmerksamkeit sowohl der Geschäftsf⁄hrer attenzione dei dirigenti e degli specialisti aziendali nonche’ dei providing high quality information, it has gained The ascension to the WTO, which according und Spezialisten, als auch der Behördenvertreter rappresentanti delle autorita’ della Federazione Russa. Durante the respect and attention of company managers to politicians is likely to happen in late 2006 Russischer Föderation verdient. Während der Jahre der gli anni dell’attivita’ fruttuosa la redazione ha acquisito un and experts, as well as representatives of state – early 2007, will open our borders and gradually erfolgreichen Arbeit hat die Redaktion viele kompetenten numero notevole delle fonti d’informazione competenti in tutte authorities of the RF. Over the course of several ensure equal rights and opportunities for foreign Informationsquellen in allen Regionen Russlands gefunden le regioni della Russia, nonche’ un gran numero dei contatti years, the editorial board has secured a large and domestic companies in all market sectors, und es gibt auch viele Kontakte mit den ausländischen con societa’ estere ed associazioni pronte a collaborare con number of reliable information sources in all including investment and banking, mechanical Gesellschaften und Assoziationen, die mit der russischen il Complesso Industriale del Legno della Russia. Stavamo the Russian regions, as well as many contacts engineering, power generation, the production Holzwirtschaft zusammenzuarbeiten wollen. Wir bekommen ricevendo periodicamente delle richieste relative alle ricerche in foreign companies and associations that are of industrial and consumer goods, etc. This regelmäßig die Anfragen auf die Forschungen von unseren analitiche da parte dei nostri partner stranieri ed abbiamo visto eager to cooperate with the Russian timber means that within the next 10 years, Russian ausländischen Partnern und sehen ihren Wunsch, alles il loro desiderio di essere al corrente delle tendenze principali industry. We regularly receive queries for further producers will not only gain access to the ⁄ber die Haupttendenzen der Zweigentwicklung zu wissen. dello sviluppo del settore. In quanto la rivista LesPromInform research from our foreign partners and witness foreign markets, but will also no longer be Da die Zeitschrift LesPromInform hauptsächlich auf e’ indirizzata principalmente al mercato interno e ai paesi del their desire to have up-to-date information protected by such measures as artificially low den Binnenmarkt und die Lände GuS berechnet ist, CSI essa esce solo in lingua russa. Di conseguenza per poter about the main development trends in the prices for gas and petrol, high import duties wird sie nur auf Russisch ausgegeben. Um unseren dare ai nostri partner stranieri la possibilita’ di sapere di piu’ industry. Since LesPromInform magazine is for competitors’ products, etc. ausländischen Partnern die Möglichkeit zu gewähren, mehr 4 sul Complesso Industriale del Legno della Russia, nonche’ di aimed mainly at the domestic market and the ⁄ber Forst- und Holzwirtschaft Russlands zu erfahren, 5 avere un’idea di quanto scriviamo nella nostra rivista russa, states of the CIS, it is published only in Russian. There have been many discussions about the und auch die Vorstellung zu bekommen, wor⁄ber wir abbiamo deciso di pubblicare un allegato annuale – una Therefore, in order to provide our partners consequences of Russia’s ascension to the WTO, in unserer russischen Zeitschrift schreiben, haben wir raccolta degli articoli appositamente stesi relativi al Complesso abroad with an opportunity to learn more about but one thing is already clear: it is necessary to entschieden, die jährliche Anlage - die Sammlung der Industriale del Legno in lingua inglese. the Russian timber industry and to give them an ensure the rapid development of business areas speziell vorbereiteten Artikel ⁄ber Holzwirtschaft auf idea about the content of our Russian edition, that have apparent competitive advantages in Englisch auszugeben. Dunque, adesso tenete in mano la raccolta RUSSIAN FORESTRY we have decided to publish an annual English the global market. One of these potentially REVIEW – un’edizione unica. la quale, speriamo, ci permetta supplement with specially prepared articles competitive areas is the Russian timber industry. Also, halten Sie in Hände die Sammlung RUSSIAN di presentare alla Vostra attenzione nel modo piu’ completo about the timber industry. However, historically, and until now, despite its FORESTRY REVIEW – einzigartige Ausgabe, die uns e nel contempo obiettivo il Complesso Industriale del Legno large potential, the timber industry remains one maximal voll und objektiv, Ihrer Aufmerksamkeit die Forst- della Federazione Russa. This volume of the RUSSIAN FORESTRY REVIEW of the least developed areas of the economy. und Holzwirtschaft Russischer Föderation vorzustellen is a unique publication and we hope that With almost unlimited resources of oil and gas, ermöglichen wird. Nonostante tutte le difficolta’ attuali, il Complesso Industriale it will give you a complete and objective few people in Russia considered it necessary del Legno della Federazione Russa e’ un mercato serio e account of the timber industry of the Russian to develop wood processing. As a result, the Trotz aller Schwierigkeiten des heutigen Tages, ist promettente che non puo’ non interessarVi. Speriamo che Federation. main export commodity of the national timber russische Holzwirtschaft ein ernster und perspektivischer la nostra raccolta Vi aiuti a trovare delle risposte di Vostro industry is unprocessed round timber and the Markt, der f⁄r Sie interessant sein soll. Wir hoffen, dass interesse e che diventiate nostri lettori assidui. Until about five years ago, this industry was share of timber production with high level unsere Sammlung Ihnen helfen wird, die Antworten rather closed and obscure, even frightening processing in the total export volume is growing auf die interessante Fragen zu finden, und Sie unsere E se siete pronti ad un’attivita’ dinamica nella Federazione for an outsider, because of the high level too slowly. ständiger Leser werden. Russa, la nostra rivista russa LesPromInform ed il giornale da of criminal activities, mainly illegal felling. fiera LesPromFORUM sono sempre alla Vostra disposizione. This situation resulted in a specific image of Nevertheless, some changes have taken place Wenn Sie zur aktiven Arbeit in Russischer Föderation the Russian timber business both in Russia or are in progress, and they will pave the fertig sind, sind unsere russischsprachige Zeitschrift Abbiamo realmente tutte le possibilita’ di far arrivare delle and abroad. Publications in major foreign way for the rapid development of the Russian LesPromInform und die Ausstellungszeitung informazioni sui Vostri prodotti e servizi alla maggior parte periodicals that focused mainly on the negative timber business and the attraction of large LesPromFORUM immer zu Ihren Diensten. Wir haben alle delle imprese del Complesso Industriale del Legno della Russia developments in the industry only supported investments into the industry. We are talking Möglichkeiten, die Information ⁄ber Ihre Produktion und – a partire dell’ammasso del legname fino alla produzione dei existing apprehensions. mainly about the development of a new Forestry Dienstleistungen bis zu der Mehrheit der Unternehmen mobili e alla costruzione delle case in legno! Code, which will radically change the ‘rules russischen Holzwirtschaft - von der Holzbeschaffung However, Russia is changing. The economy of the game’ in the timber industry and is bis zu der Möbelherstellung und des Holzhausbaus zu is becoming more civilized and at various expected to substantially reduce the risks of berichten!
№ 1 2006 № 1 2006 MODEL FORESTS OF RUSSIA
timber enterprises in relation to the stability Management of raw materials supply. Also, the decisions • Confederation of Associations and Unions of the Government of the Russian Federation of Timber, Pulp and Paper, Wood Processing concerning the limitation of the export of round and Furniture Industry THE EXHIBITION NEWSPAPER “LESPROMFORUM” timber, the modernization of existing enterprises and the construction of new facilities for • Union of Harvesters and Timber Exporters is the OFFICIAL informative issue high-level wood processing will also be very of Russia of the LEADING TIC FAIRS in Russia! important. These affect the interests of many • The Russian Association of Organisations enterprises both in Russia and abroad and they and Enterprises of the Pulp and Paper will need to adapt to the new situation in order This unique new project is a supplement to the journal “LesPromInform” Industry to benefit. The most progressive companies for massive coverage of the audience of the hugest exhibition events! – and there are quite a few of them – are • Association for Wooden Houses Construction already following the changes with attention • Ilim Pulp Enterprise High-quality polygraphy and interest, developing strategic plans and Original design making corresponding decisions regarding • Arkhangelsk Pulp and Paper Mill marketing, investments and production. They Contains useful information … and also personally: are the target audience for our first pilot issue Programs of all the events in the frames of an exhibition of the RUSSIAN FORESTRY REVIEW, which will • Dmitry Chujko, Development Director of be published annually. the forest industry corporation, Ilim Pulp Interviews with VIP’s of the country and its regions Enterprise There is no need to give a detailed description • Andrey Gosudarev, chair of the Union of of the content of this volume: you can browse Dissemination: Harvesters of the Leningrad region. through its pages yourself and choose the 6,000 to 10,000 visitors and participants of the most highly-attended Russian fairs will see your advertisement! articles that are most relevant to you. We • Natalya Pinyagina, deputy general manager would only like to note that we are not trying for strategic development, Arkhangelsk Pulp to offer you a detailed analytical report on the and Paper Mill During a fair, newspapers are distributed: Russian timber industry, because such reports 6 already exist. Our goal is to introduce you to Despite all of the current challenges, the timber On the registration place, the situation in the industry and to the opinions industry of the Russian Federation is a serious During all the seminars and conferences in the frames of the fair, of the experts who work in the industry and and promising market that will definitely interest know all of its advantages and disadvantages, you. We hope that our volume will help you find In the organizational booths, which are often hidden from outsiders. the answers to your questions, and that you In the booth of “LesPromInform” magazine will become a regular reader. We would also like to thank those who On the poles in all the pavilions have made significant contributions toward If you are ready to start doing business in the By help of promoters wearing the uniform of “LesPromInform” magazine the publication of the RUSSIAN FORESTRY RF, you can always use our Russian edition of REVIEW: LesPromInform journal and the exhibition The rest of the circulation is delivered to the region’s Chamber of Industry and Commerce (CIC) and branch unions as well as to the offices of the hugest companies. newspaper LesPromFORUM. We have all the • Ministry of Natural Resources of the means to deliver information about your Russian Federation productions and services to most enterprises The list of fairs covered by issues of the newspaper “LesPromFORUM”: • Federal Forestry Agency of the Russian timber industry, from harvesting to furniture manufacturing and wooden house • The Committee of the State Duma of the RF LesPromForum Issue #4 #5 #6 #7 construction! for Natural Resources and Environmental Tekhnodrev. Ural. International Exhibition Lesdrevmash 2006 Russian forest 2006 WWW.LESPROM.SPB.RU Povolzhye Forestry Forum Place, Perm, Moscow, St.Petersburg, Vologda, SUBSCRIPTION FOR ONE SAMPLE OF RUSSIAN FORESTRY REVIEW date 20–23 June 11–15 Semtember 10–13 October 6–8 December BY POST DELIVERY COSTS EUR EC «Permskaya 170 Organizer yarmarka» and ZAO “Expocentr” EC “RESTEC” EC “Russkiy Dom” DURING PROFILE EXHIBITIONS YOU CAN BUY A SAMPLE FOR 80 EUR EC «RESTEC» (Table of exhibitions 2006 you may find on the last page) Circulation 6 000 samples 10 000 samples 8 000 samples 5 000 samples To order the subcsription contact: +7 (812) 703 3845, [email protected] Last issue #3 Novosibirsk: www.lesprom.spb.ru/arhiv/LPF_3.pdf
During year 2006 subscription for RUSSIAN FORESTRY REVIEW #2 (2007) costs 140 EUR (+7 812) 447-98-68, 703-38-44, 703-38-45 Russia, 196084, St.Petersburg № 1 2006 #270, Ligovskiy pr., 2nd floor www.lesprom.spb.ru, [email protected] MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
added value for one cubic meter of production In comparison to the countries with developed in the Russian timber industry is 45 US dollars, timber industries, this figure is relatively low. which is 10 times less than in Finland (USD This is related not only to the low level of 480). Or consider the index of timber use for business activity in the timber industry, but a production requiring high-level processing: also to the predominance of production with in Russia it is around 20%, while in countries low-level processing, which has a lower added with advanced timber and paper industries this value. figure can reach 85%. If the Russian timber industry succeeds in bringing these and other The share of the timber industry in the Russian performance indicators to the world level, it export is even lower – only 4%. might be able to reach the economic potential stated above. One of the reasons for this situation is the traditional attitude toward forest exploitation This article looks at the current situation in as well as to the management of timber and the Russian timber industry: its potential and wood-processing enterprises. Russia has long been the supplier of raw in the Russian Federation is 1173.4 million ha, capabilities, problems and solutions. We also materials for more developed countries. There is and the reserves of standing wood exceed 82 hope that the reader will come to his or her For many decades the timber industry was also no doubt that the Russian timber industry billion cubic meters. The annual increase of own conclusions about whether the Russian based on the principles of a planned economy could hold a more significant position both wood in Russian forests is 932.2 million cubic timber and wood processing industry can be and profitability was not the main goal of the in the national and international economies. meters with an allowable cut of 520 million considered a promising direction for future organization. Back then, the Northern forests However, many people both abroad and in cubic meters, of which only 22% are currently growth? were the “national sawmill,” because they were Russia fail to see the real situation. Some used. Thus, the potential of the national timber best suited for the quick harvesting and export believe that the Russian timber industry is industry is no less than that of the oil, iron and of timber and the felling sites were located as a gold mine and will eventually pay dearly steel industries. THE STATE OF THE RUSSIAN TIMBER such that they would ensure the best quality for their ill-considered actions. There are also INDUSTRY of timber. Lack of communication routes led opposing circumstances where neither timber Furthermore, the Russian timber industry has all to expansion of the cutting areas along the Currently, the Russian timber industry is nor wood-processing industries are included the prerequisites to become one of the main railroads and major rivers. An increase in the undergoing a deep crisis and it is no longer into investment rankings. These and many other industries in the national economy, which could planned amounts of harvested wood resulted 8 a secret that this information also appears 9 factors can confuse investors, even those already provide for its dynamic growth and development. in over-felling and the transition to periodic in various publications abroad. According to working in the timber business. According to some experts, the economic cutting. Many logging enterprises were created the Federal Service of State Statistics, timber, potential of the industry can be estimated at for the cutting of specific sales for several wood processing and pulp-and-paper production According to various experts, the Russian more than 100 billion US dollars. This figure may years, while reforestation was often neglected account for a bit more than 4% of the total Federation possesses about one fourth of the first seem unreal, but it appears plausible when and no attempts were made to ensure proper production volume. This figure has been world’s forest resources. The total area of forests we consider the data. For example, the average forest management. Therefore, for natural decreasing each year.
Fig. 1. The distribution of Russian production among the main industries in 2004 Fig. 2. The structure of Russian exports in 2005. Source: The Federal Service of State Statistics. Source: The Ministry of Economics, Development and Trade of the RF
№ 1 2006 № 1 2006 MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
biological reasons in many areas of harvesting The situation of the main timber industries more and more areas of common interest are promising. Once Russia joins the WTO, the prices the softwoods were replaced with aspen and – logging, pulp-and-paper and wood processing appearing. for energy and raw materials will unavoidably birch woods. – can be briefly represented in the following go up. As a result, basic production prices of way. The logging industry presents the most There are also definite advancements in the the timber industry will reach the global level. Also, not all regions have many forest, problems. Most of the enterprises in this industry restoration and development of the industry. Thus, Russian production may completely lose all transportation and production infrastructures. currently break even or suffer losses. The decline Along with the ongoing consolidation of Russian of its competitive advantages and consequently Recent research has shown that less than 60% in production for 2005 reached about 6%. The enterprises of the industry, the influence of be driven out of the global markets. of total forest areas are suitable for further planned increase in export duties for round the largest international companies in the exploitation considering their accessibility timber will probably make the situation worse, Russian timber industry have also increased This does not look like the most complicated and the technologies used in the industry, because it will close the main distribution recently. They have to face such challenges as problem, but the financial situation of most but most of them have been depleted as a channel. With an annual felling volume of 130 cost reduction and the further consolidation enterprises does not allow for independent result of extensive exploitation during the million cubic meters, only 80 million cubic of capacities in regions with relatively low reorganization and technical modernization in last century. Furthermore, more than half of meters are sold at the domestic market, while expense levels. Russia is very suitable for order to increase the competitive strengths all Russian forests stand on deep-frozen soils the rest is exported. As a result, the Russian these purposes, because the energy prices are of their production. The average share of (Siberia and the Far East). This leads to low export of forest products mainly consists of still below the global level, the personnel are unprofitable enterprises in the industry is productivity in these areas. Incomplete broken unprocessed woods. cheap and qualified and the timber industry is about 70%. forests cover 224 million ha. The probability fragmented. Some Western companies (such as: of attracting timber companies to these areas As for pulp and paper production, its development International Paper, Mondi Business Paper, Stora In order to improve the situation, the timber is very low, even if a transport infrastructure has also slowed down due to the depletion of Enso, UPM Kummene, Kronospan, Metsaliitto, industry urgently needs large investments, existed. Economically efficient forest resources capacity reserves for pulp production. In 2005, IKEA and others) already control several large but there are a number of obstacles: the cover only 250 million ha. the index of production was 101.2% of the paper-and-pulp factories as well as logging and existing procedure for VAT refunds for capital previous year’s volume. wood-processing enterprises. Their investments development projects and high rates of import The restructuring of the industry and into new enterprises and the upgrading of duties for equipment that is not produced in liberalization of foreign trade in the early In 2005, for the first time, the wood-processing existing ones are estimated at tens of millions, Russia. As a consequence, already at the initial 1990s resulted in a rapid growth of the industry achieved the greatest growth rate in even billions of US dollars. On the basis of this stages of construction, the investor spends number of timber enterprises by a factor of the timber industry. The production index in estimate it can be concluded that the industry 20-30% more, which makes these projects 5. Currently, there are about 25 thousand 2005 was 104.5%. According to experts, this is becoming more attractive for investors as substantially less attractive and increases their 10 enterprises operating in the industry, which growth is related to the increase in production the trends persist. payback period. According to various estimates, 11 employ more than 1 million people. The lack with a higher level of wood processing. the modernization of existing production and of management theory and practice, low levels Every publication about the Russian timber the construction of new capacities during the of business organization and competence for Of course, one cannot blame predecessors for industry gives a different definition of the following decade requires USD 1.3 to 2.4 billion solving economic and financial problems in all the current problems. The best way forward “main problem.” This is most likely because investments into the industry. Although, at least new independent enterprises constitute another would be to identify the exact problem and there are numerous problems, which we will a 10 times greater sum is required to “release” important reason for the recession in timber. One to achieve a clear understanding of possible examine in this article. the economic potential of USD 100 million. of the solutions are large vertically integrated solutions. Today, this is done from two points structures that can coordinate business in an of view – public opinion (the opinion of those efficient way, and are mainly suggested by the who are directly involved in the operation of the PRODUCTION CAPACITIES POLITICAL ASPECTS: companies who have already started creating timber industry) and the opinion of government AND TECHNOLOGIES FORESTRY CODE, BUDGET, ETC. such structures. officials. It must be noted that every year The duration of equipment use exceeds its Our government still has a major impact on standard service life by 60-80% according to business operations and many political factors various estimates. New technologies are barely need to be considered: New and existing laws, used and the existing ones were implemented the activities of regulating authorities, etc. about 50 years ago. Furthermore, their technical Normal business operations require a stable and economic characteristics are 2-4 times and comprehensible legal basis, primarily the worse than the technological processes used Forestry Code. in the West. Today the main advantage of Russian production in the global market is its The development of a new Forestry Code has competitive price, which results from lower been in progress for several years. The draft domestic prices for raw materials, energy and Code was approved in its first reading at the labour. State Duma of the Russian Federation. The procedure also envisages the second reading, Almost all experts in the industry realized which includes numerous amendments, and the long ago that if the national timber industry third reading. The second reading is provisionally relies only on this factor to maintain its scheduled for the beginning of May. So far competitiveness, its future does not look too there has been a lot of criticism of the draft, Fig. 3. The structure of the Russian export of forest products in 2005.
№ 1 2006 № 1 2006 MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
especially from those who are directly involved road construction. The proposed budget for substantial environmental, social and economic damaged by fires and worms and also felling in harvesting. 2006 for the first time allocates around 500 costs for the state and has a negative impact on leftovers. In Russia, with few exceptions, there million roubles for the building of agricultural the whole timber industry. According to official are almost no capacities for the processing One of the issues that need further clarification roads, according to Valery Roschupkin, head of data, the volume of illegal felling in Russia is of low-quality raw materials, such as aspen, is the procedure for forest privatisation. The the Federal agency for forest management. The around 11%, while the unofficial data reveals therefore investments into these technologies draft Code makes provisions for private property investments will be performed as a partnership figures of 20-30%. The turnover of imported can be both profitable and socially oriented. of forests: the one who has more money becomes between private entities and the state on an timber of unknown origins in Europe and the US Many heads of regions are ready to take real the owner. The issues of forest rental, creation equal basis, and it may be hoped that the total is 25% and in China and Japan 50% and 40% measures for the organization of such enterprises and closure of timber enterprises, allocation of sum of funding including the funds from the respectively. Obviously the “global community” and the attraction of investments. forests for construction works, etc., are resolved regions and investments will reach 1.5 billion disapproves of such situations and this has exclusively at the level of government officials, roubles per year. So far, however, for a number been particularly prominent during discussions As for business, experts forecast the further not only without consulting public opinion, but of reasons, including the absence of a necessary about the possibility of Russia joining the WTO. development of the consolidation trend. also (as it often happens in Russia) without regulatory basis and the uncoordinated activities According to various estimates, Russia annually Only five years ago, the main goal of the informing the general public. This will create a of corresponding authorities, road construction loses around 1 billion US dollars because of state government was to restore a company number of possible conflicts: restricted access has not yet begun. illegal felling. Unfortunately, this kind of management system that would allow the to forests, disruption of wildlife systems, total activity is sometimes called an “industry1.” improvement of the situation in the industry privatisation of forests in the nearest suburbs of In 2006, it is planned to allocate some funds Illegal felling mainly occurs because most of the and the development of the reorganization large cities, etc. In fact, the state lays down its from the federal budget for the development of logging enterprises hardly break even and thus, program for the timber industry. Of course, duties to manage, protect and preserve forests a physical infrastructure for the forest industry illegal logging is their only way to survive. It this recovery is not possible without creating without any requirements for forest management within the framework of the special program is a pity that not everybody understands this optimal economic, technical and organizational and the corresponding systems. The future of “Forest Management,” including the purchase of and that protectionist administrative measures conditions. Vertically integrated structures on the main constituents of the forest management aircrafts and ground vehicles for the prevention rather than “encouragement - punishment” the basis of large pulp and paper and wood system, forest farms and their units, is in and termination of forest fires and aerospace approaches are viewed as the remedy. processing enterprises were taken as the question. The most urgent problems of the timber forest monitoring. main turnaround model, which resulted in the industry, namely: attraction of investments into emergence of the current Forestry Code. high-level processing, reclamation of new forest Appendix 8 to the Federal Law “On the Federal FORECASTS FOR FURTHER resources, restoration and protection – have not Budget for 2006,” contains the encouraging DEVELOPMENT OF THE RUSSIAN Some companies have already expressed their 12 been fully addressed in the Forestry Code, which information that almost 12 billion roubles have desire to be the centre of consolidation in 13 mainly treats forests as a commodity. been allocated for forest management. The TIMBER INDUSTRY the industry. The companies that were most increase in expenses for most budget items Forecasting the development of the market in successful and have become the largest While there is a general trend by the state to is greater than the estimated inflation rate Russia is a difficult and ambiguous task, which companies in the industry will be able to monopolize the economy, the timber industry (however, the rate of 8.5% will most likely is rather similar to forecasting the weather. launch an initial public offering (IPO) during is a different situation. Maybe this is done remain an estimate, 10% seems more plausible). The global information and forecasts allow for the next few years. This will most likely be to attract more investments and to create It is a bit suspicious though, that while serious concluding that the harvesting volumes as well possible for the enterprises that include pulp “transparent” enterprises. That is, when the reform, that is, the approval of a new Forestry as the share of Russia at the global market and paper factories with a serious presence new expensive commodity – timber – is on code, is planned for 2006, the budget does not should increase by 2-3 times by 2015. This can at the Western markets, although there may the market, it will be bought by large holdings, include the unavoidable additional expenses for only be achieved if Russia ensures the conditions be some surprises. Until then, the main trends including foreign ones. It is possible that the the transition period. Conversely, the planned favouring the development of integrated forest (for all large enterprises or those who consider refusal to address many issues, leaving things increase of investments into the timber industry utilization and the improvement of the legal themselves as such) will be growth of the market to sort out by themselves (and this seems to is rather small: it is planned to increase them basis. We would like to identify and examine share, company value and the added value of be the political approach in the Forestry Code by 2007-2008 by only 10%. some activities of the Russian timber industry production. draft), results from a desire to ensure the free that could help to achieve these global goals development of the industry in the market As usual, the politics do not want to keep up and also other measures being taken by new Strategic Alliances: With the ongoing integration without any state interference. with the “subjects.” Next year once again we and existing enterprises. of large companies, strategic alliances will will need to rely exclusively on our capacities, become for medium and small manufacturers It can also be noted with satisfaction that the competence and the ability to anticipate future We already mentioned the state of the forests another way to survive, increase their Russian budget has been showing a surplus of developments. However, now more efforts will in the beginning of this article. One might competitiveness and generally the prerequisite more than 770 billion roubles over the past have to be paid to controlling changes in the also add, that in some regions, even where an for their existence on the market. We should few years. Of course, this is hardly directly business environment and we will have to remain infrastructure exists, almost 5 billion cubic also mention that the cooperation between linked to the timber industry enterprises, but alert at all times. meters of wood are not being used. This is large and small companies, and the outsourcing it can be expected that the greater the budget soft-wooded broadleaf timber; the forests of secondary activities to a greater number of income, the greater the allocations for various projects will be, including those related to the ILLEGAL FELLINGS timber industry. In most countries, illegal fellings constitute less than 1% of legal harvesting. However, in Russia, 1 The trade of illegally harvested wood is a multi-million dollar industry going on in over 70 countries, in all types of One of them, which is of great importance, is they occur on a greater scale, which incurs forests, from Brazil to Canada, from Cameroon to Indonesia, and from Peru to Russia…
№ 1 2006 № 1 2006 MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
more flexible and mobile subcontractors, which and also the necessity for the head of the talking about the long-term plans of companies processing would be the most profitable are has already become standard in the IT industry. region to be directly involved in this process. that are seriously considering it. It is well also being considered. Apart from the direct economic advantages of The regions that are able to recognize this known that the construction of a plant for cooperation, large enterprises will also receive now, in three or four years, will be able to high-level wood processing on average takes Furthermore, the possibility of compensating the status of “social protector” that many of enjoy the benefits. Some regions have already about two years. Therefore, if the decision is the enterprises for a part of their expenses for them really need. started making small steps in this direction, made today, production can start in 2008 at interest payments is also being considered, and while some clusters are in operation, and already the earliest, and reach its full capacity by the changes in customs rates policies are planned. B2B Companies, which provide various services in pay back. end of 2009. In order to increase the share of high-level to manufacturers, will also undergo further processed production in Russian GDP, suggestions development. There is a whole range of There is no doubt that the biofuel market have been made to lower the corresponding various activities: road building, research and has great potential. People have long been THE MEASURES THAT ARE BEING duties. development in technologies and other areas, considering various alternatives to oil, gas and TAKEN machines and equipment maintenance services, electricity, and the countries where the energy In general, the government has recently paid One of the goals of the Ministry of Industry and consulting services, etc. Reforestation and forest resources are not as enormous as in Russia a lot of attention to the restoration of the Energy for 2006 is to increase the investment regulation will also be dealt with. have long ago discovered and widely used the Russian timber industry, triggered by the appeal of the industry and to develop high-level modern technologies of biofuel production. President’s speech on March 27th where he wood processing capacities. At the same time, Contract Manufacturing Under Foreign There are many different kinds, which for the expressed his concern about the creation of experts believe that the approval of the Forestry Trademarks. How can this be of interest to sake of brevity can be divided into liquid and “energy prerequisites,” which would encourage Code is more important, because without it the our producers and foreign investors? Various hard biofuel. development. Stimulating devices were also industry will remain unstable. systems of branding, marketing and promotion discussed at the recent meeting in Syktyvkar. are more developed abroad. On the other hand, Hard biofuel is a relatively new area, at least in “While consistently increasing the export duties Still, the official message from the Ministry our experts are more competent in production Russia, but it is already well known, produced for unprocessed wood, we also consider the states that “…the main task of the Ministry of management under local conditions. In this and widely used: these are pressed fuel, pellets, possibility of investment contracts with those Industry and Energy for the beginning of this situation, joining efforts may be very productive. charcoal, common firewood, etc. This kind of market players who will invest within the year is to develop and present to the government Considering the existing practice of such fuel is mainly used for the heating of premises next few years toward the modernization and a draft of the Federal Special-Purpose Program enterprises, with the right choice of partners, and production facilities (for example, drying construction of new capacities in the timber (FSP) for the development of capacities for one side receives a stable flow of orders and an compartments). This business may be further processing industries,” said Christenko, at the high-level wood processing and the reclamation opportunity to try Western work methods, while developed by medium and small enterprises meeting of the extended Committee of the 14 of new sales by 2015.” According to the deputy 15 the other, without any major investments, gets because of its low investment capacity. In Ministry of Industry and Energy. Minister of Industry and Energy, the concept of the production demanded at its market (some order to create a profitable enterprise, one the FSP is almost ready. The program is aimed investments will be necessary though, at least needs to invest around 200 thousand US dollars. to facilitate the search for investments for the Denis DMITRIEV during the search for a suitable partner), and Although, it is not impossible that enterprises development of the industry. Corresponding also avoids the expenses for creating their own producing hard fuel will emerge within larger projects already exist. Thus, the message from production site. holdings. the Ministry mentions that in last November already, the Ministry presented the government Clusters. Clusters are well known in the Liquid fuel is still at the beginning of its with six investment projects related to the European business environment and are often development but its share continuously construction of new pulp and paper factories, used, however, in Russia they occur very rarely, increases. One of its disadvantages is highly for which the required transport, financial and especially in the timber industry. A cluster is a capital-intensive production, which is comparable energy infrastructure will also be created. Each group of related companies united on the basis to pulp and paper factories in terms of initial of these projects requires investments of about of geographical proximity that complement investments. Therefore, this area will develop 1 billion US dollars. each other. Clusters not only provide support further only with support from state programs, to their member companies, but also ensure which do not exist so far, or with investments Also, a three year project for increasing customs a substantial competitive advantage to the from the largest holdings operating in the duties for the export of round timber is being region and a large potential for attracting both timber industry. implemented. Today it constitutes 6% and investments and employees. The latter is very it is planned to increase it to 10%. A “pilot important for regions outside the European part We have considered various possible directions project” has also been launched, which cancels of Russia, such regions like Siberia, the Far East, for the development of the Russian timber the import duties for foreign equipment for and partially the Federal District of Ural, where industry, but we also need to point out the 9 months, and if the results are positive, the the main forest resources are concentrated. existing key trend in the industry: the creation duties may be cancelled for a longer period of enterprises for high-level wood processing, of time. Various tax privileges have also been These structures significantly increase the especially on the basis of raw material discussed for the construction of new pulp profitability of their member companies, the companies, including the foreign ones, in order and paper factories in Russia up to the time efficiency of their work and their manageability. to increase the cost flow and profit margins. when they reach their planned capacity. The The reason why there are such a small number of This may seem strange, especially considering projects for special economic zones where wood clusters is the time required for their formation the political aspects, but in this case we are
№ 1 2006 № 1 2006 MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
– Dmitry Dmitriyevich, in your opinion, what soon be completed. I expect that we will is the reason for the close attention of the RF finish that by the end of May. President and the Government to the forestry complex? The process of forest resources certification has accelerated drastically. Russia has joined the DC: I think that at last they have found time for FLEG (Forest Law Enforcement and Governance) this promising and interesting industry that has process, and certification is one of the very serious potential. The process of changing efficient ways of tackling the tasks that are asset owners in the timber industry complex and set in the framework of this process. Besides, market re-distribution is under way: the role of the situation in the world market is being China's market is becoming extremely significant; drastically changed for certified products, there is a trend towards production curtailment and the change in China's attitude towards During the years of sluggish in Scandinavian countries, first of all, in Finland; the issue has a dramatic effect. The Olympic attempts at reforming assets are gradually moving to regions with Games Organizing Committee in Beijing has Russia's forestry sector, forecastable long-term competitive advantages decided, with the sanction of the Chinese everybody has already from the perspective of cost reduction – regions Government, I suppose, to ensure absolute with cheaper forest resources and labour forces cleanliness during the forthcoming games grown accustomed to the (South America, South Africa, etc.). Now is a and to use only certified wood for everything typical, with some rare very important period, which is promising from having to do with timber industry articles exceptions, apathy of the standpoint of making timely decisions in – paper, cardboard, plywood, boards and panels, the federal authorities changing the situation in the industry, therefore construction parts, floors and ceilings, doors, towards the destiny of it is not accidental that the top leadership of windows, etc. This is fundamentally changing the industry. This apathy the country has turned its attention to these the situation and suppliers' attitudes towards can hardly be explained issues. certification. It is from Russia that an immense rationally, considering the quantity of timber industry products are immense potential of the In November 2005, a session of the RF supplied to China. Respectively, there is a timber industry complex, Government headed by Prime Minister Mikhail task of having our country's forest management 16 Fradkov dedicated to this question was held, certified as soon as possible. A conference since Russia ranks second 17 and in April the President of Russia visited dedicated to this issue was recently held in to none in the world in its Syktyvkar and delivered a speech, and on 19th St. Petersburg and much attention was paid to quantity of forest resources April a Russian-Finnish intergovernmental ways of adequately responding to the current – over 20% of the planet's meeting took place in Helsinki. The All-Russian situation. forests are concentrated Coordination Council of the Forestry and Timber in the Russian Federation. Industry Complex is resuming its work, and a Our corporation sees certification as a Against a background of meeting of the Council was held on 26th April means to achieving two goals. The first is the low efficiency of forest exploitation (according to official data, the after a long period of inactivity and made strengthening our position in the market and volume of lumbering amounts to just 180,000,000 cubic meters annually, decisions on the new body of members of the the second is putting things in order inside which makes up 23% of the rated felling area), woodworking, pulp and entire Council, its Management Board and its the corporation as concerns forest exploitation plan of action. and putting an end to illegal felling. Ilim Pulp paper and other branches of the timber industry complex consume a little has been working on implementing voluntary more than 80,000,000 cu. m of wood, and their share in the industrial The work on the completion of the new forest certification for two and a half years. products of the country is just 4.5%. However, the spring of this year is Forestry Code is in full swing. Since 4th It took a year and a half to do everything likely to be something special for Russia's timber industry complex – in April, a respective Task Force of the State needed to get the international certificate. fact, top state officials are paying attention for the first time. A number Duma has held its meetings on every second Even with our considerable capabilities and of events, including the session of Russia's Government headed by Prime day. 1,625 amendments that have been given a very serious attitude towards forest work Minister M.Ye. Fradkov and the speech by RF President V.V. Putin at the official status were dealt with. All of them organization, the first certificate was obtained meeting in Syktyvkar in the framework of a familiarization visit to one of have already been considered, the majority only in August 2005. We have to get nine the major pulp and paper mills allows us to hope that they have started of them declined, though some recommended certificates in order to be entitled to apply dealing seriously with the industry at last. Besides, a new Forestry Code for adoption. As a result, appropriate for the FSC stamp: three certificates for proposals will be forwarded to the State each region where we operate: the forest is just around the corner and it is sure to radically change the situation Duma Committee for Natural Resources and management and forest exploitation certificate, in the forestry complex. We have decided to talk about what can be Nature Management. At the government the production chain certificate and the final expected in the light of all the current events with one of the most active meeting that was held by the President in products manufactured certificate. We have participants in the reformation of Russia's timber industry complex April, Minister of Economic Development and obtained four. I expect that by the end of the – Dmitry Dmitriyevich Chuiko, the Forestry and Woodworking Complexes Trade Herman Gref said that preparation of year we will have nine, and we will have the Development Manager of the Ilim Pulp corporation. the draft code for the second reading would right to mark our products in a certain volume
№ 1 2006 № 1 2006 MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
in all three regions – not one hundred per will gain, however, and lumberers will get on logistics, etc. Sometimes this happens here, resolved without investing much money in cent, of course. Availability of the certificate their knees, as the market price of wood will at the Bratsk pulp-and-paper mill, too, and preserving them – plans of re-basing them implies a lot of things, including: no debts not cover their costs. The actions should be we exert extra special efforts to provide raw and using the camp method of lumbering in respect to taxes and wages, up-to-date well thought-out and differentiated by types materials for production. The same happens at should be developed. Retired people are labour protection conditions and individual of products and regions. other enterprises, but this is not a pattern, not moving on a mass scale from the North to the protective gear, a certain educational level a constant symptom that has to be resolved South. Much is being said about providing the for the people working throughout the system, It makes sense to close the channels when by closing exports, while sending round wood military with fair housing in the places where from a worker to the general manager, and woodworking is not satisfactory. But if the here. they serve. All this is creating prerequisites all these things are components of voluntary capacities of woodworking are not adequate for a powerful upsurge of wooden house- forestry certification too. to the capbilities of lumbering, then we will If we are going to develop deep woodworking building. have a very acute problem of investment in the domestic market, then we must create – What is being done to strengthen the development, especially taking into account respective conditions for such a market to Wooden house-building has great prospects, and position of Russia's timber industry complex that today people speak a lot about the live and develop. Besides, we must encourage they are absolutely real both for the domestic in the world market? need for expanding the available forest the consumption of wood and wood products, market in its pure form and for the markets of resources using various programs related using, among other things, marketing methods. former USSR countries: Kazakhstan, Uzbekistan, DC: During the meeting of the Government held both to production facilities upgrading and IN the last 50 years people have got used Belarus and possibly the Ukraine. Today this must by the President, high emphasis was placed actively developing the infrastructure; the to thinking of wood construction as a less be the key direction, as wooden house-building on the imbalance between lumbering and forest roads. Apropos, there are two ways of reliable and strong material as compared is second to no other branch of the timber woodworking, both chemical and mechanical. development here: the first is to fully master to concrete, metal, etc. However, in reality, industry complex in its full utilization of wood. Attempts are being made to find ways the sections of the forest resources that are modern technologies used in Canada, the High-grade wood is used for manufacturing sawn of intensifying the flow of investment in available now, and the second is to expand the USA and Scandinavia in mass-scale wooden timber, structural units and plywood, low-grade processing industries. The planned increase geography of economically available sections house-building (and not only for residential wood – for panels/boards, while that of even of export duties for round wood will become of the forest. Measures are needed to reduce buildings) allow peple to resolve this problem lower quality is used for energy pellets. As a an external stimulus for that. I think this is lumbering costs – the introduction of up-to- efficiently. result, taking into account the capacity of our the right decision, but, as I have said many date machinery and processes, development of market, the forestry complex may be raised to times, the problem cannot be solved bluntly the road system, reduction of transportation We have prepared a 15-page analytical note a good level and thus one of the social needs and mechanically. expenses, enhanced control; however, the key for the management of Ilim Pulp, in which of the population can be met. 18 problem is the development of woodworking we suggest creating a ramified network of 19 Increasing export duties is an efficient way in a way that would be adequate to market ten to twelve federal centres of prefabricated According to our calculations, it will take at of closing the channels of illegitimate and requirements and raw material resources. wooden house-building all over the Russian least 30 years for twelve centres of wooden illegal wood sales. A high duty, stricter Federation, from Kaliningrad to Khabarovsk. house-building with a very high capacity customs checks and the introduction of – One may get the impression from what There are proposals as to organizing the to ensure today's demand for such housing. systems for control over the movement of our ministers say that the Government production of panels from low-grade wood, I.E., we are talking about three decades, not forest cargoes can minimize the problem. is expecting to resolve the problem by e.g., OSB boards, which have not been produced a program for two or three years, and this However, what to do with excess wood? On just increasing export duties, without in this country and so far have no demand in eliminates at once the question of long-term 6th April the RF President raised this issue offering any set of extra measures for the market for psychological reasons, though prospects, e.g., organizing capital-intensive before the Government, drawing its attention woodworking development. Do you share they are widely used in wooden house-building panel productions. We believe that demand to the need for developing woodworking in these doubts? in other countries. Respectively, the issues of will be ensured for at least 30 years. I.E., the country. Herman Gref, the Minister of PR and influencing the public opinion arise. for the life period of such productions, Economic Development and Trade, said that DC: I am also confused by that. We've got a Experimental plots should be made, where such till the moment of its radical upgrading. there is a program of increasing export duties certain balance today. There is lumbering, and houses will be built. Of course, this means a risk We have performed enlarged calculations, on a stage-by-stage basis, which provides for there is consumption of wood by the operating and the investment of money, but people will and Ilim Pulp's management is considering differentiation by types of raw materials and, production facilities inside the country and there be able to make sure that houses built using them, and we hope they will be called for obviously, by the regions from which they will is the export of a part of round wood abroad. up-to-date technologies have a long service outside the corporation too, while the Ilim be exported. It will successfully facilitate Today, in contrast to what was happening 5 or 6 life and are reliable and comfortable. These Pulp corporation, in its turn, could become suppressing the exportation of illegally felled years ago, I do not encounter much information are not the 1950s-1960s, when prefabricated a centre for developing and implementing wood and resolving the problem of the low that the existing facilities are underloaded panel houses became unfit for living several such a program. efficiency of forest resource exploitation, which because of raw material shortage. There are years after they had been built, this is up-to- is accounted for by the fact that the bulk of enterprises that work inefficiently because of date, really comfortable mass-scale residential – There is an impression that society's the added value is obtained outside of this their financial and economic standing, lack of house-building. perception of the reliability of wooden country. However, this cannot be considered investments in upgrading, in a deeper processing houses started changing for the better. Does as a panacea. Increasing the duties alone will and in a transition to more up-to-date products Our vision is that Russia's market is will be it correspond to the actual situation? not improve the situation, it will aggravate it, that are called for by the market. From time to capacious. There are plans to move 18 million because there will be excess wood. Supply will time the issues of raw material shortages arises, people to the Far East and the Siberian region, DC: It is changing. Moreover, there are some be higher than demand, and the price of wood for instance at the Baikal pulp-and-paper mill, as these regions are losing their population. examples of successful implementation in the will go down drastically. Processing enterprises because of its geographical position, expensive Problems of forestry settlements should be field of big projects of wooden house-building.
№ 1 2006 № 1 2006 MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
However, they are local, done in the framework can be substantially increased and improved One thing is clear: the structure that exists at period in the development of Russia’s timber of private initiative and are not coordinated through upgrading. the moment is a transitional one, as it is not industry complex. The key problem of today’s with demographic programs, schemes of efficient. For instance, in some regions, forest base of legal texts and regulations is the moving settlements to other locations, natural – Today, Russia imports many varieties of resources are distributed through tenders only, National Forest Policy, the new Forestry Code and regulated migration of the population, high-quality paper. There are only several in some through auctions, and in some through and numerous subordinate legislation. I do provision of housing for the military or quick enterprises producing offset paper in this both. The Federal Forestry Agency has carried not think it would make sense to comment construction of fair housing in areas where country: the Svetogorsk and Syktyvkar pulp- out audits in regions and has found out that on the existing legislation in great detail, as emergency situations arise. There is no unified and-paper mills, both being divisions of big tenders and auctions have not been held in the new Forestry Code will cardinally change coordination of all these programs, and, as a international corporations at the moment. all RF entities in strict compliance with the the rules of the game. I am sure that it will result, there are doubts as to attaining this Besides, there is the Northwestern Timber requirements set forth by the Agency. Forest not be impeccable for all participants of the goal. The situation must be worked on with a Industry Company. Obviously, these products resources are often allotted and distributed process, however, there still is the possibility systematic approach. are in high demand in Russia, and therefore it according to quite different rules and criteria. of making certain amendments successively, will be advisable to develop their manufacture A decision has been made to suspend holding when experience shows that such changes are – More than once there have been reports here. Is it enough to just upgrade the existing tenders in a number of regions, including the needed. I think that the Forestry Code will that the respective federal ministries production facilities for that purpose? Irkutsk and Leningrad Oblasts, until the rules be adopted for 6 to 8 years – for the period have been developing various programs of of holding them are fully brought to conformity of the turning point of the entire destiny, forestry complex support and development, DC: No, new facilities will have to be created with the Agency’s requirements. A constructive the entire position and the entire investment however, there is no open-access information within the operating production sites, however, process of forest management system reform, picture in the forestry sector of Russia, and about them. What kind of programs are this is a question of quite large and capital- transition to a system approach towards amendments will be made from time to time these and to what extent have they been intensive investments and, respectively, accounting and the formation of a resource base, during this period. Then, perhaps, a situation coordinated with the recent statements of of stimulating such investments, as in the as well as distribution and forestry development will arise for another radical re-writing of the the President? framework of the existing costs – expensive stimulation is under way. Forestry Code, which will then be adopted loans, very high rates of the natural monopolies for a longer period, as the entire economy DC: In my opinion, all the existing federal – it is doubtful that business will be actively The situation with legislation in the forest of Russia, I hope, will be more stable and programs of forestry sector development must developing in this direction. However, the sector is similar. This is another element of the understandable for assessing development be reviewed with a critical eye. First of all, consumption structure shows that if one two-year (this and the next years) transitional prospects. they must be tied to the real prospects of manages to make products competitive by 20 the market. Take, for instance, the program of price and quality, they will find demand in 21 pulp-and-paper industry development, which the domestic market. This can be seen from provides for the construction of scores of new the structure and volume of imports. mills. I doubt whether the market actually requires this. How can business investments – Many companies, especially those from in this industry be made more expedient the West, often face the problem of a very than in other industries where the yield complicated system of government regulation is faster and higher? It is not clear what in the forestry complex of Russia. How, in stimulating moments might direct business your opinion, is this situation going to to certain areas, which are obviously not develop? the most profitable. And the program implies that there will be interest, money, DC: This is a very interesting question, as and the market will accept the products. starting from 1st January 2007, under federal Secondly, solid coordinators and contractors, law 199, a part of the centre's powers will be implementation stages, resources, funding delegated to entities of the Federation. An sources, and participants of the program on interesting thing has been revealed: powers federal, regional and business levels must will be delegated, but finance will not. This be established. will divide those who strived for powers and will get them into two camps. The first – those By the way, I am quite sceptical about the who wanted powers, will get them and will plans for building new pulp-and-paper mills, have the finances to exercise them. The second as I have never seen any analysis showing that camp will be those who wanted powers, will there will be a demand for such products in the get them, but will have no financial capability world market. I believe that the dynamics of to exercise such powers. Some of them are domestic and external markets are fully covered looking for and finding funds, and some are at the moment by the upgrading of existing abandoning powers that are not supported production facilities. The example of the Ilim by money. At the moment, the situation is Pulp corporation shows that the production at this stage and attempts are being made volume and quality of wood and paper articles to regulate it.
№ 1 2006 № 1 2006 MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
products output expressed in monetary value was – 336 kg... Per capita consumption of sawn 300bln rubles, or just 10% of the potential. The timber in Russia is 19 times less than in Finland cause of such a fall-off is an extreme technical and 11 times less than in Canada or Sweden. and technological backwardness observed in all spheres and industries of the forest sector. The To summarize, I should say that only 20% of main facilities of the enterprises were installed the resources of the Russian forest sector are more than 20 years ago; since 1990 not one used; this factor hinders the socioeconomic large timber processing enterprise has been development of the country as a whole. Owning built. The introduction of resource-saving and a quarter of the global forests, Russia holds an In spite of Russia’s huge environmentally safe technologies is very slow, impermissibly low position among developed potential, supported by a resulting in the poor competitiveness of Russian countries in terms of the advancement and quarter of the global forest timber and paper products on the domestic and competitiveness of all industries making up global markets. the national forest sector, which moved down stock, its forest industry still from the top five to the second dozen of the cannot overcome a severe The current system of timber export is quite rating. system crisis lasting more than imperfect; unedged timber accounts for 32.2%, so currency earnings from timber export are Many specialists believe that favorable a decade. What happened? USD7bln (in Finland – more than USD11bln). conditions may make the forest sector one We decided to ask a prominent The volume of timber and paper products import of the major sources of budget revenues, Russian forest expert, grows by 15-20% every subsequent year; in along with the fuel and energy sector. Do 2005, the volume of import exceeded USD3.2bln. you agree? Natalya Pinyaguina, Ph.D. in The net profit of the timber industry was only Economics, of the Department 8bln rubles in 2004, which was a 20% decrease NP: Absolutely. The potential of the Russian of the Economy of Forest against the previous year. In general, harvesting forest sector is huge. Regarding forest stock, and sawmilling industries are unprofitable. Russia is second to none among developed Management and Industry at Loss-making enterprises account for 56% of countries. It is only Russia and Brazil that Moscow State Forest University all timber processing enterprises and 64% of still possess vast virgin boreal forests, which is 22 and the Director of Strategic logging operations. why Russian forests are referred to as a source 23 of biological resources for timber and paper Development of Arkhangelsky The contribution of the Russian Federation into production and the major global climate-forming TsBK. the global forest industry has been insignificant. factor. Our country is rich in highly valuable tree In 1991, Russia accounted for nearly 10% of the species with unique properties. For instance, total timber harvest (extraction) in the world, the wood of our White Sea spruce is the best NP: In all developed forest countries, the object on the global timber market decreased, and now, this indicator is only 3%. Our share in paper in the world in regard to shock resistance and of strategic planning is the whole forest sector forests rapidly deteriorated. The volume of and cardboard production shrank from 3.6 to durability, and is the most competitive building or a cluster of national economies, uniting all illegal timber turnover is now impermissibly 1.2%, in sawmilling – from 15 to 4.4%. material in the construction industry. The same industries in a system, including forest growing large, making the budget lose more than 1bln can be said about Angarian pine and Siberian and protection and timber processing. We dollars annually, as ecologists say. To my mind, The global timber trade shows that Russia is larch; products made of these species may push have it the other way around in this country. one of the main reasons for this problem is on top only in round timber sales – 25.6% of our foreign competitors out of the market. The Russian government approved two major the unjustified division of the unified forest the cost of total export. As for other articles, documents in November 2002: the “Concept sector into two spheres – the forest and timber we are positioned much lower: sawn timber The Russian forest sector has a number of of Forestry Development” and “Basic Trends in industry. – 5.2%, paper and cardboard – only 1.5%. What’s competitive advantages: a comparatively cheap Forest Industry Development.” more, Russian timber and paper products are labor force, gas, electricity, and the fastest What indicators can illustrate the state of of lower quality and poorer performance; they growing timber market. The significance of Today, after the lapse of more than three years, affairs in the Russian forest sector? This are produced using environmentally unsafe the forest sector is verified by the growing it is obvious that neither of the programs are could help us realize the scale of the crisis technologies and worn-out and obsolete share of industrial production in GDP, stable implemented in full, and the severe system you are speaking about. equipment; consequently, they cannot withstand currency earnings from the forest products crisis in the industry is still persisting. As a competition on the foreign market. Russian export, a growing need for jobs and a constantly matter of fact, practically all forest-related NP: I can give you some figures. In comparison timber products are 30% cheaper than the increasing demand for timber and paper products industries faced crises during the transition with 1990, timber harvesting in Russia decreased global average. in the domestic and international markets. to a market economy, entailing a slump in 2.7 times, sawn timber production – 3.5 times, production volume and the declined financial paper and cardboard output – 1.5 times, and The annual per capita consumption of timber According to the UN forecast, by 2020, the global standing of enterprises, timber industry the timber house construction volume fell nearly and paper products differs greatly from that demand for timber will grow by approximately performance and labor efficiency. Most 40 times. The annual allowable cut is 559.2mln in developed countries. Thus, the per capita 300mln cubic meters. There is only one real enterprises became low profit or profit-losing, m3, though the degree of implementation ranges consumption of paper and cardboard in Russia source of timber that could meet this demand the share of Russian timber and paper products within 18-23%. In 2004, the timber and paper is 35 kg, while in the USA – 317 kg, in Finland – Russian forests.
№ 1 2006 № 1 2006 MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
If our country has so many indisputable socioeconomic stability of the areas where the strategies is the role and importance of must recognize the strategic importance of advantages, why haven’t we solved our forest industry forms the basis of the economy. international companies. The global tradition of the forest sector for the national economy multiple problems for so many years? Over the previous decade, no new large timber developing forest-related program documents is and order an inventory of the national timber enterprises were built; foreign investors are characterized by the high degree of integration resource potential and declare the priority of the NP: First of all, this is due to a lack of convinced that investing in Russia is too risky. of all forest activities concentrated within increased production of competitive timber and investments into the upgrading and construction We need to take urgent measures to ensure the several large transnational corporations (TNC) paper products before formulating the national of new plants. The need is USD2.5–3bln, while guarantees of ownership rights and investments of operating in the global timber market. As a policies. This measure will help identify points the actual investments don’t exceed USD900mln. both Russian and foreign shareholders and repress result, more than two thirds of paper products among the operating timber companies and plan It can be explained by the unfavorable and the destructive activities of officials from security are produced by enterprises belonging to TNC’s. the construction of lacking facilities to fill the high-risk investment climate in the forest and supervision agencies and representatives of National forest policies in developed countries gaps in advanced timber processing. sector, the absence of required guarantees of the judicial system who always turn out to be the support these vertically integrated structures ownership rights and invested funds, the high supporters of organizations playing a skin game. creating favorable conditions to enhance To stimulate the modernization of industrial level of red tape and corrupted permission their competitiveness and effectiveness and, production and enhance its competitiveness, the procedures, related to the commissioning of new What measures does the government take consequently, increasing their profits and tax updating of technological equipment should be facilities. The main factors, however, are the and how do they correspond with your view payments. In other words, the government promoted using depreciation mechanisms and tax so-called corporate wars unleashed in the forest of the policy to be implemented to improve should promote the creation of strong national policy. The revised RF Tax Code should include sector hampering the work and development of the situation? timber corporations and not hinder it. preferences for financing capital investments effective transparent enterprises. made at the expense of the profits and grant NP: All developed timber industrial countries In Russia, the technological integration of newly created enterprises a remission of income Among all of the Russian forest-related industries, have developed their national forest policies timber companies began in 1995. More than taxes. the pulp and paper industry has always been or foundational doctrines and special strategic a dozen large vertically integrated structures the most dynamic; its profitability in 1999 was development programs for the national forest operate in this country today, demonstrating Economic viability of the forest sector may more than 33%. Nevertheless, for the past five sectors. Russia has not yet developed a National the advantages of this type of structural be increased only by governmental support of years a significant slowdown of the development forest policy, without which, the new Forest Code organization. Their competitiveness, however, is enterprises exporting timber and paper products rate was observed in almost all types of pulp cannot be approved. The Forest Code permits still inferior to that of similar foreign TNC’s. with high added value. These measures may and paper products; the profitability fell to continuous adjustments or even changes, while include, say, subsidies of interest rates on bank 13.2%. In 2005 alone, paper production growth the National forest policy, like the Constitution, The improvement of this situation is retarded credits, issued for the development of industrial 24 decreased 4.2 times, cardboard – 3.3 times, pulp must remain intact. by the unstable and continuously changing production. Apart from this, all customs duties 25 – nearly 4 times. legislative framework, imperfect laws and imposed on exported products of advanced However, we still have not decided how many customs, and tariff regulations regarding the timber processing should be abolished. Special The main reason behind the sharp decrease of federal target programs are needed to allow export and import of wood-based products, export duties should be introduced to limit effectiveness of the leading pulp and paper the Russian forest sector to occupy one of the as well as the import of timber processing the export of coniferous sawn timber, which is enterprises was the attempted takeover of their leading positions in the global market, though equipment. The list can be extended at the the major raw material for the Russian timber assets by companies structurally related to the it is obvious that the concept of the national expense of the insufficient protection of processing industry. Harvesting can be promoted company “Bazovy Element.” The list of victims advanced timber processing development target bona fide shareholders and investor ownership by approving normative documents stimulating included Ust-Ilimsky LPK, Kotlassky TsBK, Bratsky program can partially solve this problem. against corporate takeovers, the high degree of the integration of logging operations and large LPK, Syktyvkarsky LPK, Kondrovobumprom, bureaucracy and corrupted permit procedures timber processing plants in the regions with a Kamsky TsBK and others. Today we are seeing an Nevertheless, the Ministry of Industry and related to the commissioning of new facilities, developed timber processing sector, and solving acute corporate conflict at Arkhangelsk TsBK, the Energetics intends to submit this program to etc. the problem of the joint financing of forest road largest producer and exporter of pulp, cardboard the RF Government for consideration in March. construction by the government and businesses. and school exercise-books, and JSC Volga, the In this case, many problems of forest use and Revolutionary privatization of some timber Finally, we need governmental support for the largest newsprint producer. management will remain outdated, and yet enterprises has already destroyed regional timber educational programs aimed to prepare the another industrial forest program will fail. To my sectors, which used to unite enterprises into management, engineering and technical staff The most common tool used by corporate mind, all of our problems grow out of the absence technological chains and ensured the continuous of the Russian forest sector. Unfortunately, aggressors during criminal takeovers is the of a central coordinating governmental body timber supply of large pulp and paper sawmills. the government has not yet taken the required pressuring and blackmail of shareholders aimed ensuring the consolidation and harmonizing of As a result, many timber-processing plants felt measures. at forcing them to sell their stocks at an interests of all forest stakeholders. The vertical the shortage of raw materials and approached underestimated price. The pressure is enhanced structure of the forest sector management is bankruptcy. Now, if the Forest Code offered In summary, I’d like to say that the Russian by multiple inspections and law suits against imperfect. Today, the performance of industries by the Ministry of Economic Development is forest sector is in a difficult, but not a deadlock a particular company, unjustified arrests of growing or processing wood is controlled by approved, our timber industry will face the situation. If our government recognizes the unity stocks, property and even armed seizures of many federal ministries and agencies. Can such second wave of revolution and destruction, of the forest sector as a strategic importance for administrative and industrial buildings. an approach ensure the success of the forest which will throw it back to the bottom of the the national economy and approves a relevant industry? Very unlikely. rating list. forest policy and effective federal forestry The process of unfriendly takeovers of timber program, this industry will certainly recover. companies infected most forest regions of Another thing to realize while determining In order to help national timber holdings Russia, i.e. became widespread, undermining the the national forest sector development develop and acquire strength, our government Interviewed by Ivetta Krasnogorskaya
№ 1 2006 № 1 2006 MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
– in 2005, 5.4% – in 2004, 5.5% – in 2003, Among the challenging sectors in the regional 14.9% – in 2000). timber processing industry are the wood-based panels (MDF, chipboards, OSB), plywood and Certainly, this process has several objective package. For the past two years new plants causes. At present, almost all operating for production of MDF, plywood and corrugated enterprises lack stand-by capacities. The cardboard have been commissioned. main equipment of pulp and paper mills is largely worn out. Increased output of pulp In general, the national forest sector may and paper products is guaranteed by more the expect significant prospects from “coalition” intensive exploitation of existing facilities, with intensive production investments. Russia is upgrading of old equipment and introduction following the steps of such forest countries as of the new production lines being made by Finland and Sweden. The thing is that it took the enterprises on a self-support basis. One of our neighbors more than one hundred years to the most serious outstanding issues is a poor complete this process, while we have only 10-15 condition of infrastructure as well as loss- years to shape our forest industry. making enterprises constituting more than 60% of all logging companies. - Please, tell us a little about your Confederation: whom does it support and The non commercial partnership, I’d like to draw your attention to another whose interests does it protect? What are “Confederation of Forestry, important event which took place in 2005: the the results achieved by your organization for Pulp and Paper, Woodworking lockout of the Finnish paper market announced the short period of its history? by member companies of the Finnish Forest and Furniture Associations and Industries Federation in May. It had a very The decision to establish the Confederation was Unions,” was established in 2005 serious influence on the Russian market. made at the meeting of the Board of Trustees with the aim to consolidate all of the International Forest Industry Forum. - Trying to look into the future, what It has been functioning for half a year. Our Russian timber producers. We prospects can you see for the Russian forest main goal is implementation of the tasks posed 26 discussed the state of affairs in industries? by the Forum, which is an open negotiating 27 the Russian timber industry with body. The Forum unites all forest stakeholders - Speaking about the prospects, I hope a including the administration and industry. It is Valery Saykovsky, President of the smooth transition to the advanced processing a channel for exchanging views and discussing Confederation. of timber and integrated use of raw materials forest industry problems and finding possible will take place. To ensure the competitiveness solutions. of Russian products on global markets amid growing production costs, we should care both From its start, the Confederation was to reach Valery, if we asked you to summarize the The year of 2005 saw hot debates over issues about the production and integrated recycling the key goals: promotion of development of results achieved in 2005, what positive and related to the use of neglected wood as a of industrial waste: for example, chips may the Russian forest sector, cooperation with negative trends in the Russian forest sector bio-fuel. Bioenergy is becoming one of the be used to make pulp and paper, bark – for governmental authorities, and protection of RF development would you highlight? most perspective areas of focus for timber generating electricity, etc. forest industry interests at the international companies. New bio-fuel production facilities markets. We have united all leading industrial As for the positive results of the year of 2005, are being commissioned; industrial boiler houses We expect a timber house boom over the Russian associations and unions with the I would emphasize, first of all, the enhanced are shifting to this fuel type. It is obvious that next two or three years. Analyzing the aim of formulating a uniform position in the control over illegal logging. As you know, Russia’s ratification of Kioto Protocol in 2005 advancement of the timber processing industry industry. the RF Ministry of Forest Resources and the was an additional impetus for the updating of in neighboring countries, we can see that Federal Forestry Agency have begun the satellite boiler houses. in the overwhelming majority of cases, 60- In 2005, the Confederation was engaged mainly remote sensing of forest areas; forest crime 70 percent of individual houses are timber in addressing organizational issues. This was prevention measures have been enhanced at Nevertheless, we have to admit that many frame structures with wall panels. Nowadays the stage of information gathering, establishing the local level. problems and difficulties still remain. the costs of these types of houses are lower partnership ties, and studying the niches where Unfortunately, the long expected and much- than the cost of stone or concrete-based the Confederation could work effectively. The The increased share of the timber industry discussed Forest Code has not been approved buildings. study allowed us to draw up a strategic Action is very encouraging. The statistics show that yet. Timber wars are persisting in the forest Plan for 2006. it grew from 33.1% to 35% during 2005. The industry, especially in the Arkhangelsk Region. The development of pulp and paper industries monetary value of the aggregate output of The pulp and paper sector hasn’t demonstrated will gradually continue; we will observe the We are trying to expand both in and out of goods and services offered by large and medium- high growth rates as it did before. Pulp and shift from large cities to the areas located near the country. As for international projects, we size timber companies in 2005 was 321bln rubles paper production growth has slowed down and undeveloped forestlands, making the production cooperate with the leading European forest or a 17.6% increase against 2004. remained at the same level as last year (3.3% cheaper. industry organization – European Confederation
№ 1 2006 № 1 2006 MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
of the Woodworking Industry (“CEI-bois”). We forest use rules, maintain Russian legislation demand are Russian forests. The thing is that mean that the new law should be developed have much in common – both structures pilot and demonstrate openness and transparence. our country, possessing one fourth of the global and passed in a hurry. similar technological platforms, develop forest On our part, we are sure that this step will be forests, accounts for more than half of the most projects, and interact with research institutions. useful for the forest sector as a whole. valuable coniferous species. We realize that the Forest Code is a milestone CEI-bois has a long and successful experience. document for our large-scale industry. That We have a lot to learn from them, we would This March was marked by the VIIIth Moreover, Russian forests as a deposit of carbon is why it is so important to avoid mistakes like to use their experience and potential. International Conference “Wooden House have a planetary value as they have a great while discussing the Code and try to consider The Confederation of Forestry, Pulp-and-Paper, Building – a Way to Affordable and Comfortable influence on the environment’s condition and a maximum number of peculiarities. Woodworking and Furniture Associations and Homes” held within the framework of the second retard negative climate change. An optimal Unions took part in the General Assembly of international exhibition WOODBUILD-2006 under combination of these two critical functions I’d like to say that the richest forest country CEI-Bois held in late March. the auspices of the Confederation of Forestry, is the pacing factor in the development of in the world is increasing its import of timber Pulp-and-Paper, Woodworking and Furniture the national forest sector including forest and paper products from year to year. Thus CEI-bois doesn’t include Russian organizations. Associations and Unions. management and industry. Unfortunately, neither in 2003, the cost of imported products was In connection with this, its members showed a segment of our forest sector is ready for rigorous USD2.3bln or nearly 16% more than in 2002. significant interest in our presentation informing At the end of March we took part in the meeting performance. The national timber industry has It included coated paper products, furniture about the dynamics of the Russian forest of the Coordination Council for forestry and been in a crisis all these years; the crisis has and high quality sawn lumber made, as a rule, industry’s development and the Confederation, forest industries of the interregional association not been overcome yet. out of our raw timber. This means that unless its activities, plans and prospects. At the end of “Siberian Agreement.” This work resulted in urgent measures are taken, the country, having the meeting, assembly participants agreed that solving problems in the field of effective forest Analysis of the dynamics of production growth the largest forest resource base, will turn into the future of Europe and the world in general resource use and forest planning in Siberia. We and consumption of paper products in the world the largest importer of forest products. is connected with wood. CEI-bois members hope that our cooperation will promote the and by leading industrial forest countries over are working not to promote particular forest development of forestry and the forest industry the past 10-15 years shows that, in terms of To sustain the balance of such a complex products but wood in general as a material in the whole Siberian region. most indicators, Russia has fallen into the shade, ecosystem as forests, the parity between competing with plastics, metals and other lagging behind the USA, Canada, Finland, China, harvesting and forest regeneration should be materials. - We would like to know the opinion of the Brazil and a number of other countries. We lost reached. The government must provide equal head of the Confederation of Associations and the leading position in paper production and our development opportunities for both sectors We made a decision to join efforts and redirect Unions about the position and share of the leadership is indisputable only in the export of and identify the sources of financial support 28 them toward creating a unified “Wood” brand. Russian forest industry on the global market? unedged timber or so-called round timber. So, for forest regeneration. 29 The unified Wood brand will be promoted What do you think of the prospects of the you see, leadership is very doubtful. by both parties and refer to all wood-based Russian forest industry as a global leader? Economic, legal, organizational and technical products – paper, cardboard, panels, glued Nevertheless, the situation is not as tragic as regulation of forest leasing should be introduced, laminated structures, etc. - Russia accounts for 25 % of global timber some people see it. as well as norms regulating the transfer of forest stock and only 2.3% of global timber production. lands to private ownership. The structure of In general, our activities are aimed at solving During the previous years Russia’s share in One of the reasons for Russia’s unfavorable forest fund management should be improved. the internal problems of the Russian forest lumber production decreased 4 times; in pulp, position in the timber and paper markets is The federal forest management bodies should industry. Confederation members are actively cardboard, plywood and panels – more than the ineffective export structure, which includes determine the basic trends of the industry, working to develop the concept of timber house 2 times. In the global timber trade, Russia is round timber and the cheapest wood-based ensuring their legislative support, develop building in Russia. The concept is a constituting the second largest exporter of round timber pulp and paper products. In order to restore its balance forecasts for forest resources and part of the priority national project “Affordable only, accounting for more than 30% of the position, Russia should shift the priorities of the manage forests. and Comfortable Accommodation for Russian market. As for the other forest products, we industry toward advanced timber processing. Citizens.” The Confederation joined the work of are outside the top ten. In general, Russia’s Actually, a lot of problems accumulated in the the development of the “Concept of Developing lag is illustrated by the level of income per - Some people think that many problems industry are quite urgent. However, the major Advanced Timber Processing Facilities in the hectare of managed forests – it is 10–15 times can be easily solved once we have a relevant problem is the absence of a long-term strategy Russian Federation up to 2015.” less than that of, say, Finland or Sweden. Per national forest policy and effective legislation. for national industry development. We don’t capita consumption of major forest products Do you agree? have the national forest policy implemented Efforts have also been made to develop and also indicates forest industry development. by all developed countries, which ensures its implement a National Road Construction Average per capita consumption of paper and - About 65% of the Russian territory is covered effectiveness. To our minds, the national forest Program. cardboard in Russia is 40 kg, while in Canada by forests. Forestry is a huge industry. The policy should become a part of the long-term – 228 kg, in USA – 327 kg, and in Finland – 412 potential of the national forest industry, national strategy of socioeconomic development. The Confederation takes part in solving the kg. The same figures were identified for other expressed in monetary terms, is not less than It is only then that the forest industry will find problem of illegal cuttings. In January 2006, it forest products. USD100bln per year. However, we produce only its niche in the Russian and global economy, made a flush statement against illegal cuttings USD12bln. The situation could be improved by corresponding to its actual potential. and trade in forest products of illegal origin. According to leading experts’ forecasts, the the new Forest Code. The present version of the We made a statement regarding our internal global consumption of commercial timber will Code was approved in 1997, but it doesn’t meet Ivetta KRASNOGORSKAYA, ethical norms for Confederation members. They grow by another 100mln m3 by 2020. The only present requirements. The country is in urgent require that all members follow the specified real sources that can meet this increased need of the new Forest Code. But, this doesn’t Olga MURATOVA
№ 1 2006 № 1 2006 MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
It seems quite reasonable to me. A manager The national forest policy should reflect shouldn’t be doing business by himself. a balance of interests. On the one hand, a Should there be no businesses run by the forest is part of our environment, on the other government? Certainly not. In many civilized – a natural treasure, enabling the maximum countries business is separated and united utilization of its economic opportunities; not into independent governmental enterprises only to cut the grown forest – but to totally performing business functions that are process it. This is what the goal for forest unfeasible for the private sector. Can a leasee strategy should be. It is strange enough to fight with the forest to exterminate vermin plan forest strategies for only 15-20 years, as and extinguish fires on his own? No. What is our authorities did in 2003 when they approved happening now? The control and supervision the Forestry Development Concept up to 2015. functions have been withdrawn from the The Concept ought to be planned at least for management sphere and delegated to the 80-100 years, i.e. a forest lifecycle. In 2005, Alexander Belyakov, Federal Service for the Supervision of Nature Resources of the Ministry of natural resources. Actually, all levels of authority, including Russian former chairman of the The forest conservation function was delegated regions and municipal units, ought to participate State Duma Committee on to the Rosprirodnadzor. Russian forests were left in the forest policy development. The center natural resources and nature without protection while workers went without must delegate the operative management rights salaries for several months after 199-ÔÇ came downward and keep only principal strategic management, and current into force on January 1, 2005. Furthermore, this functions. Laws as well as strategies should be auditor of the Accounts innovation brought much controversy. In fact, effective during the hundred years. Chamber, headed the Forest the mass lockouts of forestry enterprises are imminent. With only 20% of Russian forests Is it possible? The current Forestry Code was Industry and Forestry being leased, who is going to perform a forestry approved in 1997 and we have already judged Development Committee for practice for the other 80%, if authorities are it as old-fashioned and have been giving rise the Chamber of Commerce and not allowed to do business according to the to a new one for over three years. new Code and forestry enterprises are going 30 Industry of RF. He is a famous to be cancelled? AB: Frankly speaking, I’m sure that we don’t 31 expert in nature management need a new Forestry Code at all. The current and, in particular, on timber In 2004-2005, we haven’t increased the Forestry Code is quite capable of solving the woodprocessing depth at all, and haven’t problems of the present forestry development resources, and was elected increased the production of pulp and paper. level, providing some necessary amendments chairman by an overwhelming There is a 1.5% insignificant increase, but this are made. All the main points, including majority of the committee is minor. public ownership of forests, and long-term forest leases (up to 49 years) are contained members. Who is in charge of the national forest in the present Code. And my point of view is policy development? In your opinion, what that forest sections should be leased for 25 fundamentals should it include? Some years with the possibility of renewal. It should attempts have already been made to work be stipulated by law that only 3 years’ late it out. Were they for nothing? payment of rental fees could be grounds for Alexander, summing up the year 2005, what rather than focusing on the forest management terminating a lease contract. Our country is the positive and negative tendencies have you efficiency increase. In fact, its aim is forest AB: The national forest policy is the right only country where a rental fee is paid before observed in the Russian timber industry? privatization. This hidden entitlement for private topic to ask about. My position is that the beginning of a year and not according to property is mentioned in the new Forestry Code forests should be federal, public property. the year’s results. We take money before the AB: The Russian timber industry achieved the project, and the Russian timber industry has just In my opinion, private property is possible, forest is cut, whereas it’s better to pay for poorest results, as compared to other Russian started to rise. Many difficulties have been met however, it concerns only artificial forests the forest after it is cut and sold. It is easy industries, and its export rates even reduced. since the introduction of leaseholds in 1997. planted on abandoned fields. Forest planting to understand that if a company rents a forest The timber complex is constantly expecting However, many of the unfaithful leasees have is our future. Forest harvest could be reaped yield of 50 thousand cubic metres, it has to serious modernization upon the new Forestry abandoned the industry and many conscientious every seven years, as per the example in bio- pay $200 thousand immediately on the basis Code, so no qualitative shift is seen. That’s ones have 49-year-leases during these years. And fuel production. Or balances for processing of $4 per cubic metre. The forest hasn’t been the sole reason for all of our problems. Let now the new code! How do you like that! factories could be grown every 25 years in cut, the results are vague – still you have to me explain. a volume of 200 cubic metres instead of the pay. At least the recently adopted quarterly The reform on function distribution is quite current 50 cubic metres per hectare. Land could rental fee payments are favourable. Sometimes The forest strategy our government has adopted questionable. During recent years all competent be publicly owned while forests are transferred there are no forest roads, no roads constructed over many years is very conservative. It complies experts have been speaking of this need to to private ownership. by the government-owners and forest users are with the statement of administrative reform separate forest management and business. not able to enter forests either in November
№ 1 2006 № 1 2006 MODELRUSSIAN FORESTS FOREST OFINDUSTRY: RUSSIA A SNAPSHOT
or December. He in fact loses the right to cut harvester duty on the head is cancelled, while opportunity to construct more enterprises for serious motivation as this is an enormously down forests but he has to pay anyway. The it is kept on the head power drive, although the deep processing. buried reserve. I think we should establish startling fact is that although they are the tractor makes up 2/3 of the whole machine’s cost. a State Forest Bank and it ought to be the forest owners, the government does its best to It’s ridiculous! Are we kidding ourselves? At the same time, Russia doesn’t need to deeply main pledge-holder who has the opportunity put the brakes on forestry and timber industry process timber in its whole territory. A periodic to transfer to it all federal forest assets on development. What are the chances for woodprocessing, plate yield of 500 billion cubic metres being cut and behalf of the state. The bank could release and pulp and paper industry development in processed into semi-processed goods is quite obligations or depositary receipts, attracting It’s a shame that in neighboring Finland the Russia? What measures should we take to enough. The domestic market demands the people’s currency for forestry financing. This annual forest yield is 4 cubic metres per 1 develop each of the subindustries? deepest processing in order to replace import. is a brand new market approach. hectare and we have only 1-1.5 cubic metres. The external market demands semi-processed It’s all because the Finnish reform has been The government does nothing to provide goods production and encouragement of Russian Are there any timber producing companies working for 70 years and no deteriorating acts for the wood processing industry’s efficient capital export to foreign countries in order to in Russia, apart from Ilim Pulp and Titan for users were accepted. development. Export of unprocessed oak, beech, finally process the goods. We will then receive vertically integrated structures that have a hornbeam, ash-tree and other valuable kinds more profit, yet in the foreign territory, and chance to gain the lead in the industry? Forest payments should be very flexible and of wood ought to be banned, in my opinion. ensure the factory’s work load as we will be take into account many circumstances. There This is long-living forest and it will so remain the co-owners of the assets. This policy is very AB: Actually, there are many, both in the shouldn’t be a tax on “forest development,” like in ten years when we will modernize wood subtle and effective. European and eastern part of the country. There on the minerals. The forests are different and processing technologies. Don’t rush to cut down are also many good veneer sheet factories, you should realize it. Why does the government all the forests and export them. We should Do you think the Russian LPK has a chance plate factories and sawn log deep processing evaluate a 150-year pine as equal to a rotten think about future generations. According to to achieve world leadership? factories. The majority of them are rather small, 45-year aspen? reliable sources, there are already deep timber however they are shock workers of capitalist processing factories for valuable kinds of wood AB: Russia has 25% of the world’s forest labour. Lastly, each Russian citizen’s needs must be being built in our country. And these are the resources. So forests are our strategic stocks. considered by the forest strategy. Forest users factories to produce veneer sheet, which is 10 We ought to take care of them. At the same Yes, but we’ve got few vertically integrated should provide citizens with the unrestrained times as expensive as round timber. time, forests should become a source of profit structures. right to freely live, stay and rest in the forest for all Russian people. I’m sure that Russia has and utilize its gifts. The protecting duties on sawn log export should every prospect of achieving world leadership in AB: In my opinion, it’s an erroneous view that 32 be laid gradually and all duties on boards should the timber complex, providing the government only holding companies should exist. I’m for 33 It was in November of 2002 when the be totally cancelled. This is the method for addresses the needs of forests. We might the forestry cooperation similar to the Finnish government approved the policy document, implementing deep processing. There should obtain a much higher position in world timber one. In Finland they involve private persons in “The main development lines of the timber be more profit-making semi-processed goods production. The country’s growth potential the cooperatives, but we’ve developed small and industry.” This document promised to increase produced. They demand high-quality modern is $110-120 billion of gross production, i.e. medium businesses. For instance, 20 leasees timber output by 4 times by 2015. Is the equipment to be imported, which is lacking. ten times. To achieve such results we should of forest fund sections could construct a programme operational? In case domestic marketing is our aim then invest $10 billion in timber production over forest factory and enter another cooperative native equipment is suitable for the first stage, 10 years. We currently invest no more than $1 of pulp producers, then they could form a AB: It is totally out of the question to fulfill whereas certified machines would be necessary billion per year. bigger cooperative of pulp, paper, plates, etc., the programme in the way it is executed now. to produce export goods. producers. It’s the government that can help All of the governmental programmes are quite By the way, we needn’t use public funds. The perform this, especially since it has many pretentious and have no supporting measures. Strangely enough, waste from the pulp and government should induce investments by, for possibilities. Deep timber processing can’t be encouraged paper industry provides the highest percent example, establishing an equipment purchase by economic and market methods when many of surplus value, so the industry must be guarantee fund for small and medium businesses. Could you say a bit about the new RF Chamber rawwood products are still taxable by export developing in the leading rates. However, It should also provide stable conditions of of Commerce and Industry Committee on the duties. In practically all countries, raw wood the pulp and paper complex involves capital- gambling for payments, establish cooperatives, timber industry and forestry development products are non-taxable by export duties. We intensive enterprises, so their construction and support business through subsidies. Suppose founded in 2005? claim that we should saw forests in Russia rather must be financed by the government. The a timber man buys equipment, provides modern than export round timber. At the same time we investment ratio can be the following: 70% wood processing and forestry management AB: The new Chamber of Commerce and Industry set up economic barriers – export duties on public funds and 30% partners’ funds. At technologies and buys modern machines. In Committee’s aim is to improve relations between processed timber, as well as taxes and duties first, a joint-stock company is founded. After such a case the government could subsidize government and business. It is our objective to on imported foreign equipment. the factory is put into operation, the shares credit interest rates. Let’s stop the erroneous listen to timbermen and inform the government are introduced in markets by the government policy of prohibiting the privilege of using about their difficulties and offers and to demand But customs import duties on equipment seem and then sold, recovering the expended funds profits for investments. By doing this we can from the latter that they provide necessary to have been canceled. and gaining profits from taxes. There also decrease taxes on profits two-fold for fair users conditions for our timber industry complex’s should be a special forestry development fund and for all timber processers, and the degree of development. Well, yes, but not all of them. Take for example in the Russian budget in order to prevent mechanization and production mass will increase harvesters and forwarders – the modern forestry money dissipation. As the capital of the by 4-5 times. The government benefits from Interviewed by Ivetta Krasnogorskaya equipment with attached implements. The fund grows we would be provided with an it. Growth of timber exchange trade is also a
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
Official Outlook of the Federal Forestry Agency of the Russian Federation
OVERALL PICTURE largest carbon dioxide holders, accounting for Forests are recognized as the most considerable nearly a third of the total net deposited carbon of Russia's natural riches and, unlike other of the Earth's forests. natural resources, they can largely facilitate national economic prosperity and the well-being ORGANIZATIONAL STRUCTURE Diag. 2. Forest area per capita (FAO, 2004), ha of the population. Russia accounts for about a OF THE FOREST FUND MANAGEMENT quarter of the global forest coverage. According of the Russian Federation (territorial bodies According to the current Forest Code of the to FAO, the largest owners of the forest areas IN RUSSIA of the Federal Forestry Agency), and forest Russian Federation, Forest Fund lands and the are Russia (22 %), Brazil (14 %), Canada (6 %), management units (entities subordinated to forests located on defense lands shall be under the USA (6 %), and China (4 %). According to the current legislation, the state’s administration of use, control, protection and the Federal Forestry Agency). federal jurisdiction. It is worth mentioning that the new Forest Code will be passed at According to the Federal Forestry Agency, the reproduction of forests throughout the country shall be executed by the President of the Russian The Federal Forestry Agency (FFA) is led by the end of this year, and may crucially change 34 total forest area in Russia amounts to 1,173,400 the Head, who shall be nominated or dismissed the rules of play. thousands ha (for more details, see below). Federation, the Government of the Russian 35 Federation, executive bodies of the subjects by the Government of the Russian Federation at the suggestion of the Minister of Natural The FFA exercises control of 94 % of the total In terms of boreal and temperate forests, Russia of the Russian Federation, and the federal executive body of forest administration. Resources of the Russian Federation. The FFA Forest Fund area in the Russian Federation, the is considered the sole monopolist, possessing activities shall be regulated by the Statute remaining area being under the jurisdiction of nearly half of global boreal and temperate forest The state forest administration bodies are of the Federal Forestry Agency approved by other ministries and agencies. Forests formerly resources. Russian forests are crucial for the the Decree (#283, as of June 16, 2004) of the owned by agricultural organizations are now planet because they regulate environmental represented by the Federal Forestry Agency (federal executive body of forest administration), Russian Federation's Government, as well as by administered by the subjects of the Russian conditions and prevent negative climate other standard legal acts. Federation. changes. Russian forests are also the world's agencies of forest administration in the subjects
Diag. 1. Forest areas of the key forest-possessing countries (FAO, 2004), Diag. 3. Distribution of forest area in the boreal and temperate zones (FAO, thousand ha 2004), %
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
Fig. 1. The organizational structure of forest management in the Russian Federation
RUSSIAN FOREST FUND • Group II forests include those located in areas of high population density, which are 36 CHARACTERISTICS of protective or limited forest-exploitation 37 All forests except for those located on defense lands, importance, and the forests located in areas settlements, as well as lands of the Forest Fund not of scarce forest resources, whose preserva- covered with forest vegetation (forest lands and tion makes it necessary to restrict the forest non-forest lands), make up the Forest Fund. use regime. They account for 88 79.2 ha (6%). The total area of Forest Fund lands is a rather stable value that varies insignificantly. As of • Group III forests include the forests of January 1, 2004 it amounted to 1,173,400,000 well-forested areas, which are of mainly ha, includ ing a total of 1,132,600,000 ha commercial value. Those forests are meant to administered by the Federal Forestry Agency. The meet economic needs on a sustainable basis area of forests that are not referred to the Forest by providing timber without undermining Fund is 5,900,000 ha. The total standing volume forest protection functions. They account 3 3 exceeds 82 billion m , including 81.7 billion m for 815 036.5 ha (72%). in Forest Fund lands. The average percentage of forestland in the Russian Federation is 45.4 %. Only II and III group forests are of interest for This index varies depending mainly on climatic commercial exploitation. and anthropogenic factors in Russia's regions. TIMBER RESOURCES All Russia's forests are divided into three groups: Russia possesses mainly boreal forests that are growing under severe, moderately cold and temperate climate conditions. They are basically Group I forests include those whose principal • coniferous forests whereas mixed coniferous- purpose is to perform water conservation, deciduous forests are characteristic of the protective, public health, and sanitary southern boreal zone. In such a geographical functions, as well as the forests of specially context the major timber species that make protected natural areas. They account for up the forests of the Russian Federation are 269 554.6 ha (22%).
larch, pine, spruce, Siberian stone pine, oak, % Russia, in land forest of Percentage 2. Fig.
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
beech, birch, and aspen. The above species spruce forests within special protected natural account for over 90 % of all the forested area. areas are gradually extending. Other timber species (pear, chestnut, European walnut, Manchurian walnut, etc.) occupy less The increase in areas covered by soft-leaved than 1% of all the forested area while shrubs stands is caused by natural stand succession, (dwarf Siberian pine, dwarf birch, etc.) cover slack demand for timber of low-grade species the remaining area. (birch, aspen) and, as a result, a reduced AAC utilization. Ultimately, mature and overmature The major forest-forming species are clustered stands are prevailing in the soft-leaved group. into three groups: coniferous (77%), hard- leaved (3%), and soft-leaved (20%). Within the As for the hard-leaved group, stone birch, which coniferous group, the larch predominant stands of grows in the Far East, occupies about a half of Siberia and the Far East occupy the largest area the hard-leaved group area, while other valuable (51%) and possess the largest standing volume. species, such as standard oak and beech, cover Pine forests occupy 23% and spruce forests 15% some 25 % of said area. of the total coniferous group area. Mature and overmature stands account for some As a whole, the areas covered by the major forest- 50% of the coniferous group area. Over the forming species have remained quite stable over the past years, a certain improvement of the age last decades. A slight decrease in the coniferous structure of coniferous forests has been observed group area during the past decade was caused, throughout Russia: the area of young growth, in particular, by new measurement regulations (a middle-aged and maturing stands is increasing criterion for determining the main species of forest while the area of mature and overmature stands stands) adopted in 1985 and 1994. is decreasing.
The decrease in areas covered by standard oak is In some regions (Astrakhan, Voronezh, Belgorod, a result of altered growing conditions, due to the Kursk, Orel, Rostov, Tula, and other Oblasts) 38 natural decline of environmental health in the oak certain negative changes in the age structure of 39 forests of the European-Ural part of Russia. forests have been reported, as a consequence of the final felling being prohibited in the sparsely The decline in areas covered by spruce forests is forested areas of the Russian Federation. The a consequence of cutting, slow rates of artificial increase in the area of mature and overmature regeneration and, perhaps, climate changes in forests is expected to deteriorate the sanitary said areas. On the contrary, the areas covered by state of stands.
Tab. 1. Areas covered by major forest-forming species in the forests administered by MNR Russia, thousand ha Major forest-forming Year of account species 1988* 1993* 1998 2003 2004 Coniferous Pine 113 563.9 114 326.1 116 740.2 117 472.9 117 205.0 Spruce 78 810.0 75 866.3 77 658.0 77 198.4 76 737.4 Larch 277 897.8 263 348.1 265 719.0 264 287.4 263 986.3 Siberian stone pine 40 166.0 39 797.6 41 033.2 40 852.0 41 054.6 Hard-leaved Standard oak 3 761.0 3 808.0 3 719.0 3 633.7 3 650.2 Oak coppice 3 198.7 2 971.3 3 110.3 3 200.0 3 169.6 Beech 698.5 701.3 786.0 789.6 790.1 Soft-leaved Birch 85 531.0 87 732.5 94 170.5 97 950.0 98 824.8 Aspen 17 711.4 18 907.9 20 035.0 20 573.4 20 682.0
* Forests of nature reserves not included Fig. 3. Actual harvested volume to average volume growth ratio, % % ratio, growth volume average to volume Actual harvested 3. Fig.
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
The bulk of Russian forests are growing on the Tab. 2. Standing volume by main permafrost soils (Siberia, the Far East), which is a species in the forests administered fact that contributes to the rather low productivity by MNR Russia (as of January 1, of timber producing areas of the forests. Only 55% 2004) of the total forested area in Russia is considered Standing volume Main species to be accessible for forest exploitation. million m3 % Pine 115 035.87 19.71 According to the 2004 State Forest Fund Spruce 9 972.3 13.07 Account (SFFA), the total standing volume of Fir 2 523.08 3.31 major forest-forming species in the Rosleskhoz's Larch 23 068.94 30.25 forests is estimated to amount to 76.3 billion m3, Siberian stone pine 7 846.45 10.29 including 42.6 billion m3 of mature and overma- Tree-like juniper 0.09 0.00 ture timber. The average standing volume in Total for conifers 58 446.73 76.63 mature and overmature stands (shrubs not included) is 132 m3 per ha, including 162 m3 Standard oak 470.65 0.62 per ha in accessible forests. The gross annual Oak coppice 371.97 0.49 increment in Russian forests is 932.22 million Beech 207.61 0.27 m3, and the mean annual increment is 1.21 m3 Hornbeam 44.99 0.06 per ha of forested lands. Other hard-leaved 973.94 1.28 Total for hard-leaved 2 069.16 2.71 FOREST USE Birch 10 027.96 13.15 Aspen 3 124.97 4.10 According to the Forest Code of the Russian Other sot-leaved 1 019.12 1.34 Federation, timber shall be mainly harvested Total for sot-leaved 14 172.05 18.58 through final felling in mature and overmature Other timber species 44.16 0.06 3 stands. In 2004, a total of 127 million m of Brushwood 1 539.81 2.02 timber was harvested in Russian forests, includ- GRAND TOTAL 76 271.91 100.00 40 ing 115 million m3 in the forests administered by 41 FFA. The annual allowable cut (AAC) amounts to nearly 520 million m3, including 295 million m3 in and western regions of European Russia. In conifer forests. The AAC is used, on the average, the conifer forests of the European-Ural part at 22%. The highest use of the AAC is observed of the Russian Federation the AAC is used at in the forests of northwestern, northern, central 40-60%.
Diag. 4. Annual allowable cut and actual harvested volume (final felling), 3 million m Area Forest Stocked of Percentage as Areas Natural Protected Special of Forests the of Area 4. Fig.
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
At the end of 2000, the second certificate ha. 10 more companies with the aggregate was granted to the German company Dammers, forest area of 3.3mln ha have declared their operating in the Arkhangelsk Region and intention to certify forest management systems harvesting timber on the leased area of JSC according to FSC standards. Dvinsky lespromkhoz. Some time later, JSC Madoc (Novgorod region) received its certificate. INCONSISTENCY A real breakthrough in forest certification, SHOULD BE ELIMINATED however, was observed in the second half of The major obstacle to certification is flawed 2004. Certificates snowed in Russia: now 27 FSC Russian legislation, in particular, discrepancies forest management certificates are issued and between Russian laws and international valid in Russia. The total certified forest area requirements and standards. As a result, (as of April 10, 2006) is 8,919.9 thousand ha enterprises trying to meet international (see Table 1). By the end of 2006, this figure standards and obtain forest management may double. TThehe mmajorajor pportionortion ooff RRussianussian fforestorest pproductsroducts ((bothboth rroundound ttimberimber certificates are forced to break Russian timber harvesting rules, forest legislation and, as a As for the geographic location of forest aandnd wwood based)ood based) iiss ssoldold aabroadbroad – iinn EEuropeanuropean aandnd AAsiansian consequence, pay large sums in fines. In fact, management certificates, most of them relate the government is punishing environmentally mmarkets.arkets. IInn cconnectiononnection wwithith tthis,his, ttimberimber ccompaniesompanies aarere fforcedorced to the Arkhangelsk Region (10 certificates responsible forest users, following international ttoo mmeeteet tthehe rrequirementsequirements ooff RRussianussian llawsaws aandnd iinternationalnternational issued, including one group certificate) and standards. Although, some positive changes cover the certified area of 2,729.7 thousand sstandardstandards aandnd rregulations.egulations. TThishis iiss pparticularlyarticularly rrelevantelevant fforor have already been made: the Federal Agency ha, while the second largest certificate holder for Forestry (Rosleskhoz) has begun “adjusting” fforestorest mmanagement,anagement, cconsideringonsidering tthathat ssuchuch rrequirementsequirements is the Irkutsk Region (2 certificates covering Russian standards to international norms. So, aarere iincreasinglyncreasingly ccommonommon nnotot fforor RRussianussian ggovernmentovernment aandnd 2,645.7 thousand ha). we may hope that some day Russian and ssupervisingupervising bbodies,odies, bbutut fforor iinternationalnternational iinstitutes,nstitutes, eenvironmentalnvironmental international standards will be similar. The The high expansion of certified areas in the “adjustment” process, however, is too slow. oorganizationsrganizations aand,nd, cconsequently,onsequently, EEuropeanuropean mmarkets.arkets. RRussianussian Arkhangelsk region can be explained by the 42 ttimberimber pproducersroducers aarere ffacingacing iincreasingncreasing ddifficultiesifficulties iinn ssellingelling ttheirheir fact that more than 90 % of its timber products Some Russian regions do not recognize the vital 43 are sold in European markets, placing more pproductsroducts uunmarkednmarked bbyy tthehe llogoogo ooff a rrecognizedecognized ccertificationertification importance of the implementation of global strict requirements on timber products. Apart forest management standards and are still ssystem.ystem. from this, Russian timber companies realize the putting spokes in the wheels of certification. imperfection of national forest management Nevertheless, most regions demonstrate an standards, leading to the loss of valuable forests understanding of the significance of certification and the replacement of coniferous stands with for the development of forest management. hardwoods. Among the various forest certification The greening process in the forest business HECTARES, CUBIC METERS, has already reached the Arkhangelsk, Vologda, schemes, the most popular with Russian timber According to the latest data, 18 companies from Irkutsk and Pskov regions, the Republic of Komi, producers is the one offered by the Forest CERTIFICATES various Russian regions with an aggregate forest Altaisky and Krasnoyarsky Krais, and other Stewardship Council, which is a monopolist in area of 4.6mln ha are under the certification In late 1999, the first Russian enterprise federation subjects. Among active followers the Russian forest certification market. The process (i.e. underwent pre-assessment and forest management system underwent a are the Republic of Karelia, Kirov and Leningrad main reason for this is the high demand for are eliminating identified gaps in compliance baseline appraisal for compliance with Forest regions. FSC-marked products on international markets Stewardship Council standards. In March 2000, of forest management systems). One of these and the support provided by the leading enterprises – IlimSeverLes Ltd. (Arkhangelsk the corresponding certificate was issued to In general, the degree of certification environmental organizations – WWF and region) – passed a baseline appraisal in early Kosikhinsky FMU and Timber Production Ltd development may signal the degree of Greenpeace – to paper product producers. April 2006, and is waiting for issuance of a group Company, which covered forests around the environmental responsibility of the authorities. city of Barnaul (Altaisky Krai). certificate covering the area of 700 thousand A sustainable forest management certificate allows the timber company to declare In the meantime, a National Working Group the transparency of forest business and on Voluntary Forest Certification was created. should, in principle, promote production The group has already prepared a version of investments. Moreover, certification in Russia national framework principles and criteria of is developing so fast that, in many regions, sustainable forest management adapted to the forest agencies initiated the establishment Russian environment. Regional standards are of specialized certification divisions proving under active development in the Republic of the importance of the process for regional Komi, the Arkhangelsk Region, Krasnoyarsky, authorities. Khabarovsky and the Primorsky Region.
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
Table 1. Certified forest area in the Russian Federation as of April 10, 2006 In the regions where certification is flourishing, environmental organizations and federal and local Enterprise Certified forest area Certificate validity, expiration date authorities managed to strike a compromise. Such agreements stimulate the development ARKHANGELSK REGION of forest certification. However, a blanket JSC Svetlozerskles 171,900 ha 08.12.2009 distribution may be reached only when Russian Dammers Ltd. 65,905 ha 12.31.2005 legislation and international requirements have JSC Maloshuykales 336,445 ha 06.02.2008 been brought into harmony. JSC Velskoye LPP 68,035 ha 06.12.2010 The forest business strives to be a responsible JSC Ust-Pokshengsky LPH 236,541 ha 05.16.2010 user (including international standards), as in the JSC Zelennikovskoye 89,872 ha 07.12.2010 future, this will help preserve the environment JSC Shalakushales 274,172 ha 05.17.2010 and become the only possible strategy of making JSC Nimengales 187,000 ha 04.05.2010 international trade profitable. However, timber Toyma-les, subsidiary of Solombalsky LDK 166,379 ha 10.16.2010 companies meet a number of problems in the PLO Onegales (group) 1,133,451 ha 12.11.2010 process of certification, which are indicated Total in Arkhangelsk Region 2,729,700 ha following the FSC principles – the 1st, 4th, IRKUTSK REGION 6th and 9th principles. IlimSibLes (a part of Ilim Pulp) 1,589,944 ha 08.12.2010 FSC principle # 1 requires compliance with laws CJSC Logging and timber rafting Depart- 1,055,759 ha 02.23.2011 ment (a part of Ilim Pulp) and FSC principles. As was mentioned above, Total in Irkutsk Region 2,645,703 ha this principle can hardly be observed in Russian legislative conditions because international and PRIMORSKY REGION Russian standards are underpinned by different Terneyles 1,394,488 ha 11.15.2009 forest management principles. REPUBLIC OF KOMI Komilesbusiness 62,727 ha 05.02.2010 Principle # 4 provides for community relations 44 Priluzhsky leskhoz 794,409 ha 02.29.2008 and workers’ rights. Companies interested in 45 Leskom 78,362 ha 11.03.2010 obtaining forest management certificates maintain worker’s rights. Such forest enterprises, Luzales 36,169 ha 12.29.2010 as a rule, have no problems with special clothes, Total in Republic of Komi 971,667 ha labor safety, legal salaries, etc. VOLOGDA REGION CJSC Bely Ruchey 398,000 ha 07.20.2009 The problem arises when it comes to the local JSC Belozersky lespromkhoz 221,492 ha 08.24.2009 population. The people are inexperienced with Avtodorles 351,83 ha 03.15.2011 forest management; they cannot make an Total in Vologda Region 654,675 ha informed choice about the most appropriate system of forest management and use. Even KRASNOYARSK REGION the pilot project in the Pskov Model Forest Novoyeniseysky LHK 49,333 ha 04.25.2009 supported by WWF and STF-Strug Company Lesosibirsky LDK ¹ 1 219,155 ha 12.29.2009 showed that people are reluctant to take part Total in Krasnoyarsk Region 268,488 ha in such work. Meeting this principle will require Kirov Region careful, time-consuming work, aimed to change Kay 124,203 ha 07.12.2009 the mentality of people and alter their attitudes Zalasninsky timber plant 48,615 ha 11.08.2010 to forest resources. Total in Kirov Region 172,818 ha Principle # 6 covers environmental impact. At ALTAISKY KRAI present, the law maintenance policy is not yet Kosikhinsky agricultural FMU 32,712 ha 11.14.2009 regarded as natural by most enterprises. This is NOVGOROD REGION particularly true of the environmental expertise Madoc 31,200 ha 12.03.2006 of forest management projects. PSKOV REGION Principle # 9 – maintenance of high conservation STF-Strug 18,440 ha 08.31.2008 value forests. There is no notion of “high Total in Russia 8,919,891 ha conservation value forests” in Russian legislation, According to FSC Russian Office and consequently, the enterprises have no right
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
to preserve HCVF (though this is prescribed by Table 2. Russian Enterprises Holding At this time, 5,168 FSC certificates of forest several reasons for this. First of all, the FSC FSC standards) otherwise they will have to pay Chain-of-Custody Certificates management have been issued in 80 countries; certification system is supported by the a fine for “undercutting.” Besides, a year ago as of April 10, 2006 the area of certified forests is 72.3mln ha. It leading environmental organizations – WWF a working group created under the auspices of is expected, that by the year 2015 it will be and Greenpeace, which have authority in the Arkhangelsk WWF Project Office completed 350mln ha – the FSC will become the leading the global timber industry. Apart from this, Certificate the development of the High Conservation validity, international certification system according to the FSC began working in Russia in 1998 Enterprise Value Forests Identification Methodology and expiration the area of the certified forest. when our country was not yet regarded as submitted it for approval to the Regional Agency date a rightful participant of the certification for Forestry. This normative document was Altaisky Krai It is common knowledge that applicable forest process. The FSC paid for elevation and got approved not so long ago, though it is not Timber Production Pricebatch 11.13.2009 certification standards are too cumbersome it. Also, as the study showed, the FSC is the obligatory yet. Kosikhinsky and Nalokhibinsky LDK 11.13.2009 and inconvenient for users. At present, the most required certification scheme in the FSC is demonstrating a new trend for standards global forest certification market. 71 % of Biyskaya Furniture Plant 01.30.2011 The opening of the FSC National Office is simplification – “cutting off ineffective consumers in the territory covered by the UN considered by many stakeholders as an important Arkhangelsk Region parts.” Economic Commission for Europe are oriented impetus toward the promotion of FSC certification Solombalsky LDK 01.10.2011 with the FSC, and only 29 % with the Pan- in Russia. According to Andrey Ptichnikov, the Arkhangelsky TsBK 02.20.2011 As Heiko Liedeker noted, this work will result European forest certification system (PEFC). head of the Office, certification specialists IlimSeverLes 01.30.2011 in the second version of chain-of-custody The largest suppliers of certified products at enterprises and in local administration Kotlassky TsBK 03.08.2011 standards and new rules for marking certified in Europe are Sweden, Finland and Germany; bodies have gathered unique experience in products. The existing standard came into the major certified products markets are in FSC standards implementation, which they Onezhsky LDK 10.13.2010 force about a year and a half ago and is to Great Britain, Germany and the Netherlands. should share with other stakeholders. The FSC Lesozavod 25 08.12.2010 be revised. According to Liedeker, the FSC is However, the boom of certification in Russia will focus on promoting certified products to PKP Titan 12.11.2010 trying to make the chain-of-custody standard may make this country one of the leaders in environmentally sensitive markets. Irkutsk Region more convenient, simple and acceptable for the the global certified forest product markets IlimSibLes (a part of Ilim Pulp) 08.12.2010 forest business. in the near future. Today, Russia accounts The promotion of products is, however, not for about 10 % of the FSC-certified global CJSC Logging and timber rafting enough for forest companies – Russian timber is 02.23.2011 Department (a part of Ilim Pulp) forests. in demand irrespective of certificates. The FSC CHAINOFCUSTODY Kirov Region 46 is required to influence not only the producers, However, forest management certification is This perspective conflicts with the results of 47 but also the consumers of forest products, who LZK Lunvozh 09.11.2010 not enough for the right to mark the products studies conducted in Russia. The results of should be reflected in the price policy – the Kostroma Region with the FSC logo. A supply chain of raw wood studies showed that the forest certification producers must get compensation for their Fanplit 10.31.2010 (chain-of-custody) should be certified, too. market should not be a monopoly of one system. certification expenses. Krasnoyarsk Region Moreover, forest market participants expect not The chain-of-custody certification is an essential only a competitive cooperation of certification Novoyeniseysky LHK 04.24.2009 Today, the audit services are quite costly. This condition for the finished products to be schemes, but for Russia to have its own national is largely because audits are performed by five Lesosibirsky LDK # 1 02.03.2010 marked with an FSC logo and recognized in the forest certification system oriented at local foreign companies operating in Russia. One of Moscow international markets. The goal of certification conditions and based on Russian legislative the alternative ways of reducing the cost of VM-Invest 11.16.2010 is to verify that FSC-certified raw materials and normative acts regulating forest activities. auditing could be the appearance of an FSC- Republic of Komi were used to produce FSC-certified products. At the same time, the national system should accredited Russian audit company. Two Russian The sold volumes of certified lumber or paper receive international recognition. Finleskom 07.18.2010 companies are under the FSC accreditation products are controlled based on the actual process at the moment; as soon as they get Komilessnab 07.05.2010 volumes of procured certified sawn timber used the right to perform certification audits, an Kustyshev N. M. 07.11.2009 in production. COMPETITION issue of certification cost decrease may be Mag Ltd. 08.01.2010 IS AN ENGINE OF PROGRESS raised. One of them is EuroPartner Ltd. It is Today, 29 Russian timber-producing companies Verkhnyaya Lopya 07.27.2010 One of the main drawbacks of FSC forest to receive FSC accreditation shortly and its are chain-of-custody certificate holders (see Syktyvkarsky Plywood Plant 06.23.2009 certification is that it does not provide for experts are already participating in the audits Table 2). Is it too much or too little? Most the recognition of national forest certification of timber companies. Komiles 09.26.2010 likely the latter. For example, in China, 150 systems. The PEFC system competing with Noshulsky LZK 08.14.2008 certificates have already been issued, while in the FSC admits the establishment of national Luzales 07.31.2008 Japan – more than 300. IT IS TIME TO CUT OFF forest certification systems provided they are INEFFECTIVE ELEMENTS Saint-Petersburg approved by the PEFC. That is why several years Pomosch-Invest 07.05.2010 NATIONAL FOREST ago the development of the National Voluntary Head of Forest Stewardship Council, Heiko Vologda Region CERTIFICATION STANDARDS Forest Stewardship System was started at Liedeker, during his recent visit to Russia, Cherepovetsles 05.30.2010 the initiative of union timber producers and said that the FSC keeps working to improve The certification market in Russia has exporters, oriented with PEFC endorsement. The JSC Belozersky Lespromkhoz 03.21.2010 forest certification requirements and standards. become almost monopolized. There are work was coordinated by the National Voluntary According to FSC Russian Office
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
Forest Certification Council. Among the founders Thus, a competitive environment in forest of the Council were timber companies and certification is being formed in Russia, which forest management enterprises from various is an element of normal market relations. Russian regions, research institutions and forest-related NGOs. Work on the national These days the government is becoming system has been performed since 2000 and increasingly concerned with the necessity of is nearly complete. voluntary forest certification implementation in the Russian forest sector. On the other hand, The National Forest Certification System includes it creates obstacles for the development of a legal framework, specifying the requirements national forest certification schemes and the of certified objects and indicators of the degree use of western certification schemes. of compliance of certified objects; forest management and use certification procedures; One obstacle is the constantly changing Russian It is widely known that the State chain-of-custody control procedures; TOR on legislation. The recently approved Federal Law system trademark; statutes of the managing board “On Technical Regulation” abolished the existing Duma passed the new Forest and functional departments of the system. rules of voluntary forest certification bodies’ Code draft in the first reading in accreditation, according to which, Roslesaudit, April 2005. The second reading The legal framework is based on principles the only operating national voluntary forest of sustainable forest management and use in certification body, was accredited. The of the draft, however, has not economic, environmental and social spheres. new law provides for the accreditation of yet taken place due to heavy These principles are requirements for the voluntary certification bodies to be made in criticism of the document, and activities of all forest stakeholders. They are compliance with the rules approved by the RF based on Russian legislation. The principles Government. The rules, however, have not yet is scheduled for the spring consider all PEFC requirements for national been established. session. The Forest Code draft forest certification systems. They also reflect is currently being revised by some FSC requirements not interfering with Moreover, certification bodies face difficulties Russian legislation and reality. when operating under the constantly changing the State Duma Committee on 48 legislation, including the Forest Code and Natural Resources and Use. 49 The draft system of voluntary forest certification, normative acts, swallowing dozens of crucial Vladimir Kroupchak, doctor including its legal framework and procedures, amendments every year. underwent testing in the production environment of economic sciences, an RFSD at three timber producing regions of Russia: CONCLUSION deputy and Chairman of the Central (Vladimir region), Northwest (Vologda Subcommittee on Forests of the region), Urals (Yekaterinburg region). Russia is now experiencing a certification boom. Just a few years ago no one could imagine that corresponding SD Committee, For the past three years, corresponding forest certification would expand so quickly. has discussed its progress. seminars, discussing the system, were held Nevertheless, at present, the certified forest in Arkhangelsk, Vologda, Yekaterinburg, area in Russia constitutes over 10 % of global Moscow and Saint-Petersburg. The system certified forests. In terms of the certified area, was revised and amended based on the results our country jumped up to the third place. of tests and public consultation processes. Certification in Russia can be expected to “Vladimir, how many proposals for all levels. This version was sent to all interested In April 2005, the system passed the state develop further and the area of certified forests amendments to the Forest Code draft has enterprises and organizations, so now we may registration. The national forest certification will exceed the areas in other countries. your subcommittee received since the first compare the two main versions of the Forest standards are to be submitted to the PEFC reading?” Code: for endorsement. This forecast is supported by the fact that the forest business in Russia has great potential for VK: “At this time we have received more than 1st – a version developed by the Ministry However, several years after the set-up of profit and will develop in the future. Industry five thousand amendments, comments and for Economic Development and Trade of the the National Forest Stewardship Council, a development is always driven by changing demand. proposals to the version of the Forest Code Russian Federation, which was submitted by the Russian National Forest Certification Board The demand, however, is increasingly oriented approved by the State Duma during the first Government to the State Duma and approved was established by the Federal Agency for with certified products. Thus, certification is a reading. Based on these materials, and the final in the first reading. Forestry. The board had a similar task – to cornerstone of successful forest business, giving protocol of the working group, our subcommittee develop a national system of voluntary forest the enterprises a financial impetus and drawing prepared its version of the draft law, considering 2nd – a version prepared by the Subcommittee certification. The Russian National Board, their interest. It doesn’t matter what certification most of the proposals submitted by various on Forest Resources for the second reading, though, was oriented at drawing up standards scheme dominates – the FSC, PEFC or others. The forest stakeholders – forest managers, timber which took into account proposals of the within the FSC framework. final objective is sustainable forest use, to which producers, environmentalists and authorities at working group, the public and business.” our timber companies are striving.
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
“As far as I know, the draft offered by the plays a vital role in the development of the demonstrating the relevant experience necessary all forest stakeholders and elaborate specific Ministry for Economic Development and Trade national forest industry. As for the length for forest planning and sustainable use.” measures in order to help the Russian forest is referred to as largely unsuccessful. Could of forest roads, we are lagging far behind sector out of the crisis and let the timber you list its drawbacks?” other countries. It is worth noting, however, “We offer an alternative classification of lease industry use all its competitive advantages that, thanks to our efforts, the 2006 budget types. In our opinion, a short-term lease should and hold an appropriate position among the VK: “Having studied the version of the appropriates 500 million rubles for forest road be a lease excluding forest management for developed timber countries. Our subcommittee Forest Code submitted by the RF Ministry construction. The sum is insufficient, but better the period from one to six or seven years, and has already worked out conceptual approaches for Economic Development and Trade, I can than nothing…” a long-term lease – a lease including forest to the development of such a program.” definitely say that this version doesn’t solve management for the period of seven to twenty- the problem of attracting investments into “The Ministry for Economic Development and five years with the option to prolong for five “What do you think of the transfer of federal the development of new resource bases, forest Trade didn’t consider many other comments subsequent years provided the contractual forest governance and management functions infrastructure, or the improvement of forest set forth in the final protocol of meetings of obligations were fulfilled. This practice proved to the RF territorial subjects following the protection and regeneration. It doesn’t provide the working group established by RF Duma for highly effective in Canada.” federal law FZ “On Introducing Amendments to conditions for the development of advanced revision of the draft law.” Some RF Legislative Acts in Connection with timber processing; on the contrary, it provokes “The fees per forest resource type should be the Perfection of the Division of Powers?” ownership redistribution in the forest sector and “They say, also, that the Ministry for Economic determined based on lease conditions, that is, the crumbling of effective timber companies. Development and Trade implicitly allows for considering the quality of resources, their location VK: “My attitude is negative, and I will explain The thing is that it offers only one - not always the private ownership of forestland, which and harvesting conditions, as well as finished why. First, large timber corporations include justified - mechanism of forestland lease by we have all anticipated.” consumer products manufacturing options.” harvesting companies and processing enterprises, companies, including non-specialized fly-by- located in different regions, i.e. they maintain night companies through a forest auction VK: “The draft law introduces an institute of “The most important of our amendments to the an interregional status. Being a “growing point” system. In practice, this draft law regards private ownership of forests, indeed. Moreover, draft ensuring the inflow of investments into the for the forest sector and the national economy forests not as a fragile ecosystem but as a the transfer of forestlands belonging to the development of forest use and management is a in general, they require a guaranteed supply commodity, as the only way to win the auction forest fund will be accomplished under civil provision regarding concessions of forest areas of raw timber to their processing plants. This is to offer the highest bid. It is obvious that legislation. There will be a risk of the transfer of in the form of a long-term lease providing for problem can be solved only on the federal the auctions will entail a decline of forest use, large forest areas into private property without the investment commitments of the parties.” level, as the practice shows that pursuing the the interrupted supply of large processing plants considering the interests of local communities, personal interests of regional administration 50 with timber and, finally, a system crisis due to which will give rise to social instability in the “The subcommittee’s version prioritizes the lease heads may lead to the discrimination of timber 51 the collapse of technology-based local timber densely populated forest regions of Russia.” of the forest fund by enterprises performing the companies, developing their production in other corporations. Newly-made forest monopolies will advanced processing of timber, and attracting RF subjects.” get permission for the unrestricted building of “What is the difference between this imperfect subcontractor organizations to perform the works, cottages in the forests, surrounding cities, and drat law and the version of the Forest Code as specified in the lease agreement. Companies “Apart from this, the transfer of forest push up the prices of such socially-sensitive prepared by your subcommittee?” engaged in forest certification will also have governance functions to the regional level commodities as wooden houses, furniture and privilege during forestland allocation.” has a political background. Owners or heads paper.” VK: “Our version of the Code prioritizes public of large interregional corporations, which have ownership of forests, as the global practice “I believe that the draft should include demonstrated the ability to control a large “The draft law doesn’t provide advantages for showed that the effectiveness of forest provisions regulating the development and management project and made a significant forest use companies, which passed voluntary management and business does not depend financing of forest infrastructures. If the forest contribution into the development of the region, forest certification, and introduces a non-market directly on the forms of ownership of forestlands. user has already borne considerable expenses have authority with the local population. So, mechanism of increasing the forest resources use In Europe, less than half of all public lands from the construction of forest roads or other the heads of corresponding administration fee, forcing the forest managers to use at least are private property. The share of public lands infrastructure-related costs, our version provides bodies are often tempted to interfere with the 30% of each forest resource type irrespective varies from 15% in Iceland to 99% in Turkey. for the compensation of investment outlay in dynamic growth of their political opponents’ of site-specific management conditions. One In Canada, public lands account for 94% of the the event of the transfer of developed lands to businesses, first of all, through the distribution of the major disadvantages is the absence of area, in USA – 39%. However, the effectiveness the other forest user.” of natural sources of raw materials. This notion a justified procedure for determining fees per of forest use and regeneration in these countries, is proved by the experience with forest auctions, forest resource type; it should be calculated which are on top of the international timber “As we know, you took part in the meeting held in late 2004 in the Arkhangelsk region, based on the conditions of the lease.” market, is nearly the same.” of the Government of the Russian Federation which resulted in the transfer of the best forest on November 24, 2005, which touched upon areas to fly-by-night companies, leaving aside “The draft law ignores investment-attracting “We have also excluded the provision about the the development of the forestry and timber traditional forest users owning advanced timber instruments such as pre-qualification for unjustified limitation of citizens’ access to the industries. The participants decided to work out processing facilities. The federal ownership of participation in an auction, forest concessions forests – this is our principled position. The a Federal Program entitled “Forests of Russia.” forests, interregional and transnational character with investment commitments, and the forestland’s lease procedure in our version of the Is there any progress with this program?” of the timber industries and vast forest areas establishment of management units for specific Forest Code requires holding auctions with the require that the coordination be performed by purposes. It has no provisions regulating the pre-qualification of participants. Priority should VK: “First of all, a national target program the federal center.” construction and financing of forest roads. be given to the leaseholders with harvesting for forestry development is a must. I am sure In fact, accessibility of forest resources and advanced timber processing facilities, thus this program will allow us to join efforts with Interviewed by Ivetta KRASNOGORSKAYA
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
AP: “Some years ago, in 1998, a number certificates: according to this system, of non-governmental environmental certified products make up 30-50% of the organizations (WWF, Greenpeace Russia, total volume, while the remaining part Centre of Wildlife Protection, etc.) created doesn’t pass a thorough inspection, but the an initiative working group for the legality of the products’ origin is controlled development of national FSC standards. If by the enterprise. At present, from 10 to no standards existed, implementation of the 15mln ha of Russian forests have entered the FSC certification system with all its merits certification process. So, we may say that would be impossible in Russia: every country forest management is under the significant has its peculiarities. The progress was slow, influence of forest certification.” a lot of conflicts arose between the parties; we tested tentative standards in different Is it only export-oriented market actors regions of Russia. Practically speaking, the who receive certificates? agreement was reached not so long ago: national FSC-certification standards came AP: “Not necessarily export-oriented. Among into effect only last year.” certificate holders there are companies oriented exclusively in Russian markets, By the end of 2005, the certified forest area in Russia reached Despite all the difficulties, none of the supplying products to ‘responsible’ producers authors doubted the importance of their or trade companies with foreign capital. Thus, 6.7mln ha. All of these forests are FSC certified. Though the Forest work, as the certification had already Kaysky lespromkhoz (logging operation) Stewardship Council has been operating in this country since 1998, covered 80 countries and Russia could not harvests birch sawlogs, used by Domostroitel the FSC Russian Office – the direct office of FSC International, stand aside, could it? company to manufacture furniture, supplied to IKEA supermarkets and purchased by Russian controlling development of the certification in Russia, was opened AP: “Surely. Even China has about 150 customers.” in Moscow only in February 2005. How did it start, what are FSC chain-of-custody certificates. Chinese the challenges of FSC certification in Russia and should it fear enterprises procure Russian roundwood, So, the voluntary certification is, in fact, process it and then re-export nearly half of forced: if you want to be successful in 52 competition? We asked these questions to Andrey Ptichnikov, it to Europe and the USA. This, in fact, is the business and meet with the approval of 53 director of the FSC Russia National Office. reason why they entered the certification the industry, you won’t be able to survive process. Recently, a Chinese governmental without certification… delegation visited FSC headquarters in Bonn and supported the initiative for opening an AP: “Certification is needed to minimize FSC National Office in China.” the business risks. If the corporate policy of IKEA requires only certified products, the “In Japan, over 300 enterprises are holding supplier cannot but meet these requirements. FSC chain-of-custody certificates. Importing Or he will have to search for another buyer. timber for their numerous processing plants, Some timber producers are willingly passing they make high demands on the certification the certification procedure not only because of tropical forests and increasingly strong it is the requirement of the market, but requirements for imported forest products because this is the requirement of their from temperate and boreal zones.” corporate policy. In the view of the market, for Ilim Pulp company, there was no sense in “Russia has faced the same situation – passing certification: most of its products almost all the enterprises in its European are exported to China and supplied to part have to meet certification requirements. the domestic market. The requirement The certification is expanding to Siberia of certification of Ilim Pulp is, first and and even to the Far East. Up until now, foremost, the requirement of the corporate FSC certificates have been issued to 24 forest use standard.” Russian companies, out of which 22 have the so-called chain-of-custody certificate, “The certificate means the opportunity to allowing the opportunity to trace the sell the products at a higher price. Many movement of certified forest products from big western banks crediting forest-related the stump to the enterprise and commercial enterprises, for instance, the International agent and mark the products with an FSC Financing Corporation (IFC), Abn-Amro, may logo. A number of large enterprises, such refuse the grant of a credit if the company as Kotlassky TsBK (PPM) have FSC-mixed lacks the certificate or doesn’t plan to
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
obtain it. Thus, there are many reasons why for Supervision of Nature Resources or Tax by all countries, which accepted the FSC the meantime, other logos can also be seen enterprises enter the voluntary certification Inspection. If he comes to know that the system, each country has specific features in wholesale trade: any certified wood is process.” supplier is recorded as engaged in illegal that cannot but influence the certification better than non-certified.” harvesting, the auditor will issue a pre- process. What are the peculiarities of the How much time does it take to pass a condition or a condition for the company: Russian process? “In Western Europe, FSC forest management certification process? to refuse a dishonest partner or make him certification has less bright prospects due play by its rules…” AP: “Indeed, though the principle and criteria to the dominance of small forest owners. AP: “Certainly, this is not a quick process. are the same for all countries, Russian On the contrary, FSC is booming in Russia It begins with a pre-assessment. An “One should not stick to the idea that if an distinctive features are related mainly to its and other former socialist countries. For experienced expert or auditor makes a visit enterprise managed to obtain a certificate, its unique forest management system. Nowhere the past year the area of certified forests to your enterprise to get acquainted with performance is perfect. This means only that else in the world does the government in the Ukraine increased 5 times, in Belarus its performance, paying special attention the problems of the enterprise are identified interfere with business as much as it does – 4 times, in Bulgaria and Romania – 3-4 to the quality of forest management and and should be addressed within a five-year here. Nowhere else are there leskhozes and times, in Russia – 3.5 times. This year we use, highlights all gaps in compliance to period. They are not, however, serious enough such complicated knotty rules of forest use predict a doubling of the certified forest be eliminated by the enterprise by the to prevent the issue of the certificate.” as in Russia. Existing rules of planning the area. The total certified forest area in Russia time of the baseline audit. As a rule, for allowable cut, designation of harvest, forest has expanded nearly 20 times over the past the average Russian enterprise, the time In this country, certification is often put regeneration, all turn out senseless in market five years.” period from the date of pre-assessment on par with environmental responsibility. conditions and lead to forest deterioration. till the date of the baseline audit is from How are these notions interrelated? Can you In short, the system itself is inadaptable and “Now our main task is to help small and six to twelve months. During this period draw a demarcation line between them? non-marketable.” medium forest owners certify their operations. the enterprise should eliminate all gaps in FSC offers a group certification scheme compliance with certification requirements. AP: “Certification often encourages the Let us speak a bit about alternative and a simplified certification procedure for Large companies may need up to two years for enterprise to take greater environmental certification schemes applied in the small and low intensity managed forests the whole process, though much depends on responsibility. Before the certification world and their prospects of expansion (SLIMFs).” the enterprise itself. For example, the Titan era, only a small percentage of companies into Russia. group of companies spent two years on the demonstrated such responsibility. Speaking on “In Russia, two initiatives for the development certification process, while Ilim Pulp Corp. this issue, I should touch upon the problem of AP: “If we look at the USA, they have of National certification schemes emerged; 54 – only one year.” illegal logging. It has two sides: on the one elaborated three certification systems: the both are planned to be accredited in the 55 hand, there are the so-called ‘black loggers,’ first is the proper American SFI scheme; Pan-European Council. For this purpose, two What factors in to the refusal of the operating in our forests and ignoring permits the second is the Canadian CSA scheme, councils were established: the National Forest certificate? and rules. On the other hand, Russia has a actively promoted by the government and Certification Council under the supervision of chronic problem with the underassessment the FSC. The latter is well developed in academician A.S. Isaev (close to the Federal AP: “The task of the auditor is to check the of timber due to a systemic error in forest Europe. On the other hand, Europe has its Agency for Forestry) and the National Council progress of the enterprise in taking action inventory. Forest rangers should make own and very active Pan-European Forest of Voluntary Forest Certification under the on the prescribed corrective measures. If measurements of the forest before and after Certification scheme – PEFC. It was worked supervision of N.S. Yeremeev (close to the the problem cannot be solved entirely by the cutting. Unfortunately, no one wants to do out on the initiative and for small forest RF Union of Timber Producers and Exporters). applicant, the auditor assesses the situation this job, so the measurements are all too owners possessing half of European forests. Each of these councils passed the standard and makes an informed decision as to what often made in a hit-and-miss fashion, based In some European countries PEFC certification development procedure and now they both extent the problem hinders the issue of the exclusively on forest inventory data, which is may be easy for small forest owners thanks are completing their packs for standards and certificate.” outdated. The error accumulates with every to the benign requirements and standards of certification procedures. It is obvious that passing year.” certification procedures. On the other hand, some of the Russian enterprises will be PEFC “There is an illustration in point. The this system has a smaller market share. Many certified, though the competition of the two buyer of the raw materials is to conclude “When it comes to ‘black loggers,’ the experts believe that the PEFC certification systems on a limited market may become a contracts with the supplier. These contracts enterprise must filter out controversial development is stimulated by politicians, headache for interested forest users.” must guarantee that the company buys only sources, and in case of any doubts check not businesses. Most experts recognize that legally harvested timber. The suppliers should its suppliers and reject those with tarnished the FSC system is less flexible and oriented “Our FSC Russian Office is supporting the present the buyer with all required documents: reputations. How can certification help with mostly at large and medium forest owners; National Forest Certification Council headed by logging permits, transport bills, documents ‘officially non-inventoried’ forests? Obviously, consequently, it is developing actively in A.S. Isaev: this system is much closer to the verifying the controlled status of the wood. they can’t. This is the system’s problem, which countries where they dominate (Canada, FSC in terms of forest management standards. The companies following this principle in is to be solved by the government. Our FSC Sweden, and Russia). When purchasing wood, It will be suitable for the enterprises desiring their work with timber logging enterprises office receives a lot of appeals asking us the buyers are concerned with decreased to obtain certificates for various systems, the are regarded as contributors to the fight to have this problem addressed at a higher environmental and social risks, so many of forest management requirements, however, against illegal timber harvesting.” level.” them, if not most, are oriented in strict will be largely similar.” certification schemes. By the way, the FSC “The auditor has the right to send enquiries You mentioned earlier that despite the logo is most often seen at retail shops; it can Interviewed by Ivetta KRASNOGORSKAYA about the supplier to the Federal Service uniform principles and criteria applied be seen practically in all large DIY shops. In
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
THE PROJECT TODAY that needs to be addressed is to identify which of the forest companies in Arkhangelsk and “After the second phase of the Pskov Model Vologda Oblasts are interested in disseminating Forest had been launched in April 2005, the the Pskov Project’s experience in sustainable project gradually started to pick up speed and more intensive forestry. in disseminating innovative approaches in four regions of Northwest Russia,” remarked the project’s donors and stakeholders at the FOREST NORMS ARE TO COME INTO meetings of the Advisory Board and Steering FORCE! Committee, which took place on December 6th and 7th in St. Petersburg. Issues under According to law, new forest norms should be discussion included the dissemination of project officially approved before forest companies may The project aims to develop an environmentally outcomes in Arkhangelsk, Vologda, Pskov and apply them in their operations. In cooperation appropriate, socially beneficial and economically Leningrad Oblasts, mechanisms for the approval with the project, WWF-Russia is actively working towards the facilitation of the authorization viable forest management model and replicate of forest norms on the federal level, the role of the newly established consultative body – the process by the forest administration. The first the model for other regions of Northwest Russia. Advisory Board – in facilitating the project’s success in this direction has been achieved: work, and other important matters. as it was announced at the Advisory Board meeting, norms for commercial thinning The Pskov Model Forest is located on the developed during the project’s first phase are territory of Strugo Krasnensky District of Pskov PROJECT’S TARGET COMPANIES: going to be considered by the Forest Use and Oblast in Northwest Russia. The model area NEW WORK FORMAT Forest Inventory Section under the Council of the Federal Forestry Agency (Rosleskhoz) in covers 18,400 hectares of forestland. While establishing productive means of February-March of 2006. collaboration with our target companies, it is important to understand what expectations we By the summer of 2006, project experts are are holding of each other and what practical planning to develop norms for conservation results our joint efforts will lead to. We 56 Project Donors: realize that there are a lot of challenges 57 ahead, however, it is only the replication • Swedish International Development Cooperation of new approaches in the everyday work of Agency (Sida) forest companies that will help them reach new levels in developing an economically • WWF Germany viable and environmentally sound business. • Stora Enso Oyj “Dissemination of the project’s major outcomes means a transition to a new format where modern approaches to forest management will Project Partners: go beyond the 18,400 hectares of experimental • Ministry of Natural Resources of the Russian area and be replicated and tested in new territories covering 500,000 hectares of Federation forestland,” said Boris Romanyuk, scientific • Administration of Pskov Oblast director of the Pskov Model Forest. • Administration of Strugo-Krasnensky District According to the project’s work plan, the focus • Forestry Agency for Pskov Oblast of 2006 activities is going to be on determining • Northwest Forest Inventory Enterprise region-specific models for disseminating • St. Petersburg Forestry Research Institute experience in the four target companies, including Russkiy Les, Swedwood-Tikhvin and the Kingisepp Forest Enterprise in Leningrad Project Duration: Oblast, and STF-Gdov in Pskov Oblast.
Phase I – 2000–2004 During negotiations with the target companies Phase II – 2005–2008 in November, a decision was made to conduct a preliminary assessment of the companies’ forest funds in order to determine the list of forest norms that are of primary importance for certain forested areas. Another objective
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
planning, which are also subject to the official and the identification of wood defects. On the next day, project donors at the Steering approval procedure in Rosleskhoz. The total number of model trees measured Committee meeting summarized the input from was 1900. Fieldwork aiming to collect data the Advisory Board members and discussed necessary for testing taxation and landscape the project’s work plan and budget for the FINETUNING OF THE PROJECT parameters and the application of remote year 2006. MODEL sensing methods was focused on establishing a network of 320 test polygons to analyze Project specialists are in the process of fine- the information capacity of satellite images tuning and upgrading technologies of more with different resolutions. PROJECT NEWS intensive and sustainable forest management. In the summer and autumn of 2005 they conducted an extensive field survey of forests in the A NEW PROJECT COORDINATION PROJECT GOES BEYOND PSKOV north of Pskov Oblast with the purpose of BODY ESTABLISHED collecting field data necessary for developing OBLAST new forest norms, interpreting satellite images The first meeting of the Advisory Board On October 7th-9th, 2005, over thirty journalists to obtain rapid and accurate forest data, and of the Pskov Model Forest was held on representing various print and electronic mass establishing a system of economic methods in December 6th in St. Petersburg. The goal media took part in a press tour organized by the forest management, including assessment of of this coordinating body is to ensure a Pskov Model Forest Project. the quality of standing timber and impacts of broad involvement of stakeholders in project thinning operations on its quality. implementation. Every autumn, members of The motto of the press tour was, “Pskov model the Advisory Board representing the Federal of sustainable forest management in reforming Field surveys included a number of activities, Forestry Agency, Forestry Agencies from forestry in Northwest Russia.” Alongside such as tree counts on the identified forest Leningrad, Pskov, Arkhangelsk and Vologda Olga Rogozina, environmental director, Stora federal media such as RBC, AIF, and Forest. RU, compartments, selecting of model trees, Oblasts, leading forest companies and their Enso International Wood Procurement participating in the press tour were journalists measuring of parameters of model trees, associations, forestry research institutes and from Leningrad, Arkhangelsk, Vologda and Pskov educational institutions will come together Oblasts, St. Petersburg and Novgorod. According to to discuss the project’s current activities, scientific director of the project Boris Romanyuk, four regions of Northwest Russia about this Vladimir Arkhipov, director of the Northwest provide their feedback and establish priorities “One of the major objectives of the second phase approach, but also to initiate broad discussions Forest Inventory Enterprise for the next period. 59 of the project is to disseminate knowledge and on the ways forestry can become economically experience in the northwestern region of Russia.” viable and environmentally appropriate. Participants of the first Advisory Board meeting Thus, the press tour was one of the instruments addressed the following issues: economic used to communicate information about the Pskov The press tour brought tangible results: according analysis of practical implementation of the Model Forest, its ideas, and practical outcomes to the follow-up monitoring, approximately 40 project’s model by its partner, STF-Strug to the public in four key regions. analytical publications appeared in the national Company, and comparative analysis of new mass media and information about the project technologies and traditional methods of forest The press tour program featured a press was communicated to the public in Northwest management, official approval of normative conference with the head of the Forestry Agency Russia. In addition, new professional contacts documentation developed by the Pskov project for Pskov Oblast Oleg Semyonov, an excursion established among the journalists will be on the federal level, revision of the cutting of the project’s demonstration plots and the maintained and developed in the future. age for aspen in light of its current economic nature trail, a meeting with local community inefficiency in most territories of Northwest activists in the Forest Club and a presentation Russia, and other important matters. HOT DISCUSSIONS of children’s environmental clubs. The journalists got first-hand information about the current IN MODEL AREA PROCEED Director of the Northwest Forest Inventory situation in the forest sector of Pskov Oblast, as Enterprise V. I. Arkhipov suggested that his Among the 60 forest specialists who visited well as feedback on major problems and solutions company and the Pskov project might consider the Pskov Model Forest on October 10, 2005, suggested by administrators, foresters, policy- possibilities of cooperation in developing federal there were directors, chief foresters and forest makers, researchers, and the general public. standards for establishing databases of test engineers from 22 agricultural leskhozes of plots on the territory of the Russian Federation. Pskov Oblast. The touring group also included A number of practical solutions were developed Mr. Arkhipov also said that it would be useful Mikhail Zenkov, head of the Pskov Oblast in the framework of the first phase of the to elaborate on the incentives for developing Committee for Nature Use, and Nikolai Buriy, Pskov Model Forest (2000–2004). Thus, the environmentally responsible forest businesses head of the state enterprise “Pskovprirodresursi” journalists were introduced to major elements since only large forest companies can afford the (Pskov Nature Resources). of the project’s approach to sustainable transition to the intensive forest management forestry including its sylvicultural, economic, model proposed by the project. The goal of the tour was to get acquainted environmental and social aspects. The press with practical outcomes of the Pskov Model tour aimed not only to inform the public in Forest Project in the area of sustainable forest
№ 1 2006 № 1 2006 MODELFORESTRY. FORESTS FOREST OF USERUSSIA
management, including experience in FSC The goal of the conference was to develop forest management practices, and illegal logging. certification. According to N Buriy, who initiated environmentally sound mechanisms of long-term N Buriy believes there is an urgent need to change the excursion, “We want to keep up with modern forest planning at the national and regional levels the entire forest management paradigm through requirements, so we are very much interested based on the global HCVF concept. Pskov Model introducing modern thinking and new attitudes in methods of rational forestry developed by Forest Project leader Ekaterina Chernenkova and by building on the available experience the Pskov Model Forest.” made a presentation on the application of of the Pskov Model Forest. With this strategic project experience for developing a regional goal in mind the head of “Pskovprirodresursi” The Project’s demonstration plots were a popular strategy for conservation of biodiversity in is working on the new inventory of the forest topic regarding the advantages of various forest use. fund, establishing a staff retraining system, and sylvicultural systems in the light of new forest purchasing professional tools and equipment. norms proposed by the project. Retention of key biotopes in clear cutting was also one of the ECOLOGICAL MARATHON OF YOUNG Reforming processes also affected self- issues under discussion. Admitting the necessity NATURE LOVERS government structures. The new head of the to update forest management methods, forest local self-government body, Victor Reshetov, At the beginning of December an ecological specialists, however, pointed out that positive noted that the list of his priorities includes marathon, “Love your Land!” started on the aspects of the standard system of forest use the most urgent needs of local residents, such model forest area in the Strugo-Krasnensky should not be left out. as firewood for heating homes, street lighting, District of Pskov Oblast. Eight teams representing cleaning forests adjacent to the village of various educational institutions took part in domestic waste, and increasing penalties for the event organized in the framework of WWF Boris Romanyk, scientific director of the Pskov PROJECT’S EXPERIENCE PRESENTED individuals and organizations that drop litter Friend’s Club program. During a month-long Model Forest Project in the forests. AT INTERNATIONAL CONFERENCE preparation period each team practiced drama On December 13th and 14th, project experts pieces devoted to issues of environmental Members of the Forest Club meeting also took part in the international conference, “High protection. Young nature lovers called on the MASS MEDIA ABOUT THE PROJECT welcomed specialists from the Pskov Model Conservation Value Forests” (HCVF): from the audience to protect nature, take action and join Forest, who shared results achieved by the Global Concept to Regional Forest Management the environmental movement. In addition, they project in 2005. • N. Popova. Podium for Trees. “Volna” Systems,” which took place in Arkhangelsk. organized an exhibition of pictures and artworks (newspaper published in Arkhangelsk Oblast) 60 made from wood, straw and other natural ¹41. October 25-31, 2005. materials. The marathon had a significant OTHER NEWS 61 response among local residents. Mikhail Zenkov, head of Pskov Oblast On November 22nd, in-field monitoring of STF- • S. Mikhailov. Pskov Model Forest Shares Committee for Nature Use, Strug’s performance of the ecological/landscape Experiences. “Lesniye Novosty” (“Forest is interviewed by Pskov TV Company LOCAL COMMUNITY IS CONCERNED forest plan was carried out by project experts, News”) ¹20. October 15, 2005. ABOUT FOREST REFORMS specialists from the Northwest Forest Inventory Enterprise and the company’s management. As • S Mikhailov. Pskov Model Forest Is Replicating A meeting at the Forest Club on December 16th a result, a decision was made to upgrade the Outcomes. Magazine “Lesprominform” ¹9. discussed the situation in the forest sector system of training for the company’s staff and 2005. of Pskov Oblast, which is in the process of to further develop the system of monitoring reforming. The meeting was attended by 26 compliance with the requirements of the forest Iliya Verveiko, senior forest regular club members residing in the model plan developed within the framework of the specialists, Ilim Pulp Enterprise forest area including forest specialists, project’s first phase. administrators, teachers, journalists and other representatives of the local community. The project’s recent publications include the following brochures: Among guest speakers who shared their opinions 1. B Romanyuk, A Knize, S Shinkevich, about the situation in the forest sector of the G Zakharov, and A Kudryashova. Thinning region was Nikolai Buriy, head of the newly Schedules. 500 copies (in English). established state enterprise “Pskovprirodresursi” (Department of Nature Resources for Pskov 2. Y. Bublichenko, A. Bublichenko, and Oblast). This department was organized as part B Romanyuk. Criteria for Assessing of the ongoing forest reform, which assigned Biological Diversity of the Vertebrates responsibility for management of former in Conservation Forest Management agricultural forests to the regional authorities. Planning. 1500 copies (in Russian). According to N Buriy, the situation in his department is far from ideal. Major problems they 3. A 2006 desk calendar “Wildlife of the have to address on a daily basis include inaccurate Pskov Forest”. 1000 copies. forest data, lack of qualified specialists, inefficient
№ 1 2006 № 1 2006 MODEL FORESTS OF RUSSIA FROM IDEA MAIN ACHIEVEMENTS OF THE KOMI MODEL FOREST PROJECT REGIONAL FOREST POLICY FSC CERTIFICATION FORESTRY • Draft Concept of sustainable • The area of the Priluzsky Leskhoz • Recommendations on soil protection forest management and use in the of 800, 000 hectares and chains of during logging operations were TO PRACTICE Komi Republic is developed and custody of the 3 logging companies approved for the Komi Republic. determines the main aspects of the were certified by the FSC system. regional forest policy for a middle- • Inventory program according to term perspective. • FSC-certification of the IKEA suppliers the principles of sustainable forest from the Kirov Region (100, 000 ha) and management is prepared for the • Draft of the development strategy Mondi Business Paper Syktyvkar (1, 200, Priluzsky Forest Unit. 000 ha) is assisted by the Komi Model The Komi Regional Non The popular term, “sustainable forest of the timber industry of the Komi Forest Project consultation. TRAINING AND management,” is interpreted as attainment of Republic until 2015 is elaborated on Profit Foundation “Silver the basis of the Draft Concept. QUALIFICATION a balance in economic, social and environmental Komi Regional FSC Draft Standard Taiga” implements principles • IMPROVEMENT values of the forest. At first sight it seems is harmonized with the National Draft of sustainable forest to be a clear definition. Moreover, national PRISTINE FORESTS AND Standard. • Extension courses in sustainable management in the Komi and international criteria of sustainable forest BIOLOGICAL DIVERSITY forest management are developed for foresters. management has been developed and applied for Inventory and ecological evaluation FOREST ECONOMICS Model Forest Project over 10 years in different forest certification • of pristine forests in the Priluzsky • Rent assessment method of timber Over 800 professionals from systems to carry out conformance evaluations Forest Unit (leskhoz) was carried out resources is developed and presented • of timber companies. In reality it is not that forest units, logging companies and and utilized as the basis for decision- to the forest stakeholders. Approaches conservation organizations of the obvious, especially when a theory meets daily making in their conservation and to the determination of the economic Project Implementation Area: practice in specific forest areas, logging sites Komi Republic, neighboring regions sustainable management. accessibility of forest resources are and abroad have attended extension and landscapes, and encounters problems of elaborated based on this economic Priluzsky Leskhoz, Komi Republic, the local population dependent on forest. On courses in sustainable forestry. Regional Program on Pristine Forest evaluation method. Russia, 800 000 hectares the border of the 20th and 21st centuries, • Conservation and Management in the Training courses in the Komi Model 62 the World Wide Fund for Nature (WWF) and • 63 Komi Republic for 2001-2008 was PUBLIC PARTICIPATION Forest are aimed at practical solutions World Bank held a conformance evaluation of Project Goal: elaborated and is under systematic IN FOREST MANAGEMENT to the issues related to biodiversity forest management systems in several countries implementation. By the beginning conservation, forest certification, Implementation of sustainable and found that even the best systems met the Recommendations on public of 2006 the inventory of pristine • forestry and logging planning, etc. forestry in the Komi Republic sustainability criteria maximum by 65%. hearings in forest management are forests was completed in the territory introduced in the Komi Republic. and new experience dissemination of 19,5 million hectares (2/3 of the Most of the Model Forest courses Sustainable forestry strives for a combination • in Northwest Russia. total forest area in the region). A are held in the field at special of three important components: a long-term • The Statute on allocation of field evaluation of pristine forests demonstrational trails and polygons. and stable profit in forestry, meeting ecological mushroom and berry sites in the state Key Components: was carried out in 10% of the total forests is drawn and recommended requirements during logging operations, and The Komi Model Forest Project and forest area. for application throughout the Komi • Social: observing interests of the local population and Silver Taiga Foundation are interested future generations. It is a goal of the Komi Republic. • Long-term interests of local Methodological recommendations in a broad dissemination of new Model Forest Project to guarantee application • population for determining the ecological, social The Community Forest Council is and previously accepted approaches of international criteria to forestry practice, • and economic value of large pristine established and functioning in the to sustainable forest management. • Participatory tools in forest a complex project that aims at analyzing and forests areas in the Komi Republic Priluzsky Region. It involves local Information on most of the project management handling economic, environmental and social were drawn up. Various solutions activists, carries out information achievements is available at the Economic: issues of forest management in the Komi in conservation and sustainable and training activities in sustainable web-site www.komimodelforest.ru/cgi- Republic and the European North of Russia. • Economic basis of forest man- management in the Udora Region forestry and assists cooperation bin/eng/eng_main.pl. However, as the of the Komi Republic were proposed between the population and the saying goes, it is better to see once agement The Komi Model Forest Project has been on the basis of the conducted forestry unit. than to hear a hundred times. That Economic assessment of timber functioning since 1996 and is funded by the • evaluation. is why the Silver Taiga staff invites resources Swiss Agency for Development and Cooperation The Project has supported local all interested specialists to visit the (SDC). • • Efficiency of forest management • Recommendations on final fellings initiatives in: establishment of the Komi Model Forest Project to see how in pristine forests with ecology Forest Museum in the Priluzsky Regions this sustainability concept is realized Ecologi: Since 2002, the project has been implemented by conservation for the Komi Republic (place, 2 expositions on the forestry in forestry practice. • Pristine forests the Komi Regional Non-Profit Foundation “Silver history and forest exploitation); were approved by the Head of the PAUTOV Yury Anatolyevich, Biodiversity conservation plan Taiga,” assisting forest stakeholders in the recreation forestry (popular recreation • State Forestry Agency for the Komi Forest Policy Officer promotion of sustainable forest management. areas, village tourism development). • Soil protection Republic. Silver Taiga Foundation
№ 1 2006 № 1 2006 MODELWOODWORKING FORESTS OF RUSSIA
in its 1995 inventory report to illustrate the general office’s to the Presidential Executive state of the Swedish sawmilling industry and Office. It seems everyone realizes what the OLD EQUIPMENT WON’T its development in the 1700s, 1950s and 1990s. necessary actions are: renewing technologies The picture is included in this article. It’s clear by supporting the domestic science in its that the pictures from the 1990s comply with development of modern frame saws and complete LAST LONG: THE FUTURE the modern state and development of the lines, etc, although the sometimes incompetent sawmilling industry in the Scandinavian country. policies of authorities prevents the problem from The pictures from the 1950s are recognized by being solved. Moreover, the almost completely every Russian sawmill operator, featuring large ruined system of research institutes takes its OF RUSSIAN SAWMILLING native sawmills or LDK’s with prevailing saw devastating effect. There are almost no research frames. Yet, 30 years ago, Valentine Samarin, institutes in the country that function evenly. the director of Severolesoexport, the country’s Furthermore, many of the institutes are virtually largest timber exporting group, said that we in a state of bankruptcy. So, native sawmilling were 25 years behind in the sawmilling industry. has no equipment being developed in Russia, The glowing reports of Russian officials on the non stop growth Similar high-flown announcements were made while western technologies are too expensive by Nickolai Tomofeev, the minister of the timber for Russian enterprises, thanks to the state of the Russian sawmilling industry signify anything but a radical and woodworking industry. No considerable customs policy. turn in the industry. The growth achieved by timber factories and changes were made in the technologies either sawmills derives from the selflessness of industry workers and in the Soviet or post-Soviet period. As a result, However, some efforts by Russia to design Russian sawmilling is reported to be lagging at its own contemporary frame saws cannot be competent on site managerial decisions rather than from the a minimum of 50 years. denied. The Ministry of the Timber Industry competent management of the industry itself. realized frame sawmilling had no future at the The majority of Russian factories are equipped end of the 1970s, and in the beginning of the with saw frames that were phased out 15- 1980s, some attempts were made to design a 20 years ago. Moreover, leading countries in domestic contour band and milling machines the timber industry refuse to use them. Table in many sectoral research institutes including: 1, representing the change in the number of VNIIDMash, CNIIMOD, CNIIME, CNIIF, VNIIDrev, 64 RUSSIA’S POSITION IN THE GLOBAL Nevertheless, an increase in sawn timber exports large Russian and Swedish sawmills equipped Giprodrevprom, Giprodrev, SibNIILP, SverdNIILP, 65 SAWN GOODS MARKET has been observed in Russia. 12.5 million cubic with these saw frames, range from 1973 to SevNIIP and many others. The designers tried to metres of sawn timber was sent out in 2004, 2003, proving this fact. The number of such copy the then existing foreign frame saws while Approximately 400 million cubic metres of with 7.6 million cubic metres in 1985 and sawmills is uniform in Russia (108) and changed also trying to introduce original alternatives. various kinds and grades of sawn timber are 2.8 million cubic metres in 1992. This proves insignificantly in the last 2-3 years, whereas the produced in the world annually. The USSR was not only the accretion of demand for Russian number of “saw frame” factories reduced by Alexander Grace, draftsman and director of the industry leader up until the mid 1980s, sawn timber, but also an increase of Russian almost 70 times in Sweden (279 to 4). According the Central research institute of mechanical producing up to 80 million cubic metres of sawmilling companies’ dependence from the to experts, saw frame sawmilling is the most woodworking (CNIIMOD) offered his alternative sawn goods annually. situation in outer markets, as well as from the expensive method of timber sawing both from to the contour band line in the beginning of currency rate. an energy standpoint (consumption of heat and the 1980s. The complex line for log sawing was Nowadays, the biggest sawn timber producers electrical energy) and from the point of view tested at Arkhangelsk LDK ¹ 1 and the Nevskaya are the USA - producing 87.5 million cubic The leading importers of Russian sawn timber of raw materials (huge amounts of waste with Dubrovka sawmill in Leningrad in 1985-87. Its metres in 2004, Canada – 60.6 million cubic are: Japan – 750,000 million cubic metres, a small sawn timber yield). results are unknown. metres, Russia – 21.5 million cubic metres, Brazil Great Britain and Egypt – 700,000 million cubic – 21.5 million cubic metres, and Germany – 19.5 metres, China – 650,000 million cubic metres, The renewal and modernization of sawmill Scientific publications also paid attention million cubic metres. Consequently, our country and Holland and Germany – 500,000 million equipment is regularly discussed at every level to the new developments. The original yielded its leading position in the sawmilling cubic metres annually. – from sawmill smoking rooms and director- ideas of Grachev’s contour band line were industry and its share now amounts to only 5.5% of the global sawn timber output. This Today, the lost positions are prevented by share is said to be decreasing year by year. several factors, primarily being a lack of While the last 5 years have seen a 6.7% increase contemporary equipment and the significant in Russia’s sawn timber production and a 7.8% tearing of existing equipment, in addition to increase worldwide – and the tendency still a shortage of investments, both domestic and persists- these figures seem quite deplorable foreign. when we take a more significant period of time, such as 1992 until the present. The output has WHAT ABOUT TECHNOLOGY? decreased since the economic liberal reform in Russia by 2.5 times while increasing by 1.5% The Swedish Institute for Sawn Timber Research worldwide. has published pictures of three Swedish sawmills
№ 1 2006 № 1 2006 MODELWOODWORKING FORESTS OF RUSSIA
Table 1. Number of sawmills competitive machines leads Russian sawmill over 60%, dramatically reduces possible Russian equipped with saw frames in Russia operators to pay more attention to foreign sawn goods sales proceeds. Western partners and Sweden, items producers. don’t want to pay a high price for the sawn Year Russia Sweden timber produced at sawmills designed in the middle of the previous century. Their proposed 1973 108 279 MODERNIZING IN A HITANDMISS price is lower than the profitability level of the 1979 108 193 FASHION industry enterprises. 1984 108 150 The large Russian sawmilling factories that 2002 108 4 The experience of building a new sawmilling modernized their equipment and technology can shop at Arkhangelsk sawmill ¹ 25 is the be counted on the fingers of two hands: they most telling illustration of relations between highly estimated by Swedish scientists after amount to less than ten enterprises. However, business and state during the modernization of publication. The line could have become the this modernization is unsystematic and includes sawmilling technologies. It’s probably the first base for a competitive domestic machine, but the no purpose-oriented program. time in native history when a sawmill was able supporters of traditional frame sawing prevailed. to increase production up to the European level. As a result, the band saw cutting trend was cut The modernization of the Onega LDK sawmilling The saw line, equipped with modern facilities down at CNIIMOD after Alexander Grachev moved shop, for example, resulted from a fire that of the world’s leading producers, such as Linck, to the Leningrad Lesotechnical academy and destroyed the shop completely and not from a actively. The government has recently decided to Valon Kone, Lekops, Vollmer and Hekotek, was CNIIMOD turned back to the quite unproductive planned circumspect program. In fact, Onega lay a 0% customs duty for some woodprocessing put into operation. The saw line production frame sawing study. Consequently, CNIIMOD LDK is the most branded and trustworthy and furniture equipment, however such amounts capacity amounts to 400,000 or 200,000 cubic was almost unequipped for the economical name in Europe. So the construction of a new of duty apply only for 9 months. Does the metres of sawn timber per year. The volume of liberalization, barely making ends meet. Since sawmilling shop equipped with modern machines government really believe the modernization of investments in sawmilling modernization came 2003, when CNIIMOD was seized by a real estate and grade lines was a necessity for the St. the enterprises’ technology could be performed to €15 million – a very impressive sum for the agency, there has hardly been any sign from Petersburg-based Orimi Group. The shop was in such a short time? Russian timber industry. the enterprise – its building was turned into rightfully considered the best in Russia when a business center. Something similar happened it was implemented four years ago. It was a Not many sawmills similar to Arkhangelsk exist WHERE TO GET MONEY to the SevNIIP (The northern industrial research unique shop at that time. in Russia. Less than ten, actually, many of institute). Its scientific activities took a back FOR MODERNIZING? which are constructed at the expense of foreign 66 seat to obtaining benefit from leasing. Quite The unfavorable investment climate for domestic 67 investors, particularly Stora Enso and UPM. Naturally, the modernization of sawmilling similar processes are observed in most of the investors results in the unwillingness of Sawmill ¹ 25 (a member of the Titan group of equipment requires money: Huge amounts of sectoral research institutes. The resulting Russian enterprises to invest in production companies) didn’t plan to save on quality and money. The sum of €15 million is significant inability of the native producers to offer any development. While foreign enterprises are was choosing the most suitable combinations even for the larger enterprises, such as sawmill provided with tax remissions and all possible of machines and extra equipment. The total ¹ 25. Only large vertically integrated holding support, Russian companies receive no such cost of the shop (equipment, building and companies and oil and gas companies have their generosity. Particularly, foreign companies are assembling) was estimated at €12 million. The own funds in this amount, although they are exempt from VAT, whereas Russian companies State then intervened and made the enterprise slow to invest in the development of the timber have to pay the duty in full. pay more than €2 million in VAT and about €1.5 industry and are more active in getting rid of million in customs duties. So, the enterprise “non-core assets” in other sectors, including Most woodworking enterprises possess old- had to find an extra €3.5 million in addition to the woodworking industry. fashioned production assets. Many foreign the equipment costs. How can we even speak investors prefer to build a new enterprise about modernizing sawmilling technologies According to investment company experts, for the rather than buy the existing one (even the when such huge taxes and duties are imposed steady development of the industry, Russian LDK biggest in the country, or in Europe). The cost on the domestic investments? needs $2–3 billion in investments annually. In of establishing sawmilling production is dozens 2004 the timber industry was granted less than of times less than compared with pulp and Recently, national leaders and timbermen $1 billion in foreign investments at a time when paper mill construction. The investors kill two realized that the only chance for Russia to the total amount of foreign investments came to birds with one stone - they don’t have to pay preserve its position in the world markets, $40.5 billion, according to the Rosleshos reports. for the outdated equipment and can spend on competing with Scandinavian and Baltic In comparison, annual production sales for all its modernization. Yet, construction from the producing countries, implies putting the Russian sawmilling enterprises are estimated ground up is more expensive than the purchase discussed lines into operation. That’s why at as high as $1 billion. Consequently, inside of an existing enterprise. It’s a matter of time the enterprises take on credits, seek out the the sector today, one will find no resources though, and it will be the most rational way to warrantors, tighten their belts and work for for modernizing. Therefore, seeking other enter the Russian sawmilling industry. the future, hoping their investments will be fundraising options is necessary. generously repaid. Furthermore the depreciation of basic Russian The large volume of foreign investments is a sawmilling production assets, which constitutes Even the authorities get to operate a bit more result of the significant depreciation of basic
№ 1 2006 № 1 2006 MODELWOODWORKING FORESTS OF RUSSIA
multiple answers are possible, the main one is enterprises in the Russian timber industry the situation with the Timber Codex, which has complex) and skip sawmills. However, it looks as been shaped by the State Duma and government if big LDK will be next as all comparatively stable for four years. Who will become the owner of operating pulp and paper companies are shared forest resources? When this question is answered, because of the present owners’ steady positions the investment climate will clarify itself. Further, among both regional and federal authorities as the low investment activity of foreign investors well as among the factory workers. is caused by the following reasons: Evidence of future unfriendly attacks on sawmills 1. The forest resources are usually leased for has revealed itself lately. It includes the stock 3-5 years maximum, and in the most favourable piling of negative information on sawmills. In circumstances, for 49 years. The newly formed case illegal attacks take place, a decrease of timber enterprises and businessmen find such investments in the Russian sawmilling may short terms optimal as they are highly mobile follow. and are able to organize lumbering in practically any region. What’s more, they are exempt from Foreign investors prefer to build a new enterprise assets, which amounts to 80% in some industries extra social obligations. Those interested in the from the ground up in order to prevent battles of the timber complex (60% in sawmilling). long-term leasing of forest resources are the big between enterprises, aiming to avoid any with the help of experts. This prolongs the Home credits are limited due to a tight money timber industry enterprises with a rich history possible claims from former owners. What is terms of delivery. policy – as crediting rates amount to 20%. Only organized in the 1990s of being in charge of the more, the Finnish and Swedish company, Stora some enterprises (longstanding and trustworthy social sphere of neighboring towns. Long-term Enso, even intended to dissolve an agreement to Conversely, in terms of loans, sawmill ¹ 25 partners of Sberbank) manage to agree on leasing provides them with successful future construct an industrial complex in the Novgorod excluded Russian banks immediately. It focused 10-20% interest rates for a very short time. operations. Companies that are frequently owned town of Nebolchi when it found some remains on the westerners and found a reliable creditor in However, this money is not long-term – the by huge processing companies, such as paper of the previous building on the construction Austria. Raiffeisenbank Austria provided a credit € maximum term for repayment of a credit is 5 and pulp mills (PPM) and LDK, are in dire need site. of 15 billion for production modernization. years, when the project (especially expensive of investments and equipment modernization. The money was given only on the security of in the pulp and paper industry) payback term Recent conflicts between the enterprises Arkhangelsk PPM, the leading European pulp and 68 is rarely less than 7-10 years. The enterprise Four links form a logical chain: a 5-year lease about Russian pulp and paper companies add paper mill, whose board of directors is headed 69 ends up paying almost double the cost of the for timber industry enterprises; the owning unattractiveness to the Russian timber industry. by doctor Heinz Zinner, an Austrian. On that equipment. timber mill is provided with raw material for A sensible foreign investor hardly wishes to put ground only, the sawmill obtained the credit. 5 years only; the investor is prevented from his money into the development of a factory Why do foreign investors hesitate to invest in investing funds in the timber mill’s development, that has been involved in legal proceedings for CUSTOMS TAKE AWAY the Russian timber industry complex? Whereas and the term for recoupment of investments several years. Investing is also unreasonable exceeds the term of leasing. But suppose in considering that the owner is uncertain right In my publication I’ve mentioned a general 5 years the enterprise doesn’t gain the forest up until the end whether they will keep their lack of modern competitive developments in Sawn timber output and export, in resources at the auction? This means that the factory or not – what if the sluggish judical sawmilling. It is doubtful that they will surface 1985-2004 million cubic metres term of leasing should be longer than the term machine runs over the legal owner? in the near future. So, the utilization of foreign for recoupment of investment projects. machines and lines seems sensible, since the Year Output Export 4. Low yield of the timber industry: It is industry should be more developed these 1985 80.0 7.6 2. As for illegal timber harvesting: According to well known that the maximum profitability days. A horse of a different colour is that the 1992 53.4 2.8 official reports, less than 1% of Russian timber of sawmilling enterprises can be reached only government must also encourage developments 1993 40.9 4.6 is harvested wrongfully, although activists of by maximum deep timber processing. Native 1994 30.7 5.4 the western environmental organization tend sawmilling is mainly oriented in export and to report every fifth log in Russia as harvested produces only products required abroad. It Regions – the largest sawn 1995 26.5 4.9 in breach of the law. Can you imagine any should be mentioned that products with low timber producers in Russia 1996 21.9 4.4 investor putting money into such a criminalized added value are salable abroad. Share in Sawn timber Russia’s 1997 19.5 4.6 country? Region output in sawn timber 5. Lack of native scientific developments 2004 1998 18.6 4.7 production 3. Lack of property legal protection: Recent in sawmilling. Native sawmilling offers no 3 1999 17.9 6.4 battles between enterprises over the possession production machines with a higher added value Arkhangelsk region 11% 2,200,000 m 2000 20.0 7.6 of pulp and paper companies (lead mainly by compared to average sawn timber, which creates Karelia republic 3.4% 741,000 m3 2001 19.8 7.6 Kotlass, Arkhangelsk and Sokolsky PPM and a necessity for buying equipment abroad. Despite Irkutsk region 7.4% 1,598,000 m3 Bratsky LPK) avert from the Russian timber the fact that the government announced the 2002 19.0 8.9 Komi republic 3.5% 750,000 m3 industry complex. Sawmills are quite lucky as cancellation of import customs duties and VAT 3 2003 20.2 10.5 “unfriendly merger” companies aim at pulp and for goods unique to Russia, the enterprises have Krasnoyarsk Territory 8.5% 1,821,000 m 2004 21.5 12.6 paper companies (the only constantly profitable to prove the uniqueness of foreign machines Vologda region 4.7% 1,002,000 m3
№ 1 2006 № 1 2006 MODELWOODWORKING FORESTS OF RUSSIA
Russian sawn timber leading importers The government ought to realize the advantages in probably the sole drawback of modernization. Japan 11% stimulating the export of deeply processed timber But the progress is inevitable – and all large Great Britain 10% products – paper, cardboards, medium density Russian sawmilling enterprises will perform fibreboard plates, deal boards, etc. In fact the equipment and technology modernization sooner Egypt 10% governmental policy makes round timber exports or later. Otherwise, there is no opportunity to China 9% more profitable than that of deeply processed develop our own business and hold positions. Germany 7% products. For instance, customs duties for sawn The Netherlands 7% timber exports are 3% (but no less than 2.5 euro/ I often use the phrase “technology modernization” m3), for cellulose – 5%. As a result, the timber in my article. Just so! Not only are we lagging Leading sawn timber producing countries business is not very profitable nowadays and in equipment and stuck with worn-out machines USA 22% attracts no investors. If the export duties for – we are lagging fundamentally. We could have Canada 15% round timber are increased at least up to 25% sawn up to 90 m/sec speed, but in fact we saw Russia 5.5% and export duties for deeply processed products 18 m/sec. We could have produced more euro deal Brazil 5.5% are cancelled, the industry investment appeal will boards – but we produce sawn timber instead. enhance. What to do? Apparently, we are to wait until Germany 5% people with priorities other than here-and-now- It’s doubtful that the government realizes this. profit enter into the government. Almost all and the construction of new sawing lines in Export customs duties for deeply processed big sawmilling enterprises have got those sort compliance with world standards. Only after such products (some kinds of cellulose, paper, and of people. developments and lines appear in Russia can sawn timber) are gradually decreased. Export Alexander GREVTSOV native producers be protected from the import customs duties for round timber are planned customs duties for sawmilling equipment. Things to increase up to 10% while 0% in export are often turned upside down in Russia. customs duties are laid for some woodprocessing equipment. These steps are insufficient. Russia has none of its own machines. This fact has been accepted by the government. Moreover, the Ministry of Economic Development Nevertheless, the government invests no money poses obstacles to more significant changes in 70 into scientific developments and modern designs, the customs control sphere. The government, 71 yet succeeds in delaying the modernization little by little, has begun to understand that of the sawmilling industry by laying duties. the development of the timber industry depends At present, equipment is imported not only significantly on the government and its role. at 18% VAT but also at a 10% customs duty, A lot has been said about the possibility of which increases the equipment cost almost by the Russian timber industry benefiting from one third. There is also a “technological” duty an increase in sum of $100 billion. Production amounting to one third of the equipment cost, growth still stays within the range of inflation, which importing companies can only escape by even below the inflation rate, which reveals the providing a certificate stating that no such quite unsatisfactory operation of the timber equipment is produced in Russia; that the industry constitution. equipment is unique for Russia. RESUME At the opening of the sawmilling shop of the sawmill 25, Vladimir Krupchak, the chairman of the State Duma forest resources subcommittee and former president of the Titan group of companies, said that it is such modern factories that are the future of the sawmilling industry in Russia. New equipment increased labour productivity and the salary level of the factory significantly. Still equipment modernization should be coordinated with social aspects. Increased labour productivity also leads to staff reduction. While hundreds of people provided the existing production volumes, after modernizing, only a fraction will be needed. The sawmills perform staff reduction. This is
№ 1 2006 № 1 2006 MODELWOODWORKING FORESTS OF RUSSIA
the production of competitive chipboards, SP-25 • Reconstruction of the grinding line and lines will be brought to a standstill. The Group installation of one high-capacity refining LONG-TRUMP HOLDERS I enterprises will keep on operating. machine using the one-step process to produce fiber instead of three or four WHEN IT COMES TO FIBERBOARDS... simultaneously operating hot grinding machines. LOOSE? The wet process fiberboards are still manufactured by 30 production lines out of • Introduction of pulp grading. Only the coarse 68 that performed earlier. Over the past several fiber fraction should be fed into the refiner years, four of them were shut down: hardboard for repeated grinding. An analytical look at wood-based panel production manufacturing at JSC Volzhsky LPK, softboards at JSC Nelidovsky DOK, JSC Arkhangelsky TsBK and JSC Selenginsky TsKK. CJSC Novoyeniseysky • Equipping the production line with improved LHK launched a new line, manufactured in 1988, chip washing systems. Enjoying a tremendous stockpile of low grade wood unsuitable with a rated capacity of 8mln m2 to produce 1220 mm wide hardboards. The construction • Installation of new forming machines or for the production of pulp and paper, sawn timber, plywood and of new plants is not yet included in the upgrading of existing ones to improve the millwork, Russia has a wonderful opportunity for the manufacturing plan. The old facilities require the following drainage of the pulp. of wood based panels. However, it accounts for 5% in chipboard, upgrading: 2.7% in MDF and 6.5% in wet fiberboard. Modern OSB panels are not produced at all. The export of chipboards and MDF is oriented only in CIS countries. Dynamics of global wood-based panel production capacities development (after Metso Panelboard Customer Magazine, ќ1, 2005)
2001 2005 (forecast) 2002 2004 Global Regions Number of Number of mln m3 mln m3 mln m3 mln m3 72 Plants Plants 73 Chipboards North America 64 13,891 14,192 13,242 57 13,792 THERE IS NOTHING PERMANENT Group I operates production lines, using wire EU countries122 33,426 32,154 30,899 114 31,516 UNDER THE SUN feeding and one and two-story presses, put into Other European countries 93 11,005 10,705 11,854 101 13,264 operation after 1980. Other countries 454 23,650 23,222 25,468 447 27,172 Global wood-based panel (except plywood) Total:733 81,972 80,273 81,463 719 85,844 production reached 163mln m3 by 2005 (see 18 enterprises in Group II with an aggregate Including Russia, mln m2, 3,467 3,467 4,051 4,161 3 38 40 Table); of which Russia accounts for 5.02mln annual capacity of 1,617,000 m manufacture % of the global volume 4,2% 4,3% 5,0% 4,8% 3 m or 3.08%. The volume of fiberboards made non-competitive boards in terms of both Medium Density Fiberboards (MDF) 3 by wet processing is estimated at 12mln m , quality and cost. These are mainly SP-25 type North America 61 5,063 5,063 5,848 68 5,392 3 out of which only 7.5mln m are represented production lines with multi-storied presses and Europe26 11,522 11,922 12,622 27 14,335 by hardboards, while the rest are semi-hard aluminum pallet feeders put on stream during China 129 5,4227,320 10,995 259 15,364 and softboards. the period from 1962-1970. South-Eastern Asia 2,6022,761 2,852 3,195 North-Eastern Asia1,724 1,724 2,007 2,047 38 chipboard production lines, currently Due to high production costs, the average price operating in Russia, were designed for the (VAT included) of finished Russian chipboards South America 59 2,062 2,967 3,617 70 3,147 period before 1980; some of which have been is 4700 rub/m3 (130 euros), while the West- Australia 1,690 1,730 1,730 1,865 exploited for more than 35 years. Most of the European ones cost only 90–100 euros. This Other countries 476 606 706 766 plants report high production costs and quality- factor stands behind a zero export of chipboards; Total: 275 30,561 34,093 42,58 424 46,111 3 Including Russia, mln m2, 0,304* 0,358* 1,176* 1,226* related problems. The boards are noncompetitive the import is about 400,000 m per year and 5* 11* in the world market largely due to their price growing. % of the global volume 0,99% 1,05% 2,76% 2,66% and, to a lesser extent, quality. Oriented Strand Boards (OSB) All that is needed to ensure competitiveness and North America59 20,374 21,973 23,930 61 26,870 Boards of competitive quality are produced by 20 make the chipboard industry export-oriented is Europe íåò 2,015 3,100 3,500 11 4,053 enterprises with an aggregate annual capacity of up-to-date equipment and technology. The main South Americaäàííûõ 0 0,480 0,480 9 0,483 2,434,000 m3, whose production costs, however, assets should be refurbished, though the process Total: 66 22,389 25,56328,320 81 31,406 are too high. This category of enterprising is time and money consuming. During the next shall be called enterprises of Group I. 5-10 years required to create new facilities for Note: *Including thin fiberboards made by dry calender process referred to as MDF in foreign classifications.
№ 1 2006 № 1 2006 MODELWOODWORKING FORESTS OF RUSSIA
Wood-based panel production to 170,000–190,000 m3 per year. Five plants Chipboards, 250,000 m3/yr – JSC Egger ENCOURAGING dynamics in Russia equipped with SP-25 production lines replaced • Drevproduct (Shuya, Ivanovo Region), CJSC Chipboard Producti- plate forming and flake grading facilities, FORECASTS Electrogorskmebel (Moscow Region). Product- on Volume Rated additional chippers for producing flakes, etc. In 2005, the total domestic consumption of Years ion Line Output % against Additional lines for the production of carbamide- Among the five chipboard plants being built, four 3 Number chipboards was 3,800,000 – 3,900,000 m . Actual previous plants have 100% foreign capital. The construction year furane resins were installed. Chipboard plants A slight growth in the chipboard market is are now being reequipped with laminating of foreign enterprises in Russia is explained by Chipboards, thsd m3 expected during the next 5-7 years. This facilities. The total laminating capacity by the desire of foreign companies to take root 1990 97 6163 5563 - is explained by a tendency to decrease the end of 2004 was about 126mln m2, which on the Russian market, taking advantage of 1998 43 3676 1568 105.2 chipboard share in furniture production. is a 24% increase in comparison with 2003. favorable conditions. Some of these “conditions” Moreover, a portion of imported furniture 2002 38 3467 2731.7 110.1 This year will see the launch of two chipboard are comparatively cheap low-grade wood and wood on the Russian market will remain high. 2003 39 3627 3176.1 116.3 production lines with one-story presses by residues and low-cost energy and labor. Russia’s joining of the WTO will not radically 2004 38 4051 3603 113.4 3 Krasplitprom Ltd. in Krasnoyarsk (90,000 m per change the situation. That’s why the new 4101 2005 39 3746 104 year) and by JSC MDOK in Vyshny Volochek of Since Russian business does not demonstrate (expected) chipboard production lines to be launched the Tver region (50,000 m3 per year). interest in the construction of its own wood- in the second half of 2006 may grasp up Fiberboards, mln m2 based panel plants, the niche is occupied by to 50% of the market. The five above 1993 69 500 361.8 - Global chipboard production is oriented with foreign capital. Only one Russian enterprise mentioned enterprises will begin working 1998 41 347.6 193.1 97.8 large-duty equipment using continuous presses, – Electrogorskmebel Corporation – managed in 2006 and become the major competitors 2002 38 367.7 305.7 109.9 flake and fiber preparation and plate forming to raise funds to purchase a modern chipboard of existing Russian chipboard plants, which 2003 37 370.7 320.6 104.6 systems, etc. Wood panel forming in continuous production line instead of the outdated one, is very likely to entail temporary chipboard 2004 36 372.4 347 106.9 presses is made when transporting the pulp which was used for 40 years. overproduction. between the two steel endless bands to ensure the uniform physical and mechanical properties of the panels and within the batch. Chipboards 3 • Application of reduced or closed water supply may have a density variation ±10 kg/m of the systems. rated values, grinding allowance ±0.3 mm; the consumption rate of dry binding agent is from 74 55 to 60 kg/m3 for chipboards and 75–78 kg/m3 75 • Installation of semi-simultaneous mechanisms for MDF. Total production costs of chipboards for closing the heating pads, regulating and MDF are reduced by 10-20% in comparison the forming cycle duration by controlling with periodical panel press forming. Continuous movement of the lower press table in order presses allow the creation of production lines to increase productivity by 5-10%. with the output of 250,000 to 700,000 m3 per year, further lowering the costs. • Transition to wire frame feeding and unloading of presses. The construction of wood-based panel plants equipped with continuous presses has finally • Equipping plants with finishing facilities started in Russia. Among these are plants for paint coating and imitation print. manufacturing: The listed measures will allow for the expansion of production by 25-30%, cutting energy and • MDF, 430,000 m3/yr, and chipboards, 300,000 material consumption, ensuring panel quality m3/yr – Kronostar Ltd. (town of Sharya, and the profitability of the enterprise. Kostroma Region).
OFF THE STARTING BLOCKS • Chipboards, 750,000 m3/yr (2,500 m3/day) and MDF, 200,000 m3/yr – Kronoshpan Ltd. Recently, a number of plants have upgraded (Yegoryevsk district, Moscow Region). their production to improve the competitiveness of their products. Thus, to lower the panel 3 costs and enhance their quality, 5 production • MDF, 120,000 m /yr – JSC Lesplitinvest lines SPB-100 of Rauma-Repola company were (Priozersk, Leningrad Region). refurbished, installing more up-to-date dryers, forming machines and pre-forming conveyers, • Chipboards, 350,000 m3/yr – German concern which increased capacities from 110,000–130,000 Pfleiderer (Novgood Region).
№ 1 2006 № 1 2006 MODELWOODWORKING FORESTS OF RUSSIA
The expected surplus of chipboards in 2007 may In 2005-2006, new construction projects of MDF lead to the slightly decreased prices of finished continuous processing plants will be launched in boards and consequent export. Lower prices for Tomsk (150,000 m3/yr) and Anzhero-Sudzhensk finished boards will be acceptable to the new (Kemerovo Region) (260,000 m3/yr). chipboard plants and some of the existing ones, but will lead to the closing of most production lines manufactured in the 1960’s. The decrease in WAITING FOR THE FIRST OSB PLANTS laminated board prices is expected to be less (at One of the most perceptive directions is the present it is 170 rub/m2 or 10,000-11,000 rub/m3), production of wood-based panels out of large since the core panel accounts for 40-45% of the flaked oriented strands. These panels, made of laminated chipboard production cost. low-density wood, are designed for construction. To ensure environmental safety and atmospheric The market potential in terms of MDF is resistance, carbamide-melamine-formaldehide estimated at 600,000-700,000 m3 per year. The and phenol-formaldehide resins and biphenyl-MDI actual demand for MDF by construction and adhesives are applied as binding agents. North furniture industries is 350,000-400,000 m3. Up America is the leading producer and consumer of to 2003, Russia had only one MDF plant with these products. The OSB production volume in an output of 50,000 m3. In 2005, the total North America in 2003 was approximately 21mln output reached 948,000 m3, which exceeds the m3, or 89% of global production, of which 12.2mln internal demand by 1.5 times. This allows for an m3 was the produced in USA, and 8.8mln m3 in opportunity to abandon the import and develop Canada. These countries operate an aggregate foreign markets. 61 OSB production lines. The capacities are 90% loaded. In North America, most panels are produced In terms of technology and equipment, the most from aspen using multi-story presses, in Europe, up-to-date MDF production lines belong to Kronostar from spruce, using the continuous process. Ltd. (capacity 430,000 m3) and Kronoshpan Ltd. (capacity 200,000 m3). These lines, equipped OSB production requires healthy round timber 76 with continuous presses, ensure minimized energy with a thin-end diameter of at least 60 mm. This consumption during furniture production and the kind of production will be more effective in the stable quality of MDF panels. aspen-rich European part of Russia. Harvesting ignores practically all aspen trees that remain in Only 20% of Russian furniture is made using the forest, lowering its commercial value. MDF, while in western countries this number is approximately 70%. MDF panels are 2-2.5 times Economic feasibility can be reached if OSB plants more expensive than chipboards and used, as are located in Eastern Siberia – closer to the Far a rule, for manufacturing decorative machine- Eastern ports serving as gateways for export to cut facing elements, table tops with machined China, Japan, and North America. In this case, edges, etc. spruce and pine could be used as raw materials for panel production. The major limiting factor Modern furniture is manufactured out of MDF and for OSB production in Russia is the absence chipboards in a specified proportion. In North of a developed domestic market. We import America and Western Europe, the MDF/chipboard 20,000 m3 of these panels every year; their prices, ratio was estimated at 1:3, while in Russia, 1:10. however, are 50-60% higher due to obligatory Insufficient MDF use was connected with panel customs fees. deficit and the unwillingness of some furniture plants to shift to new furniture designs. There Kronostar (Kostroma Region) and Kronoshpan is a hope that the furniture industry will apply (Moscow region) declared their intention to more MDF panels to its production. build OSB plants with an annual output of 400,000 m3 each. Three more OSB projects of Another alternative use of MDF is the manufacturing various capacities are to be implemented in of decorative wall panels and laminated parquet. European Russia and two projects for Eastern The global production of laminated parquet from Siberia are under consideration. MDF grew from 350mln m2 (2.8mln m3) in 2000 to 600mln m2 (4.8mln m3) in 2004. In Russia, Alexander SHALASHOV, Ph.D., laminated parquet is produced only by Kronoshpan general director of CJSC VNIIDREV and Kronostar.
№ 1 2006 MODELWOODWORKING FORESTS OF RUSSIA
press in the world to produce MDF. The press KRONOSTAR uses only the local capacity is 430,000 m3 of boards per year. raw materials, a substantial part of THE BIGGEST MANUFACTURER The equipment is supplied by Siempelkamp which is low-grade timber OF WOOD-BASED PANELS (Germany). • In 2004, the plant started producing laminate flooring based on HDF boards. The total monthly output of laminate flooring today IN RUSSIA is about 2 mln. m2. This makes the plant one of the largest producers of laminate flooring in the world. KRONOSTAR (Russia, Kostroma region) is the biggest investment • In 2007, Kronostar plans to begin an OSB project of wood based panels boards’ lot production. Until now this constructional material, established all manufacturing in Russia. over the world, has not been produced in Russia. The plant will produce OSB boards The MDF line with a capacity of 430,000 m3 per year is The project was started in 2002. the main production line of the enterprise and the biggest In 2005, KRONOSTAR became of all thicknesses from 8 to 28 mm on the conveyer press. OSB boards are in high worldwide the biggest manufacturer of demand in the construction and furniture wood based panels in Russia. industries. By 2007, the total output of the plant will reach 1,300,000 m3 of various wood-based panels per year. Mikhail Fradkov, Prime Minister of the Goverment of the RF, The common requirement for wood is more 78 during his visit to the entreprise than 1,5 mln. m3 per year. KRONOSTAR owns 79 Today our product range is: timber enterprises providing for about 40% of the necessary raw materials, a substantial • MDF, sanded and melamine faced part of which is low-grade timber. The product • laminated flooring satisfies the European standard for the • wall panels emission of formaldehyde E1 and is healthy and secure. KRONOSTAR production is certified • particle boards, sanded and according to the international standard of melamine faced environmental protection ISO 14001 and of The KRONOSTAR project is developing rapidly. • wet-process fiberboards the health protection standard OHAS 18001. It is planned to start the production of OSB panels One fulfills the vicious system of sewage with a capacity of 400,000 m3 per year in 2007 circulation (manufacturing water is not thrown away).
KRONOSTAR is a part of the Swiss Krono Group “In 2006, KRONOSTAR will extend its volume (Kronoholding AG). Swiss Krono Group is one of particle boards up to 450,000 cubic meters, of the largest manufacturers of wood-based the volume of laminated floors up to 20 mln panels in the world. The concern includes m3, and the volume of wall panels up to 12 mln ten manufacturing firms in seven European m3 per year, and is also contemplating widening countries (Switzerland, Germany, France, its assortment and product range, particularly Poland, Hungary, Ukraine and Russia) and to increase the quantity of laminated particle in the USA. The total annual output of the board decors by 80% and to launch the output Kronoholding enterprises includes more than of table-boards and other products,” according 7.500.000 m3 of wood-based boards and to General Director of KRONOSTAR, Heinrich panels. Quanz.
• Since 2004, Kronostar has been using the In 2007, KRONOSTAR will become one of the most modern and high-capacity conveyer biggest manufacturers of wood-based panels in the world.
№ 1 2006 № 1 2006 MODELWOODWORKING FORESTS OF RUSSIA GLOBAL EDGE: 15 YEARS OF SUCCESS
The “Global Edge” Group of Companies [1] management, but also have years of personal (established in 1991 and with a Registered experience in their fields. Trade Mark since 1995) has unmistakably proven itself to be the leading supplier of woodworking 8. “Global Edge” has a professional team of machinery and equipment to the market of the logistics managers and custom brokers who Russian Federation. Here are the facts: ensure the fast and safe delivery of equipment from every manufacturing partner in the 1. Over 54 % of Russian woodworking and world. furniture manufacturers’ Top managers give preference [2] to “Global Edge” as their supplier, 9. Since 1998, “Global Edge” has held the with the main reasons being: industry’s most advanced (currently 12,000 sq. meters) Technical Centre in Moscow, which a) Highest technological level of equipment, includes: b) Highest level of service and technical support, a) Operator’s training facility (over 1,000 operators trained annually), c) Best business reputation. b) Demonstration area (over 50 machines 2. The business partners of “Global Edge” are in operation), 80 over 40 leading manufacturing companies from c) Technical support and service departments 16 countries in Europe, the USA and Asia. (undoubtedly, the best technical support team in the industry: twenty-seven 3. “Global Edge” has a team of over 200 graduate engineers with degrees in employees that are educated, experienced and mechanics, electronics and software motivated to provide the best possible service programming with many years of to its customers, suppliers and partners. experience in woodworking and machinery servicing, installation and training. Most 4. In 15 years of operation “Global Edge” of the field technicians are proficient in outfitted over 3,500 Russian companies, and the English language). equipped over 40,000 jobs from Kaliningrad to d) Production area including: Sakhalin and from Murmansk to Makhachkala. – abrasive materials’ conversion plant 5. “Global Edge” offers powerful engineering (“Liner-Belt”); services, such as: design of manufacturing – band saws manufacturing plant, and facilities, turnkey installation, warranty service, know-how transfer, as well as economic analysis – woodworking tools service plant (“Tool and business prognosis. Land”); e) Warehouse area for machinery, spare 6. “Global Edge” has representative offices and parts and supplies. warehouse points in all of the most important regional centers of the Russian Federation: St. 10. The “Global Edge” team supplies customers Petersburg (North), Rostov-on-Don (South), with operation manuals and instructions, Tyumen, Novosibirsk and Irkutsk (West and East professionally translated into the Russian Siberia), and Vladivostok (Far East). language, and carefully edited to include necessary additional pictures and explanations. 7. The sales team consists of trained professionals who not only have Masters 11. Through consistent marketing efforts “Global Degrees in engineering, electronics or business Edge” covers the principal fields of the industry:
№ 1 2006 WWW.GLOBALEDGE.RU MODELWOODWORKING FORESTS OF RUSSIA
i. e. woodworking, furniture and construction. 15. “Global Edge” has been acknowledged as “The The Group participates in major trade shows, Best Russian Enterprise,” [3] “The Entrepreneur such as “Lesdrevmash,” “Woodex,” “Technoles,” of the Year,” [4] “The Best Russian Equipment “Woodbuild,” “Holzhouse,” “EuroExpoFurniture,” Supplier” [5] and “The Best Social Project of the “Construction Week,” “Windows, Doors and Year.”[6] “Global Edge” also holds 200 6’s “Silver Facades,” “Umids,” “Ligna,” and “Xylexpo.” Camerton” as the best press-service in Russia. “Global Edge” advertises in the leading Russian woodworking, furniture and construction 16. Several figures that show the activities of magazines. “Global Edge” in 2005: • The Group gained over $17 million in 12. The Group publishes it’s own as well as the annual sales (which is a 20 % growth industry’s unique bimonthly 24-page corporate compared with 2004, and 13 % of newsletter, “GE-News,” which is directly mailed Russia’s market of wood processing to 7,000 potential customers nationwide, equipment [7]); distributed through regional representative 76 % of the sales amount constituted offices and respected by nine leading Russian • high-tech turnkey factories based on universities as teaching aids both in business the latest CNC machinery; and environmental protection fields. • 11,310 engineer hours spent on 13. The Group’s Internet site, www.globaledge.ru, installation at customers’ sites; is one of the top-rated Russian sites relating • every 2 days a container with machinery to woodworking equipment, and is considered is unloaded at the Group’s warehouse; by the industry’s business community to be “Liner Belt” manufactured over 216,000 highly educational. • meters of abrasive belts; 14. “Global Edge” leads a number of social • “Tool Land” produced over 40,000 meters programs and proudly sponsors car racing and of band saws, and the estimated value of air-rally teams. spare parts and materials stock reached 82 $2.5 million – the industry’s largest; • 200,000 direct mail letters have been distributed; • 125,000 visitors entered the Group’s Internet sites. All the 16 points above ensure success for the Group’s foreign and domestic partners and explain why you too may rely on “Global Edge.”
[1] Includes “GE-Service+,” “Liner-Belt,” Tool Land”, “Milan,” “Global Edge American Division,” “Global Edge-Taiwan.” [2] 2005 poll by the “Spindle” woodworking magazine. [3] 2004, 2005 The Russian Union of Manufacturers and Entrepreneurs [4] 2004, 2005 “Ernst and Young” [5] 2006, “Lesprom” [6] 2005, Russian Federation’s Ministry of Natural Resources [7] 2005, An Independent Experts’ Estimate
№ 1 2006 MODELWOODEN FORESTS CONSTRUCTION OF RUSSIA
(the average villager gets older and younger of housing and municipal services. The solution to generations choose to move to towns), and weak the present problem, as seen by the authorities, WOODEN HOUSE-BUILDING infrastructures. Prior to the market reforms in first of all, is the development of a mortgage the country, the main investors in housing in system that aims at making housing affordable. the countryside were agricultural enterprises The second step is restructuring the Russian IN RUSSIA that motivated their employees, while with construction industry. Currently, this business, in the beginning of perestroika, agricultural the opinion of many experts, stands out with its production started its decay and a number of extreme non-transparency and low efficiency. It unprofitable enterprises grew bigger. A decrease is believed that one of the promising directions Nowadays the housing situation in Russia is reminiscent of 40 years of production profitability in the field led to a of the development of the Russian construction reduction of investments in house-building, and industry is industrial wooden house building. ago. The housing deficit has become a burning issue over the few as a result, the population itself has become last years. Most houses have a maintenance term of 20 25 years the main customer. According to the data of According to the population census, 20% of the while in reality they are exploited for twice as long. Each year, 20 the House-Building Association on farms, only people in the Russian Federation live in wooden 382 houses were built with the total area of houses (Picture 2). Most houses using wood 2 25 million м of housing become obsolete in Russia, and 250 million 42,4 thousand m2. With the quality of amenities, as a main exterior material are individual real м2 are in urgent need of major repairs, or replacement. Even in big country houses give way to town houses. Of estate with a long history of exploitation (73% 2 cities with sufficient financing to develop housing and municipal 16,092,9 thousand m of individual houses of the population live in houses built over 40 available in 2004, only 39,7% were completely year ago, 23% - between 10 and 40 years ago, services, about 25% of the communal network is totally depreciated. supplied with engineering communications 4% - less than 10 years ago). It should be pointed out that the housing deficit was inherited by (50,8% in towns and cities, and 28,3% in the Russia from Soviet times. In the beginning of 1990’s there was a countryside). At the present time, construction volumes with application of the technologies of wooden house considerable drop in construction that made the problem worse. With the initiation of the Russian President building remain considerably low – a little over Even the current volume of available housing of 41 44 million м2 is Vladimir Putin, comfortable housing provisions 1,8 million m2 per year, although an active twice as less than 15 years ago. According to the official data of the became a state objective. Apart from low rates growth in this field has been lately observed. of construction, a considerably negative factor 84 Federal Agency of Construction, Housing and Municipal Services is the high retail prices for living space. In the construction industries of Scandinavia, 85 (Rosstroy) about 1,5 billion м2 of available housing is needed to meet North America and Australia, for 1 m2 of housing 2 3 the present demand of the Russian population. In Moscow 1 m costs over 2,000 USD, on average, they use 0,5-0,7 m of timber material, while in in St. Petersburg it is 1,000 – 1,300 USD, and Russia – only 0,03 m3. in the regions the price ranges between 500 – 800 USD, in town and cities, 150 – 300 USD According to the data of the Wooden House- The present average housing provision in Russia influence on the forming of the housing market: in the countryside. Building Association, the biggest volume of 2 is 19,7 m per 1 person. In comparison, the quality requirements for apartments, houses, and individual wooden house-building can be figure in Japan is 1,55 more than in Russia, in living conditions grew high, and consequently According to the statistics, up to 85% of Russians observed in the Central and Volga Federal the USA it is 3,25 times, and in Norway in 3,7 the price structure changed as well. The need to improve their living conditions, and only Districts, however a percentage of wood use times more. majority of the Russian population lives in 10% of them have such a possibility. in the total volume of individual house-building towns and cities, and a little over a quarter is relatively low – 21,4 and 25,7% accordingly. The housing deficit problem is urged by a reside in the countryside. At the same time, Now the Russian Government is working on the This can be explained by the remoteness of continuously growing number of middle-class in big cities with a high density of population elaboration of the national development program these regions from the forest. At the same time, representatives who are key consumers. In where most people live in multi-storey blocks Russian statistics, the middle-class are those of apartments, there is a great need for more with an average income per person of 35– comfortable, roomy, healthy and ecologically Picture 1. Population dynamics in the Russian Federation, thousand people 70 thousand RUR per month (ca 1000 - 3500 clean individual housing. EURO) for the big cities, and 12 – 27 thousand RUR per month (ca 400 – 900 EURO) – for Most of the villagers live in individual mini- those living in the regions. In percentage, storey houses. However, their accommodation is it is 9-22% of the total population of the no better than the townspeople’s. According to country. In many highly developed countries the population census in 2002, over half of all this index stays at 70-80%, and there is belief private householders occupy buildings that were that Russia will be in keeping with the world constructed between the 1950’s and 1980’s. At conjuncture. present, the number of newly built houses is way less, which is caused by a continuous crisis Social-economic reforms in Russia originating in agriculture that brought about an economic about 10 years ago also have a significant and demographic decline in the countryside Source: Association of Wooden House-Building
№ 1 2006 № 1 2006 MODELWOODEN FORESTS CONSTRUCTION OF RUSSIA
leaders in wooden house-building in the total throughout Russia is less than 130 million m3 Picture 3. Distribution of individual house building in 2004, by exterior volume of individual house-building are the or 22% of the allowable cut, approximately 80 material. Northwestern Federal District – 47%, Siberian million m3 are processed within the country, and FD – 49,5%, and Far-Eastern FD – 49,9%. the non-processed surplus is exported. Taking into account active attempts of the state to There are several main reasons why construction stimulate logging and simultaneously limit the priorities in Russia will be given to wooden export of round wood, the accessibility of raw house-building in the future. timber material is considerably increasing.
First, the public will become aware of the fact that Fourth, wooden house building enables shorter wood is the most ecologically healthy construction construction terms as compared with reinforced material. Numerous studies proved that people concrete or brick buildings, and the cost price feel more comfortable in a wooden house from of such constructions can also be cheaper. a psychological point of view. Besides, wood as a construction material provides people with the The development of a powerful wooden house- maximum physical comfort, i.e. moisture-exchange building industry on a new high-grade level is with the environment and a high thermal capacity vital for the Russian economy. The economic Source: Association of Wooden House-Building that allows one to economize on heating. growth of the previous years implies a demand for growth and, consequently, for the increase of Second, in the 21st century the preference for wooden house building. However, in its current several major technologies that producers adhere The first category – prestigious and elite house building will be given to the construction state, the Russian timber industry is not able to can be singled out: dwellings for citizens with high income. Such of buildings from recycled and secondary raw to supply the needs with its own low-priced • Manufacturing from solid wood (including houses have no limitations in price, living space, materials. Wooden mini-storey house building and high-quality production, mostly because of round wood from manual cutting; cylinder comfort and other characteristics. Houses of meets this demand. the weak technological level of the production logs and glued square logs) prestige are mansions, villas and cottages. capacities. As a rule, the price for 1 m2 of such types Third, according to various estimations, Russia • Manufacturing with panels; of dwellings is over 1500-3000 USD, which has about a quarter of the global forest PRINCIPLES OF WOODEN corresponds to the average European cost of 86 coverage, which makes wood one of the most • Frame house building. middle-class houses. If in the beginning of 87 the 1990’s the average living space of such accessible construction materials. According HOUSEBUILDING The application of one or another technology to official data of the Federal Forestry Agency houses stood for about 500 m2, lately there Frame construction is widespread in Japan; is based on the social standing of the client, of the Russian Federation the total timber has been a considerable diminution – down to building with square logs is popular in Europe; obscurity of a certain construction site, a stock in Russia makes up 82 billion m3, and 250 m2. Obviously, the reason for this is the log and frame construction – in the USA. It is formed mentality, and other factors. In terms the annual allowable cut is about 520 million realization of the actual criteria of comfort difficult to identify a type of house building of the status of a future householder, three main 3 and maintenance costs. Houses built of solid m . Although the average exploited volume types of modern mini-storey house building that is the most developed in Russia. At least, wood prevail in this category; paneling or frame can be defined. construction technologies are rarely applied.
Picture 4. Distribution of individual house building in 2004, by the Federal Districts (FD) of the Russian Federation
Picture 2. Distribution of the Russian population living in apartments and individual houses, by materials of house exterior. Source: Association of Wooden House-Building Source: Association of Wooden House-Building
№ 1 2006 № 1 2006 MODELWOODEN FORESTS CONSTRUCTION OF RUSSIA
A large number of construction companies innovative technologies and equipment. In specializing in such categories of wooden particular, it concerns the use of OSB in wooden houses are currently working in the Russian construction, the production of which is not market. This is why the elite sector of wooden yet organized in Russia despite an abundance house building is overflowed and companies of suitable raw material. very often encounter difficulties with portfolios of orders. TECHNOLOGY OF CONSTRUCTION The second category is affordable, economical FROM SOLID WOOD housing for clients with an average level of This technology implies house building with income. This category mainly includes two-storey logs (including cylinder logs) and balks (profile, houses (frequently with attics), cottages and glued, etc.). Their main advantages are the estates. The cost of 1 m2 of the total living maximal conservation of useful qualities of wood space is within a wide range: from 300 to and the longest exploitation term among other Picture 5. The proportions of built houses 800 USD. In this segment, on the contrary, a wooden house-building technologies. by different technologies in Russia gradual increase in house space can be observed. Formerly, it used to be less than 100 m2, but Construction of such houses can be carried Source: Association of Wooden House-Building presently the living space of such housing types out on industrial and individual scales – so- can reach 150 m2. called “manual” technology, which is the most different quality levels and purposes. Judging of wood-processing machinery. It is difficult to expensive. The Russian peculiarity that has to by the expert prognosis for the next 10 years, say which industry suffered the most. Therefore, The third and last category is so-called social or be kept in mind is a great number of so-called the share of house building from solid wood technological machinery produced at the present municipal housing provided at minimal prices. “jacks-of-all-trades” ready to build a log house will stay the same, and the frame and panel moment in Russia, including house-building As a rule, these houses are built by budget rather inexpensively. As a rule, these are teams construction of wooden house building will equipment, is wide open to criticism and under funds and represent mini-storey block and of 3-4 workers with a gasoline chainsaw, axes become equal. scrutiny with the West. Initial quality and section buildings. The cost for 1 m2 is about and a hammer as their main tools. In this case, effectiveness is low; service maintenance is not 250 USD. the quality and price of the finished house EXISTING DEVELOPMENT PROBLEMS provided, or it is rudimentary. The exceptions 88 structure strongly depends on the skills of the are a few single Russian brands. By the way, not FRAME AND PANEL CONSTRUCTION workers, and in practice, such house-building The problems of wooden house building all of the equipment applied in house building 89 is carried out with violations of technologies, have been discussed for a long time. Many is produced in Russia. TECHNOLOGIES which further leads to the shorter durability of conferences, Internet forums, and articles in The walls of a wooden house remain a sandwich. the whole house. specialized journals have been organized. Now In this situation, the only decision possible is Frame technology carrying constructions are there is a great confidence in the identification the import of foreign equipment, keeping in made of glued balks or square logs LVL, and The use of glued balk has been especially of the key issues agreed by many in order to mind high customs tariffs and Value Added Tax, paneling house walls themselves are carrying popular lately. Differing from other technologies, find solutions. which makes a future investor concerned about constructions. Cold-proof material is mineral it has considerable advantages: low shrinkage, financial indices at the stage of a business wadding or any other material providing a high high quality of the surface, size stability and In brief, the house-building issue concerns three plan elaboration. degree of heat-insulation. From outside and durability of joints. Houses built according to main problems – land, finances and technology. inside the wadding is covered by various tiling this technology enjoy the shortest construction All questions related to the land, including its Establishment of Engineering Networks: This material, e.g. veneer, OSB or cement chipboard time. With this construction, technology industrial preparation, should be settled by is another urgent problem. It is a critical item that can be painted, plastered, etc. requirements as to the quality of initial timber the state. The financial part of the problem of expenditure, and regional authorities prefer to are less strict than those using the construction is to be taken over by the banking system. As hand it over to investors, which makes the price 2 Due to the effective cold-proof material the material of house-building technology from solid for proper technology – it will be decided by of 1 m more expensive, and, as a result, the wall of such a house is 200 mm thick, and wood. This does not influence the quality of the business. It appears that not all solutions interest of construction companies lowers. its heat-insulation capacity is comparable to the finished construction. easy in theory are easily applied in practice. a brick wall. Even in severe cold the house The key aspect is to have a clear view of the This is the reason why there are few examples of retains its warmth, which helps save up to 50% According to the data of the Wooden House- specific problems of each operation level of mini-storey house building. Generally it concerns on electric power for heating in comparison to Building Association, the proportions of built the industry – consumers, producers, regulating city-dwellers who already have housing and build a brick construction. houses by different technologies in Russia are bodies – then suitable solutions will be found country houses at their own expense, including nearly the following: in no time. So, is it possible to emphasize the water supply, sewage and heating systems. The Panel houses in Russia are built by Russian, main points calling for management in the first country houses are built for living in during the Finnish, German, Austrian and American Lately, many companies (especially Russian place? We did our best to underline them. summer, when the problem of public utilities is technologies, mainly according to the country ones) have tried to differentiate business, for not acute, or just a limited number of people can producer of the technological equipment used. example in technology, i.e. within their own Technological Equipment: In overview of the afford solving this problem independently. But, as compared to foreign producers, there capacities to manufacture house constructions wood-processing problem, including wooden is a considerable gap in the application of with different technologies, as well as with house building, it has to be marked that the Investment structure: The major sources of industrial crisis has also affected the production financing wooden house manufacture are the
№ 1 2006 № 1 2006 MODELWOODEN FORESTS CONSTRUCTION OF RUSSIA
funds of companies; their share in the total Human interests are above all, and it concerns on subsidies to the interest rate of the credits world. At present, over 10 plants in Europe amount of financing stands for about 80%. This housing as well: it should be modern, taken by small and medium businesses are produce more than 3 million cubic meters of problem is rooted in two causes. The first one comfortable, and mainly –ecologically clean. under elaboration, as well as a credit-leasing OSB (shaving boards), while Russia has no such is the imperfection of the credit system. Not Nothing can solve this problem better than a policy. An experimental project canceling production so far. only has it become unprofitable for most of the wooden house. They have begun the elaboration customs duties on the import of technological companies to take credits (an existing interest of programs on the construction of cottage equipment has already been launched for 9 Experts say that the market of wooden house rate usually reaches 23% for small and medium villages for the permanent residence of months. Other measures, such as the return of building has always had positive dynamics, and enterprises for a 3-year term); it is also a difficult the middle-class population. The sphere of Value Added Tax and taxation leniency during a special growth has been noted over the last procedure to receive a credit. The second reason application of such programs is the development the construction period, will likely be taken. three years. During this period, wooden house is the mere incompetence of businessmen. There of living conditions for populations of the Thus, all necessary starting conditions for the building became more professional, construction are frequent cases when in pursuit of investments regions and big cities. There is a necessity organization of individual wood building will companies working in this business earned a the future production fails in its capacities, to develop village areas in the regions that be in place. good reputation, and the clients started paying equipment quality and other key aspects. require new work power, and, consequently, more attention to the quality of a house than comfortable housing. The Russian construction industry is developing to its price. Furthermore, the stakeholders have Lack of completely formed Federal programs on and accelerating a scope of available housing, noticed that the competition environment in this housing and community services, particularly, The opposite situation exists in overpopulated however, this is not enough. With the field is still favorable. Directors of construction in wooden house building: A great number of cities where there are practically no sites for development program of housing and municipal companies remark that the house-building supervisory bodies also hinder all worthwhile construction, and every year it becomes more services, available housing should come to 80 market is rather chaotic and does not yet have initiatives in this field. and more expensive and difficult to build million m2 per year by 2010. The capacities prominent leaders. As one of the managers of a houses. The lack of construction sites within that exist now are not able to manage this St. Petersburg wooden house-building company Infrastructure: For example, are there many the city limits leads to the broadening of the objective. noted, “The market is big, and there is enough natives (living in St. Petersburg and especially urban construction geography. work for everyone.” in Moscow) who would agree to move to other To meet the expected demand in the nearest regions to live and work there? Or to put it For example, in the Leningrad (St. Petersburg) future (both in the countryside and city Oleg PRUDNIKOV mildly, are there many young specialists ready region there is a need to attract over 100 outskirts) it is necessary to construct several Business Development Director, to live outside the city limits? Along with the thousand people in the near future to supply dozen modern diversified house-building LesPromInform woodworking journal advantages of living in the countryside – cleaner its growing economy with the work power and complexes capable of erecting any type of Denis DMITRIEV. environment, comfort, spaciousness – there exist to provide employees with housing. Due to the housing in a short time, and of high quality, 90 Development Manager, Wood-Invest Company. 91 many problems of a specific character: there is Land Reform, land areas were allocated and are at 1 million m2 per year. This requires, first [email protected] still a big gap between levels of social, medical, available that can and should be included in of all, the production of modern, ecologically road, and energy infrastructures within the the construction process. clean materials that are widely spread in the All photos: Wood Focus Finland city limits and outside, even in such developed regions as Moscow and St. Petersburg. For Recently the “vox populi” has been heard. fairness’ sake it has to be remarked that the Endless conferences, workshops and symposiums situation is getting better year after year. did their best, so state officials decided to start the regeneration of Russian timber, speeches Lack of trust: At first sight it may appear of the President and ministers in this concern ridiculous, but it is rather difficult to make a can be heard nearly every day. The state person wishing to build a brick or a concrete declaration must make a positive influence house change his mind. All of the reasons on the development of the timber industry with concerning ecological aspects, tradition, positive a range of 20 sub-industries, including wooden energy, fire safety and others would come to house building. It will promote board production nothing. It is hard to change public opinion, that is considered the most promising in wood especially when incompetent workers build low- processing (caused by the fact that Russia has quality wooden houses. a great volume of low-grade timber unsuitable for veneer and plywood production, or wood ADVANTAGES AND PERSPECTIVES sawing). OF WOODEN HOUSEBUILDING The forming of an economic base of industrial wood-building development is actually at its Perspectives are highly dependent on certain final stage. According to the strategic plans regions and their local administrations, of the country’s development for the year nevertheless the main theses and preconditions 2007, the Russian Ruble is to become hard can be formulated in order to promote the currency. It is also planned that by this time development of wooden house-building in short the refinancing rate will drop to 5–6%. The and long-term perspectives. Mortgage Law will be finally completed. Drafts
№ 1 2006 № 1 2006 MODELWOODEN FORESTS CONSTRUCTION OF RUSSIA
People’s longing for cities in the Soviet era planed, and glued, shows virtually no shrinkage, THE END OF URBANIZATION? is easily explainable. In our minds, “country,” and can be processed with factory machines. All always meant compulsive collective labor, a glued timber jobs are performed with maximum ramshackle barrack, and an outhouse toilet. On accuracy, which means that the philosophy of the other hand, city people living in blocks of building is transformed into the philosophy of Just half a century ago, Russians were eagerly moving to cities, flats had conveniences sincerely envied by rural assembly. The deadlines for construction site leaving villages depopulated. In recent years, however, a reverse, people. Of course, some time will be needed jobs are getting much shorter, respectively. From to revoke the established clichés. my point of view, in today’s world, glued timber yet still weak, trend has been noted, due to the deteriorating living houses are the most reasonable solution to the standards in megapolises. Experts say that the de urbanization Note that in the West, the attitude towards housing problem in terms of overall costs. process will entail the rapid development of timber house building urban and suburban life is quite different. A city flat is a residence for young people who US-type frame houses, although very attractive, in Russia. Moreover, of all timber construction technologies, glued don’t need much room, but who want to have will probably not be adapted to this country. wood houses are becoming No. 1. It is worth noting that a large fun; also, for elderly people to have things The frame structure is not strong enough; it is part of such houses were made with equipment by Global Edge. “within reach,” or for the well-to-do who can assembled and disassembled like furniture, and afford buying a decent mansion in the very requires great numbers of different accessories In the last four years, this group of companies has supplied over center of a city. Families with children prefer and finish items, which will have to be imported, forty sets of wooden house manufacturing equipment to Russian not to be stuffed in a city apartment, and and that is expensive and inconvenient. factories. We met with Mikhail Lifshitz, President of Global Edge, move to a country house, in search of a better quality of life. European trelliswork houses have their advantages. to talk about the prospects for the development of timber house They are frame houses of large-section timbers, construction and the spread of suburban living in Russia. Despite the common opinion that a timber house with a quite solid structural design, good wall cannot be expensive, its construction costs quite structure, and safe wind protection. They are an amount. Can a “moderate-income” Russian completely manufactured in factories, and quite afford this pleasure today – or, as you say, economical, however they haven’t found their ML: The greatest problem by the customer, or simply to re-draw brick ensure a quality life out of town? application in Russia so far, with only a few faced by wooden house houses as timber houses, rather than learn the known attempts. By the way, the first facility 92 construction in this technologies. This non-professional approach ML: Everything depends on the type of house making European wooden trelliswork houses is 93 country today is the lack sometimes results in unpleasant consequences. the customer wishes to build. The most to appear in the Moscow Oblast soon. of specialists – architects, I am sure that sooner or later, our builders expensive technology is a log house. Even in builders, and designers. will gain the knowledge on their own or by the West, only highly-paid people can afford Mikhail Valerievich, what does a timber Largely this is due to the others’ mistakes. Currently, Russia is witnessing such a house; the minimum cost of one square house-making facility look like? In other fact that Russia has no a rise in timber house building, and not only meter would be at least $ 2,000. The point is words, what equipment is demanded by such traditions of timber house of up-to-date construction methods such as that the material used by the builders is not manufacturers? construction. The houses frame or panel technologies or glued timber industrially processible. Raw materials cost built in the past centuries houses, but also of log houses. Today, the too much because you have to select logs of ML: Oddly enough, multifunctional processing were always practical and productivity of the industry and of the demand approximately the same diameter and fit them centers are the fashion today. A maker buying pragmatic, but absolutely for wooden house building is progressing at together. The sagging variation during the such a center hopes to make many houses with inconvenient for living. dazzling rates. construction, and the exact height of floors, its aid. But “many” is hardly achievable. For all of They had a high ground are difficult to calculate, let alone plumbing its apparent power, processing centers show low floor to avoid flooding, What is the reason for this? The average and wiring. The construction of a dressed log productivity. Even if it performs ten operations, tinted windows to avoid cold, steep roofs to Russian is still strongly tied to cities with house requires one hundred percent manual they follow in series and not simultaneously. If avoid snow accumulation, and totally non-existent multistory block flats, and their mentality labor and builders of the highest skill. we are talking about a really industrial production, utility lines. In Soviet times, it was preferred to is reluctant to change. it would be much more profitable to install five forget about wooden housing, and mass multi- The first step towards processibility is a cylindered to seven separate machines for each operation. story block construction was widespread instead. ML: In today’s situation where the housing log house. After the factory operations, all of Besides, processing center operation is especially Meanwhile, frame house building was developing prices are skyrocketing and housing is turning the logs have similar dimensions, but on the vulnerable to the notorious human factor: any in the United States at the same time, and the to gold, so to speak, people will start leaving other hand, they are more prone to cracking and mistake would cost you very, very dearly. Such so-called trelliswork, in Europe. Wooden houses megapolises. In Moscow, you’d be lucky to shrinkage than logs that are just dressed, and centers are only worth buying when the design were becoming industrially constructible, and were buy a very ordinary three-room in a far-from- require a more serious chemical treatment. But this comprises several hundred different components. getting “stuffed” with utility systems. prosperous neighborhood for $200,000. Is it type of house involves manual construction too, They are pointless when making a house. Otherwise, worthwhile, when for the same money you can therefore it will take a lot of time and money. you would utilize such an expensive unit at 10 %, Today, timber house construction has been build a country house of 300 sq. m, complete no more, and for a lot of similar jobs. revived in Russia, and many “homegrown with all the facilities, and with a front garden? The most prospective house in the Russian masterminds” are fascinated by futile efforts to I believe that the timber housing culture will environment is a glued wooden house. The Reported by Yvetta KRASNOGORSKAYA duplicate houses from foreign catalogs admired be rooted in Russia little by little. material is very processible: it is easily dried,
№ 1 2006 № 1 2006 MODELBIOENERGY FORESTS OF RUSSIA
20–500mm produced from dried leavings of factory owners, they were not ready to invest POSSIBILITIES AND THREATS the woodworking and sawmilling industry large funds into industry development. It was (sawdust, wood flour and dust, chips). Like touch-and-go business with a vague future. pellets, briquettes are produced from ground However, from the outside, the bio-fuel business FOR EUROPEAN BUSINESS IN THE dried timber. However, they are bigger, round, looked quite attractive and promising: rectangular, or have a multitangular cross- energy carriers’ deficit and rise in price section. Sometimes they have an aperture in • threatens Western Europe RUSSIAN BIO-ENERGY SECTOR the centre. • biofuel produced from wood waste is one Fuel pellets belong to the most manufacturable efficient type of renewable fuel UNDER ITS CURRENT CONDITION type of fuel nowadays. They are of high (0,65– wood waste volume in EU is limited and 0,8) bulk density, slowly accumulate atmospheric • it is dropping. At the same time, huge moisture, are free-flowing, have low ash content amounts of equipment for primary and deep and also provide a high coefficient of efficiency timber processing are imported in Russia, when generating heat and electric energy. Belarus and the Ukraine annually. Deep Russia is gaining momentum in the production of fuel pellets. They could be burnt automatically almost on timber processing is replacing round timber an unlimited scale. Fuel pellets are utilized in This country is gradually taking its place in the European market export and consequently the volume of wood different spheres varying from private stoves, wastes produced at the timber factories is as a promising source of biofuel for private, as well as industrial boilers, and fireplaces in private houses to growing consumers and district heating facilities. This development took boiler houses and CHP plants. more time than was expected. Exaggerated expectations ultimately • wood wastes accumulating in our country Briquettes are usually of a higher density during generate a serious environmental threat damaged the trust of Russian suppliers. But how could one demand transporting although their spheres of use are the 100% reliability of a branch that is only 5 years old? Russia somewhat narrower. It is possible to use fuel It might seem that bio-fuel produced from has young market economy traditions, and this influences the briquettes non-automatically for fireplaces or sawdust helps solve the mentioned problems, at boiler houses where fuel is ground before it but it is not so simple. bioenergy branch too. We have to admit that there are problems. is put into the furnace. The European market 94 However, they can and will be overcome. We will try to illustrate reveals demand for both types of the solid fuel, It were mainly venture investors who were 95 how these problems should be dealt with, and what European however, the amount of fuel pellet consumption interested in the wood waste processing and is much bigger. fuel pellets production in 2002 and their companies should expect from the Russian bioenergy sector. business often didn’t relate to woodprocessing. Terms “biofuel” and “biofuel industry” used Such investors were often invited to participate herein refer to the two types of solid biofuel in bio-fuel projects by the enthusiasts who part of waste. Also, wood wastes, being properly – fuel pellets and briquettes, as described created the first pellet factories. INTRODUCTION utilized, can be of significant value as renewable above. By “bio-energy,” one usually means the methods pollution-free fuel. Two tendencies were revealed simultaneously of industrial energy production from different HISTORY OF THE BIOFUEL INDUSTRY. at this stage. On the one hand, investors’ types of biomass: timber, crop, animal droppings, In the strict sense, Russian bioenergy exists active interest drew the attention of media, manure, other agricultural / animal waste and from time immemorial. Timber – as fuel wood CONDITION, PROBLEMS AND bodies of government, economic structures, domestic waste. – has been burnt for ages. However, firewood PERSPECTIVES OF DEVELOPMENT scientific organizations, different non-profit burning gives no high coefficient of efficiency. organizations and funds. Articles on bio-energy Bio-energy is especially important for the Biomass must be appropriately processed and The fuel pellet market appeared in Russia in began to appear in specialized journals, at Russian forestry sector. One of the most turned into high-performance biofuel in order the very beginning of the XXI century. The first in parts dedicated to new technologies. capacious and promising sources for ecologically to properly use it as a source of energy. It is first fuel pellet factory was established in the Suppliers of equipment for biomass pelletization clean biomass is wood-waste resulting from solid biofuel that is mentioned most frequently, suburbs of Saint-Petersburg in 2001. It looked have entered the market, especially since many wood logging and processing. Many Russian although recently more attention has been paid like simply innovational, high-risky business for of them, such as Sprout Matador and CPM have woodworking enterprises are almost choking to the development of technology for liquid enthusiasts then. The first factories for fuel already been supplying equipment for other from the inevitably-growing waste flow motor biofuel production including biofuel pellet production from wood wastes were in Russian industries, including mixed feed and including sawdust, cutting waste, bark, refuse production from wood-waste. fact experimental factories and were based on sugar industries.On the other hand, projects wood, etc. Accumulating wastes are a serious the modified OGM mixed feed lines that were for bio-fuel production are now provided with environmental threat. To get rid of them we Today, two types of pressed bio-fuel are the widespread within the post of certain areas. deeper and more considered investment analysis. should incur significant expenditures, even most distributed. They are fuel pellets and The equipment was old-fashioned and unfit Any new business bears an investment risk. those leading to the decrease of the overall fuel briquettes produced from wood pulp or for wood granulation, and the task was very High risk requires high profit margins. Venture profitability of woodworking enterprises. different type of biomass. Wood fuel pellets new for our country. investors enter an economical sector only if Naturally, it is forest harvesting and primary present small cylindrical pressed wood items they expect intense growth and high profit wood processing that generates the biggest with a diameter of 4–12mm and a length of Despite the enthusiasm of the first pellet margins. Still, it was soon realized that fuel
№ 1 2006 № 1 2006 MODELBIOENERGY FORESTS OF RUSSIA
pellet production sometimes doesn’t meet these themselves as well as a divergence in the While in 2002–03, the Dutch, Swedish and British Unfortunately, unsolved transport problems made conditions. The bio-fuel prime cost is more than overview of both existing and potential Russian were glad to sign declarations of intentions many pellet factories projects unprofitable in zero, as wastes have to be at least transported pellet producers, and of European producers, concerning bio-fuel supplies from Russia, in different regions of the country and decreased to the production place, purified, ground and of each other. 2004 they were much choosier about them, the profitability level of “afloat” factories dried. The finished product is to be delivered as none of the signed declarations have been significantly. to the suppliers. Let us discuss some principal problems of implemented. development that were within the view of 3. Quality As a result, despite great interest in bio-energy, market participants and analysts. What’s more, the bio-fuel market in Europe is no more than 10 factories had been put into young and subject to significant fluctuations of The quality of fuel pellets produced in Russia operation by 2003, and the export volume of 1. Divergence in prices supply and price volumes. As a result, prices to presents another problem. fuel pellets was scant. The volume of pellet be oriented while drawing up business plans can exports was not exceeding 10,000 tons. Most At that moment, Russian entrepreneurs had a quite change greatly at moment of factory launch. The western standards for pellet quality have of the first bio-fuel factories used domestic vague understanding of the structure and state strict requirements. They were worked out low-capacity equipment. Moreover, they were of the European pellet market. The information 2. Logistical problems taking into account possibilities of European built for finished production export to Western on this topic was pretty uncoordinated and came pellet producers, which more often use dry and Europe. to nothing more than statistics of different Despite logistical benefits of wood pellets, purified wastes from deep processed timber and associations, of governmental and scientific including a high bulk density, homogeneous the furniture industry. Most Russian producers In autumn 2003, the first association of bio-fuel bodies of Europe consuming biofuel. These consistency, high solidity, etc – its transport also rely on wastes from the primary processing producers in Saint Petersburg was registered: statistics often involved average retail prices over long distances is a difficult task. of timber with natural moisture content and the Russian bio-fuel association. It was the for wood pellets at a level of €180–200 per ton less homogeneous wastes. It is much harder to first one to set itself the task of turning the and higher. These figures were automatically Firstly, the problem involves the character of the ensure that pellets from such material comply separated innovational production of wood carried into a bio-fuel factory feasibility study demand. European traders and large consumers, with the standards. Raw material has to be pellets into a full-fledged industry with its due to incorrect translations into Russian and as a result of the specific character of their sorted, debarked, ground and dried, which own standards, infrastructure, and lobby, etc. because of selectively perceived information. businesses, prefer to work with suppliers on leads to the technology chain complication and First of all, the most urgent problem – the Consequently, investment parameters of such long-term contracts for monthly shipments of increase in bio-fuel costs for manufacture. accumulation of ship consignments for fuel feasibility studies were very attractive. In fact, large (ship) pellet consignments. Almost no pellets in ports and their delivery to European it was soon found out that fuel pellets can consumer is ready to work with fuel packed in Besides compliance with standards (which is 96 consumers – was to be solved. At that time, cost €200 per ton only in retail chains. This 650-kilogram big bags popular in Russia, which not always required) consumers mostly want to 97 there were no producers with a production price includes costs of consignment division, makes cargo receipt and on-site processing receive homogeneous consignments of pellets capacity high enough for monthly shipments packing, marketing and advertising in the target quite long and expensive. – preferably produced at the same factory from of ship consignments for fuel pellet export. market, while it is almost twice as little in the the same raw material – but unfortunately it Therefore, activity was very necessary for the wholesale market. Consequently, there is a problem with the is still a problem. Even in the summer of 2004, survival and development of a new industry. delivery of the produced pellet from factory almost all Russian pellet producers were not On the other hand, many European consumers to port and its trans-shipment. There are several able to ensure the regular supply of fuel pellets By 2004, interest in bio-fuel production from being influenced by stereotypes that Russia is variants to solving the problem and all of them in volume of at least 2–3 tons per month and wood wastes and other types of biomass a country of cheap labour and free resources require either investing in optional equipment to guarantee such volumes under contract due increased to an extent that it became clear: also expected to get necessary fuel at lowered or expenditures on expensive consumable to different reasons. In other words, under the a whole industry is going to replace a group prices. Especially since they saw a few operating materials. current conditions, such volumes can only be of enthusiasts. As it turned out, the industry factories in Russia and discussed only unclear provided by shipment of combined consignments is not perfect. A number of problems revealed perspectives of future contracts. Creation of special-purpose terminals for from several producers. It is nearly impossible pelletized bio-fuel trans-shipment at sea to secure the cargo homogeneity in such ports of, for example, the Baltic pool could conditions – taking into consideration the be an ideal decision. Nevertheless, wharf walls fact that there is no completed technological and other port facilities in big ports of Saint practice and system of solid bio-fuel testing Petersburg are in deficit right now – they are and certification. This limits the potential insufficient even for the trans-shipment of market for Russian pellets in Europe. conventional goods, such as, metals, timber and minerals. That is why there is no telling 4. Equipment about construction of such terminals before a significant freight flow “for perspective” Development of export-oriented fuel pellet is provided. On the other hand, many production is also hindered by technical experts rightfully believe that the successful obstacles. development of bio-fuel export production depends much on the special trans-shipment The technology of pelletization is set up in facilities that ensure fuel pellet export is more Europe, while it often malfunctions in Russia. economical. As mentioned above, mainly moist material
№ 1 2006 № 1 2006 MODELBIOENERGY FORESTS OF RUSSIA
is used for pellet production in Russia. The • consultants and designers, specialized in Designers, technologists and factory managers are primarily interested in the industry’s stable material is to be purified, ground and dried. bio-energy, etc, have been accumulating the experience development and growth, ensuring the fastest All this makes the technology chain longer necessary for the proper organization of the bio- payback and intense development of their and more complicated. There is a lack in • raw material and finished product quality fuel industry in Russia. We wish that repeatedly business. technology implementation practice involving experts, made technological mistakes will help deepen the preparation and drying of raw materials the understanding of bottlenecks, typical for the both in Russian and abroad. Together with Moreover, informational infrastructures of the majority of pellet factories built in our country MODERN CONDITION OF THE INDUSTRY problems of energy supply and other elements industry have begun to form, which involve and these factories will preferably start pellet of the industrial infrastructure, this makes the following: production on industrial scales. Supply each pellet factory a unique and extremely • information centres and systems dedicated Today, Russian producers of fuel pellets from difficult project. Moreover, investors and owners to bio-energy, Moreover, there is the growing dispute about a Kaliningrad to the Urals and from Arkhangelsk of the created factories are slow to listen to possibility of wood pellet use for fuel within to Rostov on Don produce 20,000 tons of fuel recommendations of equipment designers and • a number of regional, Russian and Russia. Two to three years ago observers believed pellets monthly. It is 35–40,000 tons of solid suppliers. Consequently, they often have to international bio-energy arrangements, that pellet burning by Russian consumers was fuel monthly, including Belarusian and Ukranian reconstruct already built enterprises. • first annual sectoral reference book, “Wood a long way off. Now a number of bio-fuel factories and fuel briquettes. These are quite Fuel Pellet 2005” recently issued by Bio- producers successfully sell their products in high figures, however they are much less than 5. Export market dependence fuel portal WOOD-PELLETS COM and Russian the domestic market. Multiple specialized boiler the mounted equipment’s overall capacity. Northwestern Timber confederation.At the equipment for the automated burning of fuel Bio-fuel factory development is hindered by end of 2005, the first issue of specialized pellets is being imported in Russia. Domestic The general amount of Russian factories to the fact that they are strictly export-oriented. sectoral journal “Bioenegy” was published. producers of boilers and burners for pellets produce fuel pellets is more than 30. Their There was a primary stereotype that Russia This is one more attribute of the independent have arisen. The producers implement their own actual average output is 700 tons per month. has no market for refined bio-fuel (pellet and industry. designs as well as manufacture equipment under There are at least twenty factories scheduled to briquettes) and it will not appear soon. Export leading European manufacturers’ licenses. be launched and to reach the planned production activity always involves additional risks of At the moment activities are being performed capacity by the end of 2006. According to our fluctuation in the exchange, technical, language to create Russian standards for solid bio-fuel. Fuel pellet burning is indeed economically sound preliminary estimate, the total productivity of and intercultural barriers, of goods transported Certain efforts are made both locally and in many cases. This concerns at least municipal the Russian bio-fuel industry can amount to over long distances, etc. federally to lobby new industry interests in boiler houses in insufficiently developed gas some 100,000 tons of fuel pellets and briquettes 98 legislative and executive authorities. infrastructures. Calorific value and domestic monthly by the second quarter of 2007. 99 Evidently, solutions to all of these problems market price of a wood pellet are comparable are near. We need to form infrastructures and to that of furnace coal. Wood pellet burning The majority of existing bio-fuel factories and to increase the scale of production. Actually, it Summary can be automated much easier. Bio-fuel burning factories under construction are situated in the was the understanding of system problems that Despite these problems, interest in fuel pellet generates little smoke and harmful emissions. European part of the country. Their density is stimulated the bio-energy sector to shift to the production continues to gain momentum. Real Pellets are much more simple and safe to store lesser than further marine regions – the Saint modern stage. This stage can be called a stage perspectives have surfaced for solving system and burn than black oil and other oil products. Petersburg and Leningrad region’s, together of bioenergy industry formation in Russia. problems of the new industry. Unit thermal cost is much cheaper for pellets with the Rostov region and Krasnodar kray. than for diesel fuel. What’s more, pellet burning Such geographical distribution of production At the moment, at least since the beginning of There already exist a number of construction efficiency is much higher than that of moist powers results from the costs for finished goods 2005, bio-energy has formed as an independent projects of special-purpose terminals for fuel chips and firewood. transported to the European consumers, on the industry including several hundreds of pellet export and trans-shipment. The most one hand, and from the volume of biomass enterprises that consider the industry to be serious Russian transport market players All of the above mentioned facts, together with resources – wood wastes and agricultural one of their main business targets. The industry have started to pay attention to the bio-fuel the forthcoming implementation of mechanisms wastes, on the other. Sometimes, an abundance involves the following: business. Construction conceptions now more for the Kyoto protocol, will facilitate the intense and cheapness of raw material provides for development of wood fuel’s internal market. potentially beneficial fuel pellet factories that existing factories and factories under often include simultaneously generated facilities • After the market is organized some of the are situated far from sea ports. construction, for transporting and for finished goods trans- shipment on sea transports. most complicated problems hindering bio-fuel • trade companies developing efficient production growth will go on the back burner Demand channels for finished goods sale, Fuel pellet producers have begun to pay serious and be solved as the industry extends. The industry will be growing independently from It is still mainly European buyers that demand transport and shipment companies offering attention to questions of choosing raw material • foreign consumers’ demand. Russian fuel pellets. They are generally traders different logistical decisions for bio-fuel sources and also of proper equipment integration and large electric companies. Russian traders producers and purchasers, in order to produce stably high-quality bio-fuel. We expect a number of enterprises to appear As per our estimate, during the recent 3–4 years, have been more active recently, competing for • primary and accessory equipment suppliers, in the near future with production capacities the bio-fuel industry has been invested with an opportunity to accumulate pellets produced at least € 50 million. This investment process by different factories and ship them to foreign economic structures offering different high enough for monthly shipments of no less • involved many companies and entrepreneurs consumers. financing schedules for bio-energy than 2 thousand tons of pellets, its quality independent of one another. It is they who projects, complying with the most widespread European standards and requirements. will form a new industry backbone and who It is significant that today’s demand for Russian
№ 1 2006 № 1 2006 MODELBIOENERGY FORESTS OF RUSSIA
pellet exceeds supply by no less than 10 times Efficiency of transport and logistic operations of 2006. Speaking of bio-fuel export in the lump, the and this stimulates investors to organize new are the key profitability factors for a product majority of buyers and serious consumers in pellet factories. There is no reason to think with a retail price rarely increasing €200 per Western Europe (we can also judge by dozens that the situation will change by 2007, even ton (a little more than 1.5 cubic metres) and Big bags of requests) prefer to receive pellets in bulk providing the predicted production volume with a selling price of €60–80 per a ton at a Fuel pellets, like many other free-flowing by regular ship consignments of 2–6 tons per growth. factory. Costs for pellet delivery from producers products, are often packed in propylene bags month. to consumers can amount to 50 % of the cost – the so-called big bags. The content of the Russian pellets are mainly exported through of manufacture! The annual economy of €1 per most widespread big bags is 1 cubic metre, Large buyers usually have special-purpose the Baltic seaports: Saint Petersburg, Liepaya, ton for a large producer provides him a ten- that is, providing the standard bulk density of terminals and warehouse complexes in European Ventspils, Klaipeda, Tallinn and others. Bio- thousand euro benefit and makes only 3–4 % the product is 0.65, they store about 650 kg ports providing minimum expenditures and fuel is partly shipped to Europe through the of the logistic expenditures. of pellets. Such packaging is convenient for maximum flexibility for the logistic activities at black seaports. Bio-fuel of the best quality is transportation, protecting the product from their end of the chain. In this case, the received delivered to Europe by motor transport. There are different variants to solving this physical damage and providing use of primitive pellet is unloaded to specialized warehouses, problem. Their choice depends on the situation technologies (crane, autoloader) for loading. where the product is divided and packed, if Customs statistics for 2005 show a fuel pellet of the particular bio-fuel producer and on necessary, in big bags or 10–20 kilogram retail export volume of up to 60,000 tons. The main product markets strategically selected by the Big bags, from the point of view of pellet packages with proprietary labels, in which the export directions are Scandinavia, Finland, Great producer. delivery to Europe, have such drawbacks as product is sent to the trading network or to Britain, Germany and Italy. We can expect consumers’ costs for goods processing at the final consumers. The significant part of the significant increases in export volumes in 2006 recipient terminal, and costs for used big bags pellet is delivered to consumers in bulk by if the main target markets persist. TYPES OF PACKAGE utilization. Considering the high labour cost in special transport. The described operations There are different types of fuel pellets Europe, pellet buyers often prefer to get rid of don’t require many workers, whose labor is packaging depending on the way they will be big bags in Russia. For example, big bag cutting quite expensive in Europe. CHOOSING OPTIMAL LOGISTICS transported and utilized. in bulk carrier bilge is one of the most popular DECISIONS FOR FUEL PELLET variants of pellet trans-shipment in the port of The product can be delivered by sea transport Saint Petersburg. on trays as general cargo in case the buyer EXPORTORIENTED PRODUCTION In bulk in Western Europe is able to receive pellets The most difficult issue of the export-oriented Fuel pellet shipment in bulk is the most Paper or plastic bags in big bags or in retail packages. This makes 100 production of fuel pellets is the produced pellet attractive for large European buyers – boiler logistics within Russia simple and inexpensive. 101 transportation to the foreign consumers. houses, CHP plants and large traders. This Fuel pellets in retail packaging occupies a However, in this case, pellet consignments are variant provides the most flexible processing certain, however not large, sector in the small, which is not very beneficial to European High bulk density permitting bio-fuel’s easy of the received goods. Pellets received in bulk European market of solid bio-fuel. It is usually importers. transport for long distances is one of the can be packed in company packages or sent to 10–20kg of paper or plastic bags that can be most crucial benefits of the pelletized biofuel. the final consumers by specialized transport. sold through retail channels. For wholesale, such There is a possibility to use inner waterways, Another significant feature of the fuel pellet is Besides pellets, shipments in bulk can help bags are usually put on trays and delivered in decreasing transportation costs, provided a its homogeneous consistency that permits the economize on ship freight charges. Although containers or by freight transport as general factory is situated near an accessible river or automation of loading and burning. fuel pellet shipment from Russia in bulk is cargo. lake. The main problem is that the majority of greatly hindered due to a number of reasons: waterways freeze in winter – the best season Nevertheless, in Russian practice the mentioned Often it is extra quality pellets for private for the bio-fuel market benefits provide hardships, especially when 1) Russian ports lack specialized facilities consumers that are packed into bags and exporting. for bio-fuel systematic trans-shipment (bulk intended for burning in special furnaces warehouses at a wharf wall, transport lines for and fireplaces, or for barbecue – instead of Motor transpor Efficient processing of free-flowing products efficient loading of pellets in the ship, terminals conventional Russian wood coal. Such bio-fuel Motor transport is the most expensive yet require use of specialized equipment and for quick unloading of cars, etc) Perspectives is usually more expensive and it is delivered to simplest and most flexible way to deliver pellets experience and skills that technologists of to construct such terminals are quite vague Western Europe by motor transport. to consumers. Pellets are usually delivered bio-fuel factories don’t possess, as they are used taking into account the existing deficit of port by motor transport for short distances. No to operating timber and woodworking products. facilities. specialized equipment is required to load pellets This leads to a necessity to integrate bunkers, CHOOSING A TYPE OF TRANSPORT into bags, or big bags into box cars. Autoloaders devices for pellet packing in big bags or paper 2) Most of the existing bio-fuel factories simplify operations with big bags or cargo on bags into production lines. The finished product are not equipped for big volumes of pellets Water transport trays. Motor transport is not dependent on must be delivered to consumers or seaports, in bulk shipment. Finished goods are to be Sea transport is the most economical way to railways and waterways. which usually are remote from bio-fuel factories. delivered to port by motor transport or box cars, deliver fuel pellets for long distances. Pellets Consequently, we need transports protecting which naturally increases transport costs. can be loaded on ships in bulk, in big bags or This type of transport is more often used for pellets from atmospheric precipitations, physical in retail packages, depending on the buyer’s pellet delivery to small consumers including damage and providing maximum easy and quick 3) Unfortunately only several dozen demands and the logistical opportunities of private consumers within a radius of several product packing and unpacking. operating bio-fuel producers will be able to the factory. hundred kilometers. Factories situated far from ship consignments monthly by the beginning railways and waterways or other types of distant
№ 1 2006 № 1 2006 MODELBIOENERGY FORESTS OF RUSSIA
transport deliver finished goods to railway • how and in what form does the final Variant Peculiarities/characteristics and costs Necessary conditions/investments stations or ports. consumer want to receive biofuel? Pellet delivery from factory to the port what methods of pellet delivery does the In some cases the pellet can be delivered • No additional investments are required. Big bag shipment by Cost of big bags (about $10 per ton of pellets). bio-fuel factory have? Loading can be performed by a over long distances even for export and the motor transport Cost of voyage on the basis of 20-25 tons of product for one voyage standard loader. profitability is maintained. This is especially how do transport costs correlate with each • Big bag shipment by rail Cost of big bags (about $10 per ton of pellets) true when dealing with the pellets of best Spur-track is required of the methods? transport Railway tariff quality. It is sometimes even cheaper to deliver pellets in Europe by motor transport than by • how much finished product can be delivered Specialized motor transport is using every method? prevented sea transport or by railway. However, this way Equipment for transport loading Shipment in bulk by rail According to our data, not performed in Russia yet through the upper hatches (silo, usually employs parallel trips and it would be • what opportunities for pellet receipt do the transport difficult to deliver large pellet consignments mechanical or pneumatic transport bio-fuel buyers have? preventing damaging of the pellets) is to European consumers. required. do the final consumers need products packed • Shipment in bulk by Spur-track, access to rolling stock and Due to efficient utilization of the hopper cars area railway tariff can be in retained packages or big bags? rail transport (hoppers equipment for car loading through the cheaper than it is when the box cars and big bags are used. Rail transport - grain carriers) upper hatches is needed • where can pellets be packed with at minimum Railway transport is more profitable for pellet Pellet pre-packing at a Cost of package cost complying with all requirements of factory in 10-20 kg bags Cost of voyage based on 20-25 tons of product for one voyage. Packing equipment delivery in packages or in bulk within the the buyer? Is it possible to do at the and shipment in retail Extra expenses are possibly recovered by higher selling price of pellets Autoloader Russian Federation. Costs of delivery are lower factory or at a site for loading on the main package packed in compliance with the requirements of the consumers. than when motor transport is used. transport? Cargo processing in port The cheapest and the easiest way of trans-shipment. Approximate cost Pellets are delivered in box cars in bags and in • which place is more beneficial for the of trans-shipment in the port of Saint Petersburg is USA $10 per one big bags as well as in specialized hopper-cars accumulation and storage of pellet ship Pellets trans-shipment gross ton. No special conditions are required. consignments in case they are shipped by sea in big bags or retail It is the most economical variant in case a buyer is able to receive Can be performed by any stevedore for free-flowing products. package on trays pellets in big bags in bulk. company of the port. transport? at the factory or port? or in the Costs due to long accumulation of the ship consignment within the port However, rail transport has its drawbacks. Firstly, warehouse of the foreign trader purchasing area can be incurred when pellets are delivered by motor transport. bio-fuel from several factories? Trans-shipment demands high labor costs and takes much time. The the presence of spur-tracks and often of access Trans-shipment of pellets approximate cost of trans-shipment in the port of Saint-Petersburg is to rolling stock limits the opportunity to use delivered in big bags No special conditions are required. 102 $14 per gross ton. Big bags are destroyed during the trans-shipment 103 You can choose several alternatives depending from a factory and big Can be performed by the majority of railways. Secondly, box cars packed with cargo or and are to be utilized afterwards. bags unpacking to the stevedore companies of the port. on your answers to the questions. You can When pellets are delivered by motor transport costs can be incurred due big bags takes too much time. And grain carriers bulk carrier bilge loaded through the upper hatches require special calculate combined costs for every variant. to long accumulation of the ship consignment within the port area. equipment – silos, bunkers with moving floors With the help of the pontoon crane. Large lifting capacity crane equipment, Let us investigate a simple example: It is the most economical method of pellets trans-shipment nowadays. spur-track, and opportunity and transporters for lifting pellets. Cost of trans-shipment in the port of Saint-Petersburg is USA $10 per a for simultaneous loading big Let a bio-fuel factory with a monthly output gross ton providing there is a proper plan. Rejecting big bags ensures consignments from factories are of 200 tons of fuel pellets have spur-tracks, be Trans-shipment of pellets the additional economy. required. Logistical chain delivered in bulk from Through the special-purpose terminal. It requires an area within a port with situated in the Northwest of Russia and plan a factory by railway According to our opinion, business can exist At present there is no special-purpose terminal for fuel pellet trans- a wharf wall and special terminal to ship pellets for consumers by sea through transport in hopper cars. shipment in Russia. Several companies have announced their work on equipment, including at least: for a long time only by being profitable for all the port of Saint Petersburg. such projects independently of one another. Existing loading terminals - device for lower unload of hoppers, its participants. That is why we believe that are difficult to use due to a number of reasons and currently loads by - automated warehouse, one should ensure optimization of the whole other export freight flows, which is the main reason. - transporters for quick loading of In such a case here is the following logistical It is potentially the most efficient and economical variant. pellets in the ship. logistical chain from the very beginning, from chain: Receipt of cargo at the receiving port the raw material receiving and palletizing line ! ! at the factory up to the boiler house furnace Factory Sea port E u r o p e a n b u y e r / c o n s u m e r It is the most widespread method, providing minimum expenditures ! boiler house/power plant of consumer. and maximum flexibility to the pellet recipient. Large electric power or fireplace in the private hose somewhere in stations in Western Europe possess their own trans-shipment facilities Specialized equipment for unloading is Sweden, Germany or (why not?) Russia. Each stage (arrow) has a number of variants Receipt of pellets in bulk for receipt of fuel in bulk. Pellet receipt traders unload pellets to their required. However, it is present in the warehouses, where the goods are sorted and packed, if necessary, in big European ports described in the table. bags or retail packages. Then the goods are sent to the final consumers Logistical chains will definitely include several or to the retail chains. operations. The primary cost of bio-fuel delivered You can choose an optimum decision after you Pellets are unloaded in the common way. to consumers and consequently the overall mass consider different combinations of the above Big bags are as usual unpacked after unload and are to be utilized, Receipt of pellets in big which also leads to certain expenditures. Unloading actions are quite of profits gained by all the chain participants No special conditions. mentioned variants and calculate their prime bags labor intensive and take much time if a consignment is large. depends on who performs these operations, costs involving direct transport costs, existing On big bags unpacking the finished goods are processed in a way similar how and in what order he does them. limits and necessary investments in equipment to that of goods received in bulk. and infrastructure. You can similarly analyze Pellets are unloaded in the common way. Then a consignment is divided The variant is usually utilized when a During optimizing logistics one should take other methods of pellet delivery to consumers Receipt of pellets in and delivered to the retail chains or the consumers. preliminary order for pellet production retail package This variant is potentially beneficial, while it is worth-while only if it is and packing in compliance with the into account at least the following: by motor transport, for example. retail market oriented specifications is made in Russia
№ 1 2006 № 1 2006 MODELBIOENERGY FORESTS OF RUSSIA
Even despite the comments we made in the PROBLEMS AND SOLUTIONS tables above, we can not claim a priori that a variant is optimal in general. Such decisions Each of the Russian biofuel producers faces should be based on the analysis of the situation, at least 10 buyers in Western Europe. There investment and production opportunities of are about 10 companies willing to accumulate certain companies. Say, in one case, pellet biofuel and sell it to larger consumers abroad. packing in paper bags is cheaper in Russia and Each of the traders could buy all the pellets in a different situation it is too complicated. produced in Russia. The demand for Russian In one case it is beneficial to unpack big bags pellets today exceeds the supply by 10. This in a Russian port and in another case it is market situation seems to be favorable for cheaper for the buyer. new producers and complicated for European consumers. Traders cannot count on high profit Of course, it is possible to perform such analysis margins for their services. if both parties – a seller and a buyer – “show- down” and show their costs structure in order to We have to point out that the situation is decrease primary costs of production delivered changing rapidly due to enormous growth rates. to consumers. It is the only way to maximize It may lead to further price fluctuations not the overall mass of profit and provide mutually only regarding Russian biofuel, but also in the beneficial and long cooperation. whole European biofuel market, as long as Russia becomes a serious player. The growing volume Today there are about 40 operating producers of pellet production may lead to lower prices of solid biofuel in Russia. The average monthly for a period, which will inevitably lead to an production volume per producer draws up increase in consumption and thus, higher prices. approximately 500 tons – meaning about 30% of And so on. their average nominal capacity. With experience accumulated, many of the factories will improve The Russian pellets market is rather disorganized. their efficiency to – say – 50% (about 33,000 It lacks transparency. Everybody is asking for 104 tons monthly). 10-20 more factories are expected a market price. But there is no ‘market price’ to open up before the end of 2006. Some of for pellets in Russia. Everybody tries to sell as them are going to be larger and more efficient expensively as possible or to buy as cheaply than anything constructed in the last 5 years as possible. There is no exchange, cartel or an with the underrated forecast of 60–80,000 tons association that systematically monitors and of pellets produced in Russia monthly during publishes the current price level and can be 2007 with an annual production of up to 1 trusted by most market players. mln tons. Maybe more. We have little reason to expect a significant portion of this amount European biofuel consumers and traders will to be used in the domestic market1: have to cope with this if they want to build up a reliable source of biofuel in Russia. 2005 – 60,000 tons 2006 – 300,000 tons One more problem is the logistics side. Without 2007 – 1,000,000 tons specialized seaport reloading facilities for bulk pellets, transportation of the product to Western Incredible growth rate? With at least 100 million Europe will cost a fortune. What a European buyer Euro flown into the sector from 2001 to 2006 pays for pellets on the USA basis accounts for it seems more believable. This gives European about 50% of the price. An investor, who dares biofuel consumers, traders and investors some building the first terminal that would accept bulk food for thought. There are many opportunities pellets from different producers and reload them as well as threats for European biofuel market onto ships in one of the Russian seaports, has a players in regard to the Russian bioenergy good chance to gain control over a large portion of sector, which we will examine now. the market. Such a terminal would allow decreases in transportation costs up to 30-50%!
SOURCING BIOFUEL FROM RUSSIA: To secure stable volumes of biofuel and an
1 This paragraph is based upon the results of the research performed by experts of WOOD-PELLETS.COM. For details, please visit: http://www.wood-pellets.com
№ 1 2006 MODELBIOENERGY FORESTS OF RUSSIA
acceptable price level, European consumers of these resources are not being used today. will have to control more links to the bio-fuel Two important reasons for that are: value chain. This can be achieved: • a lack and expensiveness of investment • Through personal or controllable trade resources in the domestic market companies in Russia, which should gather a wish to secure the project by attracting the necessary volumes of the product of • a bio-fuel consumer as an investor or a needed quality inside Russia. partner in a joint-venture – to secure the • Through investment into bio-fuel production sales side and attract cheaper credits from located as close to the raw materials Europe. (biomass) as possible. This creates the perfect opportunity to invest These two approaches are described in more money into one of the fastest growing markets detail below. in the world. Preferences given by the Russian Federation as well as regional authorities for environment-related projects and investors PURCHASING REPRESENTATION BY provide for more and more favorable conditions AN AGENT IN RUSSIA and investment security. To successfully compete against other buyers, one has to be in a position to control the OTHER OPPORTUNITIES IN THE purchasing process. This can be done personally or through a reliable agent. In this case, it would RUSSIAN BIOENERGY SECTOR be possible to offer producers an individual The growing bio-energy industry also offers approach and the best possible purchasing perfect opportunities for suppliers of equipment, conditions. For instance: and financial and consulting organizations. The new branch needs technology and financial payment upon receiving the product at the • resources, as well as expertise. These resources port 106 mainly come from the West. 107 • partial pre-payment For example: over 35 contracts were signed and assistance in solving logistics tasks • paid in 2002-2006 for complete biomass pelleting • purchasing on ex-works basis lines to be imported from Western Europe, and about the same number for briquetting presses, An agent will also be able to make contracts not to mention domestic plants and presses under the local jurisdiction and better control the imported from the Baltic States. fulfillment of these contracts. It would also help to manage costs better and exclude unnecessary The market for modern boiler-house equipment intermediaries. Furthermore, packing/reloading and solutions is also very promising. facilities should be considered. Of course, manufacturers have to pursue This approach is certainly only feasible with consequent marketing policies to promote their large volumes. solutions – efficient but expensive compared to domestic. Therefore, they need to establish Smaller buyers should rather address independent their own representations or use local marketing traders than producers of bio-fuel directly. The professionals. Partnership with local engineering price advantage of purchasing directly from companies is also very important. Besides that, factories would likely be spoiled by complicated the market does not require much investment logistics, changing suppliers, etc. into sales development, beyond participation in one or two correctly targeted exhibitions INVESTING IN BIOFUEL or conferences, placing localized information on the Internet and in relevant professional PRODUCTION magazines. Statistics show that only in Northwest Russia are there resources for the production of Anton OVSIANKO 16 million tons of pellets annually. The bulk
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
to launch the production of synthetic nets and evident in 1988–1989 when production volumes ceramic grinders. This enabled the lowering of of pulp and paper reached their maximum. At THE RUSSIAN PULP imports of equipment and bulk purchases of that time the main focus was put on mass molding and drying nets and grinders. production with low added value. Later on there began a crisis, which ended in 1998. AND PAPER INDUSTRY: With the adopted Decree a broad development The share of the pulp and paper industry in of research and experimental works in scientific the world market is not that big, it makes up institutions and laboratories of the pulp for 3 % in pulp production, and 2 % in paper and paper plants were considered. On the production. SITUATIONS, PROBLEMS grounds of the Central Research Institute, an All-Russia Research Institute of Paper was At present, Russia is 8th in the world production founded. Later, it was followed by Mariysky, of commercial cellulose and 13th in paper and AND PERSPECTIVES Astrakhan, and the Siberian Research Institute cardboard production. of Pulp and Paperboard. Test installations were built at the Bratsk Timber Plant, Baikal, In money terms, the production volume of Kotlas and Krasnoyarsk Pulp and Paper the pulp and paper industry in Russia came Mills. High educational institutions: The to 4.89 billion USD or 1,24 % of the total The timber complex plays an important role adoption of Decree # 478 of April 7, 1960 of Forestry Engineering Academy, The Leningrad production volume and 2 % of global pulp and in Russia’s economy. Its share in the total the Central Committee of the Communist Party Technological Institute of the Pulp and Paper paper production. It should be noted that in industrial production volume is about 3,8 % and the Council of Ministers of the Soviet Union Industry, and Siberian Technological and developed countries the share of the pulp and and it brings 4 % of the total currency revenue “On liquidation measures of the gap in the pulp Arkhangelsk Forest Engineering Institutes were paper industry makes up 12–15 %. In 2005, the from exports. and paper industry.” Within the frame of the involved in the training of personnel for new production growth amounted to 3,3 % owing to Decree the biggest enterprises were realized up enterprises in the field. output increases of market pulp – by 0,4 %, of Production volumes of the main kinds of timber until around 1980, e. g. Kotlas Pulp and Paper paper – by 1,7 %, of cardboard – by 4,5 %. products in 2005 are shown in Table 1. Mill, Syktyvkar and Bratsk Timber Complexes, 8.6 billion rubles of the country’s capital Baikal Pulp and Paper Mill, Amur, Perm and investments (before monetary reform) were In 2005, pulp production volumes of the The highest rates can be observed in the Selenginsky Pulp and Cardboard Mills, and the allocated for the development of the pulp and Russian plants remained practically on the 108 production of deep wood-processing (wood construction of the Ust-Ilimsk Pulp Mill began. paper industry during the period of 1961–1980. same level as in 2004 (increment from cooking 109 particleboard, fiberboard, plywood). No Operating plants – Arkhangelsky, Balakhninsky, Thus, the establishment and expansion of pulp was +0,2 %, from commercial cellulose such growth is evident in pulp and paper Kondopozhsky, Segezhsky, Solikamsky – and new and existing plants were based on the – +0,4 %). Paper production increased by 1,7 %, production. most of the paper, board mills and processing application of progressive technologies and including newsprint (+1,5 %) and texture paper plants had been significantly modernized tools, mainly imported, which led to the growth (+10,1 %). Simultaneously, there was a decrease Traditionally, the key timber productions of and enlarged. Much attention was given to and technological level of the industry. The in the production of offset (-3,5 %), writing Russian exports are low-priced goods. Round the construction of companies specializing results of this development were the most and notepaper (-13,2 %), and enamel paper wood and sawn timber make up about 60 %, in machinery and equipment production for market pulp – 9 %, newsprint – 8 %. the pulp and paper industry: Petrozavodsk and Izhevsk, heavy engineering plants, and Table 2. Pulp and paper production in 2005. The pulp and paper industry, being an integral reconstruction of the Krasnokamsk Plant (the Production Measurement unit 2005 2004 2005 in % to 2004 part of the timber industrial complex, started only one in Russia producing iron nets), and Pulp cooking thousand tons 5934 5922 100.2 its development in the 1960’s – 70’s upon the the Sverdlovsk Plant of pulp grinders, in order Commercial cellulose thousand tons 2419 2410 100.4 Paper thousand tons 3969 3903 101.7 Table 1. Production volume of main sorts of timber in 2005 Newsprint thousand tons 2008 1978 101.5 Offset paper thousand tons 452 469 96.5 Production 2005 2005 in % to 2004 Writing and notebook paper thousand tons 66.8 770 86.8 Timber removal, million cub.m 105 94.0 Enamel paper thousand tons 1.15 1.61 71.4 Commercial timber, million cub.m 93.7 101.6 Print paper thousand tons 6.9 11.9 58.0 Sawn wood, million cub.m 20.8 98.2 Textured paper million sq.m 126.2 114.6 110.1 Plywood, million cub.m 2.6 113.6 Cardboard thousand tons 3055 2924 104.5 Fiberboard, million sq.m 378 110.5 Packaging pasteboard (including thousand tons 2248 2126 105.7 Particleboard, million sq.m 4.0 111.2 corrugated paper) Market cellulose, million tons 2.4 100.4 Paper bags million items 526 487 108.1 Paper, million tons 4.0 101.7 Cardboard boxes million sq.m 1939 1732 112.0 Pasteboard, million tons 3.1 104.5 Paper and cardboard containers thousand tons 124.3 98.3 126.4 Newspaper, billion issues 17.1 98.3 Magazines, billion issues 2.5 75.6 Source: State Statistics
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
(-28,5 %). Cardboard production grew by 4,5 % plants producing fiber semi-manufactures, production of packaging and sanitary-hygienic the previous years ensured support of the main in 2005, chiefly due to container boards and paper and cardboard from raw materials and goods. Among pulp and paper mills, the general types of production. However, the level of these corrugated paper (+5,7 %). The manufacture of market pulp supplying other mills; production level is determined by the 14 biggest investments supplied only the reproduction of paper bags increased by 8,1 % and paper and plants that make up 85 % of the production depreciated capital assets. Currently, worn-out board containers – by 26,4 %. • 3 pulp mills producing commercial cellulose capacities of pulp production (cooking), 90 % (depreciated, out-dated) equipment for pulp to supply other plants; of mechanic pulpwood, 76 % of paper and 48 % production has exceeded 90 %, and the load of There is a great demand for high-quality paper of cardboard. production capacities has gone beyond 85 %. – writing, print, enamel, laminated, decorative, sanitary-hygienic paper goods, etc. The growing • 38 paper mills producing various types The biggest producers in the pulp and paper An indispensable condition for dynamic need for containers and packaging is met by of paper from ready fiber semi-finished industry are the following – (Table 3). development of the pulp industry is the Russian producers by a maximum load of products, including waste paper. modernization of operating machinery, as existing capacities, while the lack of capacities A range of mills and plants belong to well as putting into operation new production for the production of other paper types implies • 26 cardboard plants. international companies, e. g. Open Joint-Stock capacities. In this situation, the stated plans a necessity to meet the demands by way of Company “Svetogorsk” to International Paper, of some regions of the Far East to establish import. Usually processing works of various paper and OSJC “Mondi Business Paper – Syktyvkar” to cooperation with Chinese businessmen might be cardboard production are also a part of a pulp Mondi Group, control packets of shares of OJSC welcomed. In the end of May 2004 the Tomsk For the last four years the import of pulp and and paper mill. The total number of processing “Arkhangelsk Pulp and Paper Mill” is owned by Region and Province Kheyluntszyan signed a paper production has grown by 2,3 times and works in Russia, including those integrated into Pulp Mill Holding (Austria). memorandum on the construction of a pulp and came to 1,74 billion USD in 2004. Pulp and pulp and paper mills and others is distributed paper mill in the town of Asino. A catalogue paper exports, the main share of which are the following way: of investment projects in the forest industry made up by commercial cellulose, newsprint More details was also presented to the Irkutsk regional and container board, increased only 1,2 times, • production of paper and bleached goods – 74; administration. There is a plan to construct a up to 1,92 billion USD Consequently, import on types of joint Russian-Chinese pulp and paper mill in the growth is about two times ahead of the export • sanitary-hygienic paper goods – 21; Chita Region as well. A number of investment growth rate. production are projects are being planned (or are under implementation) by Russian pulp producers. • container manufacturing – 100; In 2005, approximately 100 enterprises operated given below: Thus, the modernization program of the Ust- 110 in the Russian Federation, including: Ilimsk Pulp Mill, set for 2004–2006, is planning 111 • wallpaper manufacturing – 32. investments of up to 30 million USD The goal 3 timber complexes producing pulp and paper, PULP PRODUCTION • Unfortunately, there is no exact information on of the program is to achieve the production sawn wood, plywood and chipboards; the number of currently operating enterprises, In 2005, pulp cooking came to 5934 thousand of bleached pulp of up to 700 thousand tons since a range of small companies has started the tons, only 0,2 % more than in 2004. A continuing per year. The Solombalsky Pulp and Paper Mill • 23 pulp and paper mills, pulp and cardboard decline of the production growth rate is evident considered and approved a program of technical (Picture 1). development of the company for 2005–2010. Table 3. Biggest pulp and paper producers Major actions according to this program are: Russian producers have encountered the modernization of Recovery Unit #1 (purchase Total Cardboard (all Market pulp Paper (all kinds) impossibility of further accelerating production of a new electric filter), that will help lower Biggest producers, 2004 thousand kinds) thousand thousand tons thousand tons sulfate emission, the purchase of equipment for tons tons growth at the given stage. The investments of Ilym Pulp Enterprise 2 379 1 422 250 707 Kotlas Pulp and Paper Mill 861 330 250 281 Pulp and Cardboard Plant (Bratsk) 683 483 0 215 Ust-Ilim Timber Complex 609 609 0 0 St.Petersburg Cardboad Polygraphic Plant 211 0 0 211 (Ilim Pulp Corporation) Mondi Business Paper – Syktyvkar 758 0 566 192 Archangelsk Pulp and Paper Mill 750 229 82 439 OJSC “Kondopoga” 703 0 703 0 OJSC “Pulp and Paper Mill Volga” 565 0 565 0 Solikamskbumprom 478 0 478 0 OJSC “Svetogorsk” 391 16 286 86 Sombalsk Pulp and Paper Mill 232 228 4 0 Serezhsk Pulp and Paper Mill 199 0 159 40 Naberezhnochelninsky Cardboard and Paper Cellulose on cooking Commercial pulp 178 0 49 129 Mill Baikal Pulp and Paper Mill 172 166 2 3 Picture 1. Pulp production in 1995–2005, per thousand tons
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
pulp washing on the base of a two-roll press tons or 53,7 %. Reconstruction of the pulp Picture 2. Paper production in 1995 – 2005, per thousand tons. to reduce fuel burning, fresh water use, and production of the Mill will provide an increase to lower wastage to the biological cleaning of the cooking pulp yield from 80 thousand station. to 123 thousand tons. The value of the reconstruction project is over 30 million The Northwestern Timber Company and the USD Investments to Mondi Business Paper Canadian Corporation GL&V ratified a vendor – Syktyvkar amounted to 40 million EUR in contract of equipment for the reconstruction 2005. The main focus in 2005 was given to of washing and sorting of non-bleached pulp two projects: Transition to the non-chlorine and bleached cellulose of the Nemansk Pulp (ECF) bleach of softwood cellulose (20 million and Paper Mill. After reconstruction the mill EUR) and modernization of the recovery unit will increase pulp cooking for 43 thousand #4Ó (8 million EUR). In January 2005, Open
Table 4. Pulp cooking production by Russian companies, thousand tons
2005 in % Newsprint production Company Region 2005 2004 2003 Paper of all sorts to 2004 Kotas Pulp and Paper Mill Arkhangelsk Region 999.4 952.5 900.3 104.9 Arkhangelsk Pulp and Paper Mill Arkhangelsk Region 826.6 788.2 770.8 104.9 Bratsk Pulp and Cardboard Mill Irkutsk Region 758.6 755.3 737.2 100.4 Joint-Stock Company “Kotlas Pulp and Paper of production capacities at the plants. Ust-Ilym Timber Complex Irkutsk Region 713.9 678.8 650 105.2 Mill” and Andtritz Company – a producer and Mondi Business Paper - Syktyvkar Komi Republic 545.0 546.3 505.7 99.8 supplier of pulp and paper industrial machinery The decrease in paper production was caused by Solombalsky Pulp and Paper Mill Arkhangelsk Region 210.8 233.1 212.9 90.4 signed a vendor contract on the evaporator the drop in printing and publishing (by 2.8 %). Segezhsky Pulp and Paper Mill Republic of Karelia 288.1 211.9 243.2 136.0 station. The contract is valued at 14 million This is mainly connected with the reduced Joint-Stock Company Kondopoga Republic of Karelia 102.2 111.4 105.4 91.7 600 thousand EUR According to the Ilim Pulp circulation of periodicals. Advertisement growth strategy the Kotlas Pulp and Paper Mill is in mass media has influenced consumers to Mariysky Pulp and Paper Mill Republic of Mari-El 104.3 100 87.5 104.3 to be seriously modernized. Over 30 million refuse to buy periodicals. The application of Eniseysky Pulp and Paper Mill Krasnoyarsky Krai 78.3 92.3 90.8 84.8 112 USD is planned for the construction of a new modern means of communication (Internet, 113 Pitkaryanta Pulp Mill Republic of Karelia 76.8 90.2 80.8 85.1 evaporation station, half of which is invested cellular phones) is also significant. In 2005, Selenginsky Pulp and Cardboard Plant Buryat Republic 90.3 86.8 85.8 104.0 by the Ilim Pulp Corporation; the remaining the publication of newspapers came to 98,3 %, Joint-Stock Company “Tsep Russ” Kaliningrad Region 56.3 83 80.7 67.8 amount will be credited by the World Bank of magazines – 75,6 %. Solikamskbumprom Perm Region 67.5 67 81.7 100.7 and drawn from the funds of the Kotlas Mill. Joint-Stock Company “Vyborg Cellulose” Leningrad Region 60.5 60 56 100.8 At the same time it should be remarked that Sokolsky Pulp and Paper Mill Volodga Region 36.2 30.3 41.9 119.5 in recent years frequent declarations about NEWSPRINT PRODUCTION Kartontara (Maykop) Adygei Republic 21.3 17.1 19.9 124.6 investments in the construction of pulp and As for paper production in general, the Poligrapgkarton Nizhny Novgorod Region 6.8 10.2 14.8 66.7 paper plants have been made, however not a growth rate of newsprint output was reduced single new mill has been built. as compared with 2004. In 2005, companies produced 2,008 thousand tons of newsprint, Table 5. Market cellulose production by Russian companies, thousand tons The Arkhangelsk and Irkutsk Regions became which is 1,5 % more than in the previous year, the leaders in cooking cellulose production in while in 2004 production growth was 9,1 %. 2005 in % Company Region 2005 2004 2003 2005. Over 60 % of the total pulp production in Newsprint in Russia is an export-oriented to 2004 Russia and 85,5 % of commercial cellulose are product. The physical volume of exported Ust-Ilym Timber Complex Irkutsk Region 656.9 621.5 602.6 105.7 accounted for by these two regions. newsprint grew by 4,7 % in comparison to the Bratsk Pulp and Cardboard Mill Irkutsk Region 495.7 498 484.4 99.5 previous year and reached 1319,3 thousand Kotas Pulp and Paper Mill Arkhangelsk Region 351.1 330.2 311.1 106.3 PAPER PRODUCTION tons or 606,1 million USD Apart from hardwood Arkhangelsk Pulp and Paper Mill Arkhangelsk Region 227.9 229.4 216.9 99.3 pulp exporters, a lockout in Finland was also Solombalsky Pulp and Paper Mill Arkhangelsk Region 225.7 228.1 206.9 98.9 In 2005, paper production increased from 1,7 % an advantage to newsprint exporters. During Baikal Pulp and Paper Mill Irkutsk Region 142.4 165.8 171.4 85.9 to 3969 thousand tons, in comparison with the the lockout, many Finnish publishing houses, Pitkaryanta Pulp Mill Republic of Karelia 82.3 89.8 80.4 91.6 growth by 5,4 % in 2004; including newsprint including large ones, had to increase the import Joint-Stock Company “Tsep Russ” Kaliningrad Region 49.9 72.6 69.1 68.7 production growth by 1,5 %, as compared to of newsprint from Russia because of a deficit the 9,1 % increase in 2004. in their own production. It can be expected Mariysky Pulp and Paper Mill Republic of Mari-El 32.9 25.9 14.7 127.0 that paper prices will continue to grow, and Joint-Stock Company “Vyborg Cellulose” Leningrad Region 10.2 17.6 16.4 58.0 Picture 2 shows a slowdown in paper production, an increasing demand will exceed the existing Mondi Business Paper - Syktyvkar Komi Republic 9.4 10.2 9.3 92.2 which is the result of a decrease in pulp capacities of paper mills, which are currently production and a high degree of the exploitation maximized. Source: Lesprom Industry Consulting
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
Despite this, Russian producers are continuing 4 grinders for pulpwood production of 98 end of 2006, Open Joint-Stock Company “Volga” export was expected to reach 1.314 million implementation of the programs toward million RUR This will allow the improvement of plans to invest about 2 million EUR toward tons, reaching 66 % of the production volume, equipment modernization. For example, in May technical maintenance of the paper machines. the modernization of Paper Machine #5 in and taking into consideration a favorable 2005 the Kondopoga and Petrozavodskmash The delivery of the first two machines is order to increase the production speed from price situation, going beyond 600 million companies signed a vendor contract for planned for the beginning of 2006. By the 900 to 950 m / min, which will enable the UDS of the newsprint export. The leading augmentation of a general production volume importers of Russian newsprint are companies of the pulp and paper mill by 5–6 thousand from India (244 thousand tons), Germany Table 6. Paper production by companies in 2005, per thousand tons tons. The company’s management is also at and Turkey (150 thousand tons each), Great 2005 in % the final stage of negotiations to enter a Britain (90 thousand tons), and the Ukraine Company Region 2005 2004 2003 to 2004 contract to modernize Paper Machine #8, a (77 thousand tons). Newsprint imports to Joint-Stock Company “Kondopoga” Republic of Karelia 713.7 703.45 584.2 101.5 total value of 20 million EUR For the end of Russia have not exceeded 2-4 thousand tons spring – beginning of summer, a technical Mondi Business Paper - Syktyvkar Komi Republic 545 566 512.9 96.3 for over 6 years. inspection of the paper machine is planned, Joint-Stock Company “Volga” Nizhny Novgorod 570.6 565.11 555.5 101.0 which will cost 400 thousand EUR, followed Solikamskbumprom Perm Region 479.1 477.53 450.8 100.3 by a modernization contract for 2007, which CARDBOARD PRODUCTION Kotas Pulp and Paper Mill Arkhangelsk Region 255 251.12 249.5 101.5 is expected to be signed by autumn of 2006. The results of 2005 reveal that cardboard Segezhsky Pulp and Paper Mill Republic of Karelia 222.7 158.71 176.1 140.0 The Volga Company is considering entering production in Russia amounted to 3,055 thousand Arkhangelsk Pulp and Paper Mill Arkhangelsk Region 81.3 82.07 80.1 99.1 into a modernization contract with one of tons and increased by 4,5 % in comparison Naberezhnochelninsky Cardboard and Paper Mill Republic of Tatarstan 51.08 49.1 47.1 104.0 the two companies – Metso Paper (Finland) with 2004. At the same time, container-board Eniseysky Pulp and Paper Mill Krasnoyarsky Krai 32.6 36.19 36.2 90.1 and Voit (Austria). At the first stage of the production grew to 2,248 thousand tons Sokolsky Pulp and Paper Mill Volodga Region 21.5 31.56 42.4 68.1 paper machine’s reconstruction, it is planned (105,7% to the indices of 2004). Despite the Joint-Stock Company “Mayak” Penza Region 30.4 30.82 29.5 98.6 to increase production speed from 1400 fact that cardboard production growth has Kamennogorsk Paper Mill Leningrad Region 32.85 27.23 24.6 120.6 m / min (project capacity) to 1450 m / min. slowed down, this segment, along with paper Mariysky Pulp and Paper Mill Republic of Mari-El 26.55 24.14 26.3 110.0 At present Paper Machine #8 produces paper bag manufacturing, is a leader with a high Troitskaya Paper Mill Kaluga Region 10.3 19.64 26.5 52.4 at the speed of 1370 m / min. The volume of growth rate in pulp and paper industry. Kondrovskaya Paper Company Kaluga Region 19.3 17.46 15.4 110.5 investments in the first reconstruction phase Rostovbumaga Rostov Region 13.46 12.19 10.8 110.4 is 10 million EUR In the second phase, the In the context of the continuous growth of 114 Velgiyskaya Paper Mill Novgorod Region 12 11.78 11.6 101.9 speed will reach 1650 m / min. The volume of demand for containers and packaging materials, 115 Alexandrovskaya Paper Mill Kostroma Region 6.1 6.3 5 96.8 investments will come to 12 million EUR On the load of cardboard production capacities has the whole, reconstruction of the Paper Machine Selenginsky Pulp and Cardboard Plant Buryat Republic 6.1 5.72 6.3 106.6 exceeded 90%. At the given stage, acceleration will provide an increase in paper production Polotnyanozavodskaya Paper Mill Kaluga Region 5.18 4.99 5 103.8 of the production rate is only possible by volume by 30 thousand tons per year. launching new production capacities. Most Kamenskaya Paper Mill Tver Region 1.9 4.07 5.4 46.7 of the investment projects declared in 2005 Solombalsky Pulp and Paper Mill Arkhangelsk Region 4.3 3.58 3.7 120.1 The share of Russia in the world market of concern the production of corrugated board, Alatyrskaya Paper Mill Chuvash Republic 4.25 3.57 3.7 119.0 newsprint makes up for 5 %. which is a product in high demand. The Stora Baikal Pulp and Paper Mill Irkutsk Region 2.38 2.48 3.5 96.0 Enso Combination stated that it is necessary Technicheskaya bumaga Yaroslavl Region 0.85 1.61 1.6 52.8 Newsprint is the major mass production of to expand the production of corrugated boards Cardboard and Paper Plant Republic of Bashkortostan 0.2 0.69 0.7 29.0 deep processing for export. In 2004, of 1.979 in Russia. The two mills built earlier do not Joint-Stock Company “Proletary” Bryansk Region 0.83 0.6 0.4 138.3 million tons of produced newsprint, about cope with orders. Investments toward the Source: Lesprom Industry Consulting 1.26 million tons were exported (64%) in the construction of a new plant are estimated at amount of 500 million USD In 2005, newsprint 60-70 million EUR.
Table 7. Newsprint production by companies in 2005, per thousand tons
2005 in % Company Region 2005 2004 2003 to 2004 Joint-Stock Company “Kondopoga” Republic of Karelia 701.2 693.2 573.6 101.2 Joint-Stock Company “Volga” Nizhny Novgorod 555.4 553.7 541.4 100.3 Solikamskbumprom Perm Region 472.9 469 441.6 100.8 Mondi Business Paper - Syktyvkar Komi Republic 180.0 171.8 174.8 104.8 Kamsly Pulp and Paper Mill Perm Region 63.0 53.2 47.6 118.4 Eniseysky Pulp and Paper Mill Krasnoyarsky Krai 31.6 34.7 34.6 91.0 Sokolsky Pulp and Paper Mill Volodga Region 3.37 3.6 - 93.6
Picture 3. Newsprint production in 1995–2005, per thousand tons Source: Lesprom Industry Consulting
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
Table 8. Cardboard production by the biggest companies, per thousand tons In October 2005, a “Gotek” company (Kursk the unwillingness of new owners to sustain Region) put the first production line of energy consuming production. 2005 in % Company Region 2005 2004 2003 corrugated board containers into operation in to 2004 the Tula Region. Its value is 7 million EUR. The The “Panse” company of St. Petersburg began Arkhangelsk Pulp and Paper Mill Arkhangelsk Region 475.3 439.2 434.4 108.2 total project value is about 40 million EUR. The the production of new packaging of corrugated Kotlas Pulp and Paper Mill Arkhangelsk Region 310 287.83 271 107.7 first line will specialize in manufacturing board by a German technology that will cut Bratsk Pulp and Cardboard Mill Irkutsk Region 212 213.78 195.8 99.2 transport packing cases of corrugated packaging prices by 30%. In 2004, the company St.Petersburg Cardboad Polygraphic Plant St.Petersburg 205.9 211.17 213.5 97.5 board with a multi-colored flexography. The invested about 135 thousand USD, and the (Ilim Pulp Corporation) construction of the plant started in December production volume made up 6 million m2. In Mondi Business Paper - Syktyvkar Komi Republic 197.4 193.6 179.9 102.0 2004, and in 2006 it is planned to launch a 2005, it was planned to invest 330 thousand Naberezhnochelninsky Cardboard and Paper Republic of Tatarstan 136.4 129.1 116.9 105.7 Mill second production line. The project capacity USD The thickness of the corrugated board 2 Perm Pulp and Paper Mill Perm Region 135.9 116.76 105.4 116.4 will account for 180 million m of corrugated is over 1 mm. It is expected that the new Selenginsky Pulp and Cardboard Plant Republic of Buryatia 84.6 79.35 77.8 106.6 boards per year. technology will enable the “Panse” company to increase production volume by 40%. Eniseysky Pulp and Paper Mill Krasnoyarsky Krai 66.3 76.02 74.6 87.2 Closed Joint-Stock Company “GOTEK-print” Mariysky Pulp and Paper Mill Republic of Maiy-El 67.9 58.07 49.8 116.9 (part of the GOTEK company, Kursk Region) Limited Liability Company “Aeroportstroy Kartontara (Maykop) Republic of Adygeya 54.4 51.88 52 104.9 has put into operation a Swiss line for the polyus” plans to build a cardboard and paper Segezhsky Pulp and Paper Mill Republic of Karelia 49.2 41.16 58 119.5 corrugation and combing of paper. The new packaging plant in the Lomonosovsky district Ryazansky Cardboard and Ruberoid Plant Rayzan Region 40.92 40.98 44.1 99.9 line integrates both a corrugation unit and a of the St. Petersburg Region. The total area Kamenskaya Paper Mill Tver Region 45.5 40.77 37.1 111.6 combing machine into one production cycle, including warehouses will be 35,5 thousand m2. Altaikrovlya Altai Krai 39.73 34.31 33 115.8 which makes the terms of order execution Investments toward construction are estimated Kuybyshevkrovlya Samara Region 16.76 17.08 17.50 98.1 considerably shorter, and as a result, reduces at 5 million USD The projected capacity of Kondrovskaya Paper Company Kaluga Region 8.4 4.062 4.3 206.8 production costs. The minimization of costs the plant is 200 thousand tons of cardboard Syktyvkarskiye Bumizdeliya Komi Republic 0.6 3 3.3 20.0 allows optimal prices for the company’s containers per year. The deadline for putting Joint-Stock Company “Tsep Russ” Kaliningrad Region 1.9 2.58 2.7 73.6 clients. The production line produces high- the plant into operation is 2007. quality micro-corrugated board of B, E and The International Paper Company is considering AssiDoman (Sweden) has invested an F profiles with a maximum speed of 150 The main raw material for board production 116 the manufacture of a plant for corrugated additional 16 million USD toward the meters per minute. Corrugation is carried (test-liner and fluting) is wastepaper pulp. The 117 boards in Russia. An interdepartmental development of corrugated cardboard out by the Modul Facer line unit. A revival productivity of production units ranges from commission on the arrangement of productive production in the St. Petersburg Region. project from the Amursk Pulp and Board 5 to 250 tons per 24 hours. forces in the St. Petersburg region has agreed The plant started its operation in 1998. Plant (Khabarovsk Krai) attracted American upon establishing a plant for manufacturing The investment volume was 23 million investors. The Ministry of the Timber Industry PAPER BAG PRODUCTION containers of corrugated boards, the value of USD Currently, the plant produces 82 of the Khabarovsk Krai held a meeting with which is 6,6 million USD The plant’s capacity million m2 per year. By launching a second a delegation of experts from the Boston Production of paper bags in 2005 reached is expected to be 72 million m2 per year. The production line, the production volume will Consulting Group who carried out a project 526 million, which is 108,1% of the figures period of construction is 1 year. come to 120 million m2 per year. analysis for their clients. The Amursk Pulp and of 2004. Paper bag production is the most Board Plant was built at the end of the 1950’s, quickly developed segment of the pulp and and in the beginning of the 1990’s terminated paper industry. Acceleration of this production its existence because of privatization and is tied up with a continuous growth of demand
Cardboard of all sorts Container-board production
Picture 4. Cardboard production in 1995–2005, per thousand tons Picture 5. Production of paper bags in 1995–2005, per million items
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
for packaging materials, mostly from cement MECHANICAL WOOD PULP capacities. Russian pulp and paper companies mills could “delay” the aging of main assets, producers. The biggest bag production in Russia have been long oriented in the mobilization of increase production volumes, and apply more is the Open Joint-Stock Company “Segezhsky Pulp PRODUCTION reserves of the existing technological equipment progressive technologies while realizing and Paper Mill.” In 2005, the Mill increased its The production of mechanical or wood pulp is that was purchased 25-30 years ago. The loading investment programs. However, the scope of output volume to 20,9%, or 311,7 million paper not widely developed in the Russian plants, of pulp and paper capacities, starting from investments in the pulp and paper industry bags. The company’s share in the total aggregate since this semi-manufacture requires a high rate 1999, has been increasing by 3-5% per year. In does not supply the needs for regeneration and output of paper bags in Russia is 59%. of specific consumption of energy – 3000 kW / h 2005, an actual load of the main technological development. Should the investment level be per 1 ton, and has a low grade and stability equipment by the key types of production was under 1 billion USD per year, the depreciation SANITARYHYGIENIC PAPER of whiteness in a bleached state, and sewage over 85%. extent of the main equipment in the pulp that is difficult to clean. Production volumes and paper industry will be critical: 95-100 % PRODUCTION of this semi-finished product do not exceed 2 The extent of production machinery depreciation by 2008. If the growth rate of loads of pulp in the field is over 90%. During the last 20 and paper capacities stays at 3-5% per year, There are only two mills in Russia using pure million tons, of which 60% is manufactured from years, the stock of paper and board-making the depreciation of machinery will increase, pulp for these types of products. Toilet paper pulpwood by grinders, and 40% from chips by machines has not been renewed. More than investments will remain at the level of the produced by other Russian mills is made 70% crushing disc mills (ÒMM, ÕÒÌÌ). At present, 90% of pulp grinders have been operating previous years (up to 300 million USD per year) from wastepaper. operating plants have practically no reserves of for over 20 years and reached a state of and the production load might reach 95-100%. considerable physical depreciation. The load of Thus, having no additional investments for new Table 9. Production of paper bags by the biggest companies, million items production capacities at the biggest industrial production capacities, the Russian pulp and plants is the following: Kotlas Pulp and Paper paper mills will encounter the impossibility Mill – 102%, Pulp and Board Plant – 104%, for further development after 2008. 2005 in % Company Region 2005 2004 2003 Ust-Ilim Pulp Mill – 103 %, Syktyvkar Timber to 2004 Complex – 99%. The pulp and paper industry It is not easy to find investors for the pulp Segezhsky Pulp and Paper Mill Republic of Karelia 311.7 257.81 269 120.9 is characterized by a considerable number and paper industry: interest is low because Kotlas Pulp and Paper Mill Arkhangelsk Region 83.9 116.89 117.3 71.8 of small enterprises equipped with outdated of internal and external reasons. The internal Novolyalinsky Pulp and Paper Mill Yekaterinburg Region 53.8 55.2 54.6 97.5 machinery, limiting the demand of production. reasons refer to the condition of basic assets. Selenginsky Pulp and Cardboard Mill Buryat Republic 15.9 16.7 16 95.2 Most enterprises use energy-consuming and In spite of annual capital investments of 300- Maiysky Pulp and Paper Mill Republic of Mari-El 6.3 3.43 3.2 183 obsolete technologies from an environmental 350 million USD over the last five years, only 118 point of view with a high consumption of raw 5 % of Russian pulp and paper machinery meets 119 timber material, chemicals, energy resources the requirements of economic efficiency and Table 10. Toilet paper production by the biggest companies, million rolls and water. environmental security.
Company/Region 2005 2004 2005 in % to 2004 There are no favorable conditions for the The exploitation of obsolete, depreciated “SCA Hygiene Products Russia” 343,71 317,50 108,26 considerable involvement of raw paper material machinery causes the application of outdated Naberezhnochelninsky Cardboard and Paper Mill 287,32 275,79 104,18 into recycling. The coefficiency of wastepaper energy and resource-consuming technologies Syktyvkar Tissue Group 74,41 81,77 91,0 collection comes to 12% in Russia, which is that, in turn, bring about low labor efficiency. Syasky Pulp and Paper Mill 63,99 52,60 121,65 way less than in Europe (57,3%) and the States “At present, Russia produces 30 thousand USD Joint-Stock Company “Georgia Pacific” 40,77 41,26 98,81 (50%). Annual investments in the pulp and of pulp and paper per one employee in the Kaluga Region 40,59 46,87 86,60 paper industry range from 250 to 400 million industry, which is 3–4 times lower than in Rostov Region 34,96 40,27 86,81 USD, which makes up about 35% of all the Europe, Japan and Canada,” says Vladimir Karachayevo-Cherkessk Republic 19,40 19,20 101,04 investments to the timber complex and less Tchujko, Chairman of the Board of the RAO Krasnodar Krai 28,98 28,98 100,00 than 1% of the general investment volume in “Bumprom.” Another internal problem of Sverdlov Region 18,58 20,92 88,81 the country. These are chiefly the funds of the industry is the permanent increase of companies (75%) and credits from the Russian production costs caused by the growth of Primorsky Krai 9,26 10,57 87,89 banks (24%). The State takes practically no part energy prices, energy resources, raw materials, Vologda Region 12,99 16,05 80,93 in this process. It is explicable that because and transportation. “We have already overtaken Kirov Region 10,83 11,96 90,55 of limited free resources at pulp and paper and in some cases even left behind Western Tver Region 16,20 15,19 106,65 mills, it is preferable to implement relatively producers, regardless of having lesser technical Nizhny Novgorod Region 7,95 10,85 73,27 inexpensive (under 50 million USD) projects equipment and efficient technologies,” says Saratov Region 7,77 7,63 101,83 with a medium period of payback. Moreover, Vasily Preminin, CEO of the Segezhsky Pulp Altai Krai 5,02 3,58 140,2 in a number of cases available resources in and Paper Mill. According to Anton Loyter, in Novgorod Region 5,94 9,57 62,07 the industry are transferred by stakeholders the past year, a price situation both in the Kemerovo Region 4,04 3,57 113,17 to other economic fields because of low foreign and home markets of pulp and paper Irkutsk Region 3,68 3,68 100,0 investment attractiveness. Of the general production did not allow for the compensation Bryansk Region 25,18 21,92 114,87 investment volume, about 75-80% of funds of increased costs by the growth of prices. Kaliningrad Region 2,45 6,23 39,33 are used for technical re-equipment. Due to Prices for almost all types of paper and board Novosybirsk Region 3,79 3,42 110,82 this fact, big and medium pulp and paper production are lagging behind inflation rates in
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
the Russian Federation. As a result, according foreign markets, while transportation costs • Long terms of construction (8 years) and manuals in Russian are not published, to the information presented in the magazine are considerably lower. Besides, selling within payback periods of capital investments in and the “Technology of Pulp and “Conjuncture of Commodity Markets,” the the country is easy. “In the world markets pulp and paper mills; Paper Production” (new edition of the average profit in the timber complex dropped Russian pulp and cardboard give way to the Papermaker’s Reference Book) published from 11,7 % in 2003 down to 7,9 % in the first Scandinavian leaders by the production quality, now by the All-Russia Research Institute Low investment interest caused by the 6 months of 2004. and to the young market players – South • of Paper, contains frequently outdated and quality of production. America and Asia – by the sales volumes,” sometimes incorrect information. The State It should be pointed out that the tariffs of Anton Loyter explains. The Russian pulp provides minimal support to educational natural monopolies grow faster than the prices and paper mills are little by little losing • Depletion of timber resources in areas institutions. As a result, there is practically of timber producers, which has a negative impact their positions in the market of China. They with a developed infrastructure and road no laboratory equipment at the universities, on profits of timber enterprises and consequently have not caught up with the development of network along with the lack of considerable no opportunity to instruct students in on the acceleration of investments. The growth capacities to meet the growth of demand. It reforestation, which brings the necessity to practical training and no possibility for dynamic of the prices of natural monopolies is obvious that the insufficient supply from transfer logging operations to more severe professors to have practical studies or (December 2002 to December 2001) was the Russia is compensated by other sources. At nature-producing conditions; participate in an international workshop following: energy – 139,9 %, gas industry present, domestic pulp and paper mills have abroad. – 123,3 %, railroad transport – 119,5 %. At no serious influence on the global industry: • Absence of a national forest policy and These negative factors notwithstanding, the same time the prices of timber companies their share in the world’s volume of paper efficient Forest Code in the Russian an intensive growth of the manufacture of made up 106,5 %. production is 2 % (versus 12–15 % in countries Federation; corrugated boards and cardboard boxes related with a developed pulp and paper industry). to increasing demands of the food industry External factors also have a great impact on In the worst-case scenario, Russian companies No active state support for construction has surfaced. investment interest. Namely, the notorious will take risk becoming local players. However, • projects in the pulp and paper industry. “forest wars.” Unfortunately, an agreement that concentration in the home markets would Demand growth in the home market for container Ilim Pulp and “Bazovy Element” came to after a not save the Russian mills from competition and packaging cardboard influences production protracted opposition didn’t become the event with foreign producers. The segment of high- Separately among restrictive factors are the growth, which is supposed to be secured by a of the year for the pulp and paper industry. Wars priced (high-technological) paper production following: full load of operating capacities, as well as for property continue. Now, structures affiliated in the Russian market is already occupied by by the exploitation of recycling wastepaper with the “Bazovy Element” are interested in 2 European and American producers. The demand • There are no producers of modern and capacities at a number of enterprises. 120 other industrial giants – Arkhangelsk Pulp and is gradually growing, but a counteroffer from competitive machinery in Russia. The 121 Paper Mill and Volga Timber Complex. “Ugly home producers is absent. Single attempts “Petrozavodskmash” plant, despite its big Some mills have started the production of episodes and attempts to involve part of the to enter this segment have very modest production experience, uses 25 % of its corrugated paper; among them are the Open personnel along with legal forces do not add to results. For instance, the Open Joint-Stock capacities. Joint Stock Company “Mariysky Pulp and Paper the investment attractiveness of the industry,” Company “Vyborgskaya Cellulose,” after a Mill,” “Mayak,” “Okulovsky Bumazhnik,” and Vasily Preminin comments. Another negative paper-making machine reconstruction was • Insufficient involvement of planning “Elikon.” aspect is weak forest and investment legislation’s the first in the country to start producing institutions in industrial development. failure to provide investors with necessary enamel paper for books and magazines in Among five planning institutions (GIPROBUM, Lately, special attention has been given to guarantees. The inefficient elaboration of the 2004. But by a range of indicators (opacity, SibGIPROBUM, MosGIMPROBUM, ArkhGIPROBUM, the condition and development of the timber Draft Forest Code of the Russian Federation, lack softness) this production gives way to the Harris-Group) only the latter, due to its complex. The Russian Forest Code has been of a state program of forest road construction, Western analogues. The realization of more mobility, cooperated with almost all of the actively discussed. A Draft Resolution of the extremely low exploitation of the annual cut serious projects requires investments at a companies. Government of the Russian Federation on and, consequently, worsening of raw materials higher level. development of the timber industrial complex are only part of an endless list. As the experts Industrial science, represented by three and the Federal Program “Development of Deep say, the stagnation and decline of the industry Thus, the development of the Russian timber • research institutions (All-Russia Research Wood Processing and New Forest Areas” are are equal to failure. If no opportunities for complex is restricted by the following Institute of Paper, Central Research Institute under way, as are preparations of proposals on advancement are found, Russian companies factors: of Paper and Siberian Research Institute improving tariff policies in relation to timber will surrender markets of export. The home of Pulp and Board) have to a great extent production, and also proposals on the correction market, stably expanding by 4–5 % per year, • Insufficient competitiveness of many types lost their potential and have no influence of customs-duty rates for imported equipment gradually draws back export flows of pulp of production, lack of modern high-tech on the development of the pulp and paper and machinery that provide the best existing and paper production. In the beginning of machinery and modern technologies at most industry because of a lack of state support technologies at forest companies. 2000, some Russian producers quit many West enterprises; and big industrial orders. European markets. This process may continue In accordance with this program the production – simultaneously with a demand growth within • Low development level of production volumes by 2015 should reach: the country. capacities at a high exploitation rate (up • Staff training does not meet the modern to 90 % in the pulp and paper industry); requirements of production. Existing institutions of higher education give To trade pulp and paper production at the commercial pulp – 3400-4100 thousand High capital output ratio (the construction students a basic knowledge extracted • home market is more profitable: Russian • tons, increment by 1,4-1,7 times, prices are the same or higher than in the value of one plant is ca 1 billion USD); from 20–40-year-old sources. Contemporary
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
• paper of all sorts – 6300-7100 thousand import machinery in the amount of 7 million first of which will begin in September 2006, tons, increment by 1,6-1,7 times, EUR, with Russian equipment and materials and the last by October 2008. By the second totaling (2.5 million EUR). The project is to quarter of 2007 construction of an evaporation be executed by March 2006. Putting this unit station for board and paper production at the cardboard – 5150-5750 thousand tons, • into operation will enable an annual profit Kotlas Mill should be completed. The value of increment by 1,6-1,8 times. of 10 million USD The aggregate investment the construction is beyond 30 million USD This These figures were processed using the volume is over 11 million EUR, 60% of which activity is held within an investment program. predicted growth rate of volumes of pulp and are company funds, with 40% credited by the Launching this station will help lower the paper consumption by about 6%. They took into Volgo-Vyatsky Savings Bank of the Russian negative impact on the environment, reduce consideration the construction of capacities Federation. Modernization of the ground wood contaminating emissions in the atmosphere by producing goods with a high added value in operation will enable the Volga Pulp and Paper 626 tons per year and sewage to the surface order to increase replacements of imports, Mill to increase production of white ground waters by 54.1 thousand tons per year. The i.e. enamel paper and board, high-quality wood (for paper production) from 680 to 780 lowering of organic fuel consumption will lead office paper, sanitary-hygienic paper goods, tons per 24 hours. to a reduction of greenhouse gas emission Ust-Ilimsky Timber Complex various types of paper and board, multi-colored for more than 80 thousand tons per year. A packaging with plastic, water-proof coating, By the end of 2006, the Volga Company also vendor contract for an evaporation complex wallpaper and notebooks. plans to invest about 2 million EUR toward the was signed with the Andritz Company (Austria) Company (Republic of Karelia); chief installation modernization of Papermaking Machine # 5 in in January 2005. by Windmoller & Hoscher (Germany). The new Accelerating production volumes is expected order to accelerate the speed of production line will provide paper bags with plastic layers. after the modernization and reconstruction from 900 to 950 m / min, which will enable an At the Ust-Ilimsk Pulp Mill (Irkutsk Region, part The capacity of the line will total 300 paper of existing works. increase of the total production volume by 5-6 of the Ilim Pulp) in autumn of 2005 the second bags per minute. By the end of February 2006 thousand tons. stage of production modernization began. The the equipment will be put into exploitation. To accomplish this program by 2015 there is result of the project’s implementation should be a need for investments of 12.5 billion USD The Open Joint-Stock Company “Kotlas Pulp the increased productive capacity of the plant The Segezhsky Pulp and Paper Mill is considering for the reconstruction and modernization of and Paper Mill” (The Arkhangelsk Region, part in marketable bleached pulp production of up the feasibility of constructing a mill for operating plants. of the Ilim Pulp) has plans to construct a to 700 thousand tons per year. The project is commercial bleached pulp production. new plant for cooking neural sulfite pulp. The under way within the long-term program on Minimal necessary investments in the pulp and winner of the tender is Metso Paper (Finland). production volume increase, improvement of The Kamennogorsk Offset Paper Mill (St. 123 paper industry should be no less than 1.0-1.1 The value of the project is approximately 25 production quality and conservation of the Petersburg Region, part of the Northwestern billion USD per year. million EUR The construction of the new plant environment. This program undergoes two Timber Complex Group) erected a new wastepaper with a production capacity of 900 tons per phases of modernization and reconstruction of recycling plant, the value of which is over 10 The prognosis of the world pulp and paper 24 hours is part of the acceleration of the the complex. The first phase of reconstruction million EUR Productive capacity of the plant industry development is that Russia, China production of fluting at the Kotlas Mill. The entails an increase in bleached pulp output is about 80 tons of air-dry mass per 24 hours. and India will develop their industries with an plant is to be equipped with a modern system of up to 630 thousand tons per year at the The payback period of the project is estimated annual increment of about 5,3%. The expected for the continuous cooking of neutral sulfite plant’s projected capacity of 500 thousand tons. at 5 years. growth of certain types of pulp and paper in semi-chemical pulp. The opening is planned for Investments at this stage total about 19 million comparison with India and China is shown in April 2008. Within the frames of the project on USD The first phases started in 2004 and were On October 21, 2005 in the Tula Region the Picture 16. fluting production increase a modernization of to be completed in the beginning of 2006. The Gotek Company (Kursk Region) launched the Papermaking Machine # 1 is scheduled, with a second stage of reconstruction is planned for 3 first line of the mill to produce corrugated It should be pointed out that there are still productivity growth up to 400 tons per 24 hours. years. The amount of investments for this phase board containers, the value of which is 7 low prices for raw materials, electric power and Modernization will be carried out in phases, the come to 45 million USD The project entails million EUR The total value of the project is salary costs in Russia. This makes the country further automation of production processes about 40 million EUR The first line of the mill attractive for foreign investors. Kotlas Pulp and Paper Mill and partial replacement of machinery at the main technological lines of pulp production. An important part of phase two includes specific OVERVIEW OF MAJOR EVENTS AND measures on the reduction of emissions. It is Segezhsky Pulp and Paper Mill PLANS FOR THE DEVELOPMENT OF expected that the overall reduction will come to 3175,96 tons per year, and 123,45 tons per THE PULP AND PAPER INDUSTRY year of hard waste. The Volga Pulp and Paper Mill (Nizhniy Novgorod Region) is in the process of launching OJSC “Segezhsky Pulp and Paper Mill” a ground wood operation and has completed (Republic of Karelia) began installation of a preparatory construction and installations of paper bag production line in November 2005, the pulp beating line in cooperation with the with a project value of over 200 million RUR. Metso Paper Company (Finland). They have Line assembly is being carried out in the purchased and delivered a complete set of consumer packaging operation by the Alt-M
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
will specialize in manufacturing corrugated the region in years. It is supposed to be the In mid 2006, the Nemansky Pulp and Paper Mill CONCLUSIONS board boxes with a multi-colored flexography. most high-tech enterprise in the Northwest will launch a new (second-hand) papermaking In 2006, it is planned to put a second line of Russia. machine, the capacity of which is 60,000 tons Russia has great potential for strengthening its into operation. The planned capacity of the of writing paper per year. position in the world timber complex, including mill will total 180 million m2 of corrugated By 2010 OJSC “Solikamskbumprom” (Perm the pulp and paper industry. production per year. Construction of the new Region) intends to invest about 270 million The Arkhangelsk Pulp and Paper Mill developed a mill is a part of the geographic expansion of EUR toward expanding its production capacities program of production modernization for the next The tendency of export volume decrease testifies the Gotek Group. and to double the volume of finished products 10 years with a total value of 337 million EUR The that there is a potential in the home market. manufacture by 2010 up to 14 billion RUR per project includes: construction of a new line of By autumn of 2006, OJSC “Mondi Business year. The investment project is to be implemented semi-chemical pulp productions, a production An overwhelming share in external trade is Paper – Syktyvkar” (Komi Republic) plans to in two phases. At the first phase (realization capacity of 1000 tons per day, acceleration of taken by low-added value products. implement a transition to the non-chlorine deadline is 2007) the investment amount will the first board machine up to 800 m / min, and bleach of cellulose. In August 2006, the plant make up 3.2 billion RUR of funds and credits; the second cardboard making machine up to 600 A growing demand for high-added value will launch a production line for non-chlorine 0.7 billion RUR is already expended. At phase m / min. According to the long-term development production in the home market will bring bleaching of softwood pulp (23 million EUR). 1 the production volume of finished products program of the company until 2012, of the conditions for the development of such This transition will exclude emissions to is to be increased up to 600 thousand tons per aggregate value of 100 million EUR, it is expected productions in Russian and, as a final result, the atmosphere, allow the improvement of year or up to 8.6 billion RUR, logging volume to increase output of pulp at the two lines up to for the export of such products from Russia. environmental and conservation concerns, – up to 1.5 million m3 per year. At phase 2 it 1 million tons per year and of container-board up ensure the competitiveness of the company’s is planned to allocate approximately 200 million to 550 thousand tons per year. In the meantime available timber resources, production in foreign markets and strengthen EUR The production volume is expected to grow home demand growth and proximity to the most general safety at the production site. In 2005, by 850 thousand tons or 14 billion RUR per year, In the Altai Krai a new pulp and paper production fast developing market (China) determine the the company allocated 59 million EUR for the logging – up to 2.5 million m3 per year. – a mill of sanitary-hygienic production – was tendency of global industrial rotation and will modernization of its operation. For 2006, it is built. The mill has capacities to produce 25 tons bring timber stakeholders to Russia. planned to invest 48.5 million EUR, 28 million OJSC “Svetogorsk” (St. Petersburg Region) per 24 hours including paper napkins, towels, EUR for environmental protection, 7.4 million accomplished the modernization of Papermaking handkerchiefs and toilet paper. The produce is Sergey PUZIREV EUR for the modernization of papermaking Machine #4; the invested amount stood for to be manufactured from 100% pulp. machines, and 23 million EUR for the non- 50 million USD. This activity was carried chlorine bleaching of pulp. Furthermore, the out within the first phase of an investment 125 Mondi – Anglo-American Corporation owners program that is aimed at the acceleration are considering possibilities to increase pulp of production capacities of the Svetogorsk production capacities by three times. The Company and is part of a strategy of scope of investments for this project is International Paper on sales development supposed to come to 1 billion USD for 3 beyond North America and its expansion years. into the Russian market. The Svetogorsk Company has launched a board-coating Larry's Pulp Company (Norway) supposes to unit for food packaging needs. The next make an investment of about 400 million EUR stage of the investment program entails the toward the construction of a pulp mill in the construction of a plant producing bleached Pskov Region. Construction works will begin chemical-thermo-mechanical ground wood in 2006 and be completed in 2007. This is with an annual capacity of 200 000 tons. the biggest amount of foreign investment in The plant is to start its operation in 2007. The total amount spent on modernization in 2005 was 100 million USD. OJSC “Mondi Business Paper OJSC “Mayak” started construction of a new – Syktyvkar” papermaking machine for paper production for furniture manufacturing with an output increase of 35,000 tons per year by 2007. By 2010, the company plans to install another papermaking machine with a total capacity of 75,000 tons per year.
The St. Petersburg Paper Mill of Gosznak began production of ink-jet paper and made a decision to modernize a coating unit in 2007.
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
to be a company of world level and is ready to compete with the global Pulp and Paper Sector, is PPARTNERSHIPARTNERSHIP Ilim Pulp Corporation – the leader of the Russian forestry industry. The Corporation is negotiating with a number of leading western companies on AANDND CONSOLIDATIONCONSOLIDATION – strategic partnership and the implementation of mutual investment programs. TTHEHE WWAYAY OOFF TTHEHE RRUSSIANUSSIAN FORESTRYFORESTRY YESTERDAY, TODAY AND TOMORROW Ilim Pulp was registered in St. Petersburg on April 30, 1992. Originally an exporter of pulp- IINDUSTRIALNDUSTRIAL COMPLEXCOMPLEX and-paper products, over the last fourteen years Ilim Pulp has emerged as the industry leader and one of Russia’s fastest-growing companies.
In the beginning, Ilim Pulp specialized in The company’s products are exported to more the distribution of the Ust-Ilimsk and Kotlas than 50 countries in Europe, the Middle East mills’ products. In 1988–1994, as economic and South-East Asia. The strategic markets of restructuring began in Russia, the forest industry the corporation are Russia and China, which found itself in decline, with output falling use 30 % and 35 % of all Ilim Pulp supplies, by over 60 %. Aware that business stability respectively. The corporation enterprises and efficiency depended on the consolidation manufacture over 60 % of market pulp and 50 % of production processes, Ilim Pulp adopted a Globalization is a process that has no sector limitations and thus it of box board of the total amount produced in policy of building a single, vertically-integrated Russia. In the Chinese market the corporation is relevant for the forestry industrial sector as well as for metallurgy company comprising logging, distribution and is the largest supplier of pulp and paper 126 or oil industries. Tendencies are explicitly stated – taking into marketing, and everything in between. products, which for the period of 10 years 127 account the permanently increasing margin in the Pulp and Paper has increased its supplies from 50 thousand Nowadays the company controls the largest tons up to the record 905 thousand tons in sector, low costs become the determinants of competitiveness. Russian pulp and paper producers – Kotlas Pulp 2005. Ilim pulp provides 17 % of softwood Those who are able to produce goods of required quality with and Paper Mill, Bratsk Pulp and Containerboard bleached pulp and 20 % of kraft-liner in Mill, Ust-Ilimsk Pulp Mill, and St. Petersburg minimum expenses finally will be the winners in this protracted China. In order to keep the leadership in the Cartonboard and Printing Mill. Ilim Pulp also strategic market, Ilim Pulp has developed a battle for leadership, at times even for survival. Considering the includes Kommunar Paper Mill, the corrugated large-scale investment program for its Siberian capital intensity of the sector and the fact that return on investments box plant, Ilim Gofropak, and centralized service assets that cover product supplies to China. companies with a network of regional affiliates. is above 10 years, only huge vertically integrated structures can Aggregate investments of Ilim Pulp into Pulp The 38 logging enterprises of Ilim Pulp annually and Paper sector development in the region bear such increasing competition. harvest over 7,5 mln cu m of wood in the will be comprised of $750 mln by 2011. Arkhangelsk and Irkutsk Regions, in the Komi Republic and in the Krasnoyarsk Region. The Russian forestry industrial complex doesn’t mechanical wood processing requiring no serious In 2005, the mills of the corporation produced yet contribute a lot to the production of forest expenses, or the construction of mills for the 2.46 mln tons of pulp and paper products, products globally, though it has opportunities. production of corrugated packaging. Meanwhile, including 1.47 mln tons of market pulp. This At the same time, we can clearly observe a Russia, possessing huge resources of unexploited is 4.5 % more than before, and one third of the crisis in the countries – classic producers of forests, comparatively low costs for personnel total volume of PP products of the country. The timber goods – Canada, the USA and Finland. and relatively low expenses, plus very convenient behavior of growth in mechanical converting is Production of pulp and board is shifting to geographical location, is able to become a leader also obvious: the volumes of OSB output have the countries with low costs, basically to South in the global forestry industrial complex. This risen by 23 % (up to 38.5 mln m2), and solid America and South-Eastern Asia. This process market that annually increases its volume of wood products – by 5 % (up to 8.4 thousand doesn’t apply to Russia yet – not a single Pulp consumption, becomes more and more attractive cubic meters), production of lumber has come and Paper facility with participation of foreign for foreign strategic investors. Such companies as up by 4 % (up to 475.8 thousand cubic m), and capital has been constructed here. It is typical International Paper, Mondi, Stora Enso, UPM and the output of plywood remains at the same that only those projects are implemented that others, successfully function here. The largest level (137.8 thousand cubic m). imply the creation of production facilities: Russian company that has declared its plans
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
standards. Sustainable and rational forest as a logical step in further development of its management practices form the basis of the Solid Wood Products business line. company’s activity in the forestry and logging business. The corporation takes reforestation The company aims to capture a leading position measures in the total area of clear cuts, in the local market for solid wood products. which accounts for 33,000 ha. Introduction Investment plans include installation of state-of of advanced technologies and state-of-the-art the-art equipment and a fundamental change logging equipment is the main target of the in process technologies. corporate investment policy for the forestry sector. Currently, Ilim Pulp has solid wood products operations in East Siberia, which include Ust- The company has developed and implemented a Ilimsk Saw and Wood Processing Mill, Ilim Bratsk number of initiatives to enhance the efficiency Wood Processing Mill (Ilim Bratsk DOK), Ilim of forestry and logging business and combat Bratsk Wood Processing Mill (Ilim Bratsk LDZ), illegal loggings. Application of modern and in the Northwest – IlimSever Drev. to waste-based operations at St. Petersburg multifunctional machines with computerized log Cartonboard and Printing Mill, Ilim Pulp annually accounting systems allows control of the volume saves about 4 million healthy trees 2 years ago, to increase the efficiency and and yield of short logs and contributes to the THE MAIN BUSINESS competitiveness of its enterprises, Ilim Pulp overall efficiency of integrated logging. With Traditionally, the main business of the company The comprehensive corporate investment started moving from the geography-based 78 John Deere-Timberjack machines, Ilim Pulp is the production of pulp and paper. Market program is focused on the development of management model to management by product is the strongest fleet of logging equipment in pulp and boards of all types make 50 % and the local corrugated packaging segment. Ilim lines. In addition, Ilim Pulp has established a Russia. In the Northwestern region, the Company 21 % of all Ilim Pulp sales. Pulp has intends to invest more than $300 mln number of service companies and a series of operates the Lesovoz satellite system, controlling into the development of its packaging division centralized transportation and procurement truck deliveries. For timber acceptance purposes Kotlas Pulp & Paper Mill – the largest and by 2009 it plans to obtain 5 mills for service providers. This reorganization has the company uses a laser scanning system, manufacturing facility in the Russian pulp and corrugated products in the European part of allowed the company to optimize its business Photoscan, which allows measurement of the paper industry – is situated in the Arkhangelsk Russia. This will allow the company an increase processes and minimize costs in both core amount of timber delivered by each truck with Region, Bratsk Pulp & Containerboard Mill and of up to 25 % in the market of high quality operations and supporting services. Operational 128 fine precision. Ust-Ilimsk Pulp Mill are based in East Siberia. corrugated products. 129 assets of Ilim Pulp are structured by product business lines in correspondence with the Ilim Pulp is a leader in voluntary forest The core products of the Pulp & Containerboard company’s main activities, and namely “Solid certification in the Russian industry. IlimSibLes business line are pulp, containerboard and ECOLOGICAL RESPONSIBILITY Wood Products,” “Pulp and Containerboard” and ULiL hold a forest management certificate various paper grades. Pulp grades include As an environmentally responsible company, Ilim and “Packaging.” (FSC) for the total of 2.646 million hectares bleached softwood and hardwood kraft pulp, Pulp pays the utmost attention to environmental of forest leases. IlimSeverLes has completed unbleached softwood kraft pulp (flash-dried) protection issues. UPTODATE TECHNOLOGIES chain-of-custody certification. and dissolving pulp. Containerboard and paper grades include kraftliner, corrugated medium, Ilim Pulp has adopted an Environmental IN THE FOREST As an industry expert, the company is actively sack kraft and offset paper. Policy, which defines the corporate guidelines Ilim Pulp is one of the largest holders of forest involved in the development of Russia’s Forestry for environmental safety and protection leases in the global industry and consistently Code and takes part in the “Europe and North Ilim Pulp was the first company in Russia to matters. The corporate policy is focused on applies international forest management Asia Forest Law Enforcement and Governance” produce elemental chlorine-free (ECF) bleached the rational and sustainable use of forest and (ENA FLEG) ministerial process. pulp.
PROMISING SEGMENT THE HIGHEST LEVEL The Solid Wood Products business line “Packaging” represents the highest level of the consolidates wood processing plants of Ilim Company’s vertically integrated structure and Pulp manufacturing lumber, fiberboard and consolidates downstream converting facilities. plywood. The packaging business line has been formed on the basis of the St. Petersburg Cartonboard The development strategy for Solid Wood and Printing Mill, and corrugated box plant Ilim- Products focuses on increased capacity, enhanced Gofropak and Kommunar Paper Mill, with the product quality and expansion of the product following product range: coated and uncoated range in value-added converted products, such boxboard, gypsum linerboard, corrugated sheet as glued products and structural elements. Ilim and corrugated containers, folding cartons, Pulp is considering an opportunity to develop packaging paper for confectionery products, into the sector of wooden house construction and packaging paper for medical products. Due
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
water resources, and introduction of energy SOCIAL RESPONSIBILITY and resource saving technologies. Ilim Pulp consistently assesses environmental risks For Ilim Pulp, social responsibility means not associated with the introduction of every new only premium quality product output, tax INVESTMENT CRISIS technology, production line, and all equipment. payment and adherence to law, but also the The company focuses, in the first place, on provision of social stability in the regions where the company operates and maintenance of high gradual improvements of the main production The pulp and paper industry has almost exhausted its inner technology in order to reduce the environmental ethical standards in business control. impact and, secondly, on improvement of waste development potential. If we do not raise foreign investments within treatment technologies and facilities. Ilim Pulp has adopted the Social Responsibility the next few years, the industry will stagnate. Policy, a document that defines basic principles The company openly informs all interested the company obeys in relation to state parties about the corporate environmental authorities, public non-profit organizations policy and environmental projects going forward, and citizens of the regions where the company The year of 2004 can be considered quite Some projects are being executed or are planned as well as any events related to environmental operates. beneficial for the Russian pulp and paper industry for 2005. Segezha PPM, for example, continues impact. (PPI). The yearly production growth amounted to reconstruct and modernize equipment to 5.4% according to statistics. This complies along the execution workflow, including the The company aims to support small and medium Ilim Pulp is building up an efficient environmental with the development dynamics (5.5%) of the modernization of pulp cooking machines. Mondi businesses in the regions in order to mitigate management system across all of the company’s prior period. PPI’s lagging behind the whole Business Paper Syktyvkarsky LPK signed a dependency of the community on the township- businesses through the implementation of RF industry production growth rates is quite contract with Finnish Andritz Power for the forming enterprise and develop competitive international standards ISO 14001. insignificant (6.1% per year) and the industry delivery of equipment for sodium regeneration markets for commodities and services. persists within the country’s average rates. boiler reconstruction in the current year. The The corporation annually invests over USD$10 Sverogorsk mill is going to finish papermachine million into environmental projects. The The corporation implements welfare programs, However, industry participants are not satisfied reconstruction, which will increase its output Company is actively involved in the Best including support to orphanages, and educational with the middle position – in fact, they are by summer. Ilim Pulp also continues to execute Available Technologies project, which aims and medical institutions. The company promotes concerned. Optimists expect a 5% increase its large-scale investment program. at developing and implementing advanced healthy life-styles and offers sponsorship to in output that will remain for a year or two, 130 environmentally appropriate technologies in professional sport clubs. while pessimists predict that growth rates will Most plant capacity modernization measures 131 production and decreasing ecological stress. decrease between 1-3% in the near future. Still, are continuing to be performed at the expense Ilim Pulp publishes social reports on a regular both agree that widening potential through the of the industry’s inner reserves. According to Ilim Pulp is part of the WWF Corporate Club basis. The reports are done in compliance with cosmetic modernizing of existing capacities Bumprom, internal funds make up 86% of the and a full member of the Association of Global Reporting Initiative standards. has almost been exhausted. There is a need for investment volume in the timber complex (LPK) Environmentally Responsible Forest Companies industry modernization, introducing new lines and debts amount to only 14%. It is it is obvious of Russia. Operating subsidiaries of Ilim Pulp and machines and for the construction of new that quite cheap projects (amounting up to have scored high ratings in the comprehensive Ilim Pulp – The Garant fund has been established factories. This problem is hard to solve as the $50 billion) with a medium payback period environmental assessment made by the Expert for the purpose of effective control of external industry has low investment appeal and pulp are preferred as PPC lacks available funds. In Rating Agency (Expert RA). social programs. The fund has affiliated funds and paper plants have no sufficient internal a number of cases, existing resources were in Koryazhma, Bratsk and Ust-Ilimsk. Partnership funds. redirected by shareholders to other economic agreements with local authorities have become spheres due to the industry’s low attractiveness common practice for structuring the social The PPI will have a hard time unless we can for investors. initiatives of Ilim Pulp. find a way out in the next several years. Native players will lose some of the western markets The possibilities of morally and physically Investment into the personal development and start to experience pressure from foreign obsolete plant capacities being upgraded by of employees under the Corporate University producers within the Russian area. The future moderate investments are progressively less. “By Initiative, occupational health and professional depends a lot on the governmental policy 2004, most pulp and paper enterprises reached training represent the unconventional priorities concerning the timber complex. production volumes close to the maximum for of Ilim Pulp. the existing capacities. The industry’s inner potential has almost been exhausted,” says EXHAUSTED POTENTIAL Anton Loiter, Arkhangelsk Pulp and Paper Mill’s With Ilim Pulp, people know that the After significant production rates dropped in (APPM) marketing and sales director,. The corporation is set to become a world class the 1990’s, the PPI enterprises did their best to largest enterprises of the industry - Kotlas PPM, company. return to their abandoned positions. All large Solikamskbumprom, Kondopoga, Volga - already and medium-sized industrial complexes have work to the breaking point of their work load. reconstructed and modernized their production Medium enterprises are also approaching their plants, repaired conventional technologies and maximum capacity. Photo: Ilim Pulp partially implemented new technologies.
№ 1 2006 № 1 2006 MODELPULP AND FORESTS PAPER OF INDUSTRY RUSSIA
Further industry development depends on the industry worker. These rates are 3-4 times lower Another drawback is that weak forestry legislation Pulp and paper production sale within the expansion of existing capacities or preferably than those of Europe, Japan and Canada.” provides no guarantees for the investor. The country is more profitable – Russian prices are the construction of new enterprises. However, long-term unsuccessful development of the not lower and sometimes higher than prices in enterprise construction from the very beginning Another internal problem of the industry is the RF Forest Code project, no state program for the foreign markets, while transportation costs on its own account is unfeasible. The projects are permanent growth of production costs owing to forest road building, the low development are much more modest. In addition, it’s easier to very expensive and their pay-back periods are long. rising prices for energy carriers, raw products of the periodic yield resulting in the raw sell products within the country. Anton Loiter Only a few players can afford to purchase new lines. and transportation. “Our costs are comparable material problem’s escalation – this is just says, “In the world markets, Russian cellulose and Nikita Leonov, business management director of with and sometimes more than those of western the beginning. cardboards are second in quality compared with Ilim Pulp says, “It is probably only Kotlas PPM and manufacturers, and we don’t have the equipment the industry-leading Scandinavian producers and the St. Petersburg Cartonboard and Printing Mill and technology as they do.” – mentions the second in world market sales volumes compared who are able to execute the capacity expansion General Director of Segezha PPC, Vasily Preminin. CREDITABILITY CRISIS with younger players, such as South American program on their own. All of the other mills, along At the same time, according to Anton Loiter, in the Such inner and outer obstacles not only and Asian producers.” Russian PPM’s gradually with most of the enterprises of the industry, will past year the situation allowed no compensation frighten potential investors but also prevent lose their shares (which are still very significant) need to raise funds at some level.” for cost increases on both the foreign and the accessibility to foreign credits. “Today the in the market of China. They are not able to domestic markets of pulp and paper production. Russian PPC is not able to obtain a multibillion- develop their capacities at a speed appropriate WEB OF PROBLEMS Moreover, by the end of the year market prices for dollar western credit at a rate of 5-6% per for the growth of demand. Naturally, the Chinese many items were lower than in the beginning of annum. Even if such companies as Ilim Pulp, compensate the lack of Russian supplies with It is not easy to find outside investors for the year. As a result, profitability in the timber whose production is mainly export-oriented, supplies from other sources. the PPI. The industry has low investment complex dropped from 11.7% in the first half-year take a loan on western export credit it will attractiveness due to several reasons that can of 2003 to 7.9% in the first half-year of 2004, cost some 7.5% per annum and the periods Nowadays, the native PPC has no significant be relatively divided into intrinsic and external. Market Environment magazine reports. will be no more than 4-5 years. Under such influence on the world’s pulp and paper industry: The first include the state of capital assets. credit conditions, all investment project rates their share in the world paper goods output is no Despite investments at a rate of $300-350 billion External factors also exert significant influence will start to drop. We have to set limits for the more than 2% (in comparison with 12-15% for per year during the recent five years, only 5% on industry investment appeal. First, they include amounts and project pay-back periods” argues countries with a developed PPI). If the events of the primary equipment in the Russian PPI the notorious “War in the Woods.” Unfortunately, Nikita Leonov. unfold according to the pessimistic scenarios, complies with economical efficiency and is the agreement concluded between Ilim Pulp and Russian PPM’s will run the risk of becoming local environmentally friendly. Bazovy Element after their long confrontation The seeking out of foreign partners would be players. However, if the forces are concentrated 132 hasn’t become the biggest story of the year quite sensible from the point of view of industry in the inner market, Russian enterprises won’t be 133 The old-fashioned, worn-out equipment operation for PPI. Wars over the property continue. Now development. However, the PPI participants saved from business competition with foreign leads to the use of out-of-date energy and another two giants of the industry - Arkhangelsk are skeptical about this possibility. As one of manufacturers. resource-intensive technologies, which is in PPM and Volga Mill, are drawing the attention of them diplomatically defined, “Our freedom of turn the reason for low labour productivity. As “BazEl” affiliated structures. “Stories of drawing movement is very limited due to the political Now paper production’s high-price (high-quality) Vladimir Chuiko, the chairperson of RAO Bumprom, into the conflict not only legal forces but part situation. The only possible way to raise foreign segment in the Russian market is occupied by points out, “Currently Russia produces pulp and of the labour collective spoil the industry's funds for the industry is to invite financial European and American players. The demand paper goods amounting to $30 thousand per one investment appeal,” comments Vasily Preminin. investors. As usual, this is the money of foreign for paper production grows, but there has been and Russian banks, borrowed for major projects,” no counteroffer from domestic manufacturers. Nikita Leonov says. Some attempts to enter into the segment have had poor results. For example, AOA Vyborgskaya Russian credits are expensive and “short,” cellulose was the first in the country to start deferring to whatever the schedule is for producing clay-overlay paper for books and the cooperation of finance institutions with magazines, after the enterprise reconstructed its businesses. There is almost no hope that large- papermachine. However, some attributes (opacity, scale projects will be executed in the PPI over smoothness) of this product are secondary the next few years. compared to the foreign analogues.
Prevention of the industry’s stagnation and DON’T STOP rollback to the position before a default depends Experts estimate that the industry stagnation and on how soon governmental policy toward the “slipping” is equivalent to defeat. If we don’t find timber industry complex and pulp and paper an opportunity to move forward, the enterprises industry enterprises will be determined. will start “giving up” export markets. Steadily Finally, only authorities are able to ensure the expanding by 4-5% per year, the inner market attractive investment climate in the country will gradually take over PPI export flows. In and in particular, the industry. the beginning of the 2000’s, some large Russian manufacturers abandoned countries in Western By Elena DENISENKO Europe. This process may continue.
№ 1 2006 № 1 2006 ARKHANGELSKLENINGRAD REGION REGION
6.1mln ha, including 4.7mln ha of forested applied timber production technologies, residues areas. produced by logging make about 20%, sawmilling THE TIMBER INDUSTRY – 35-55% of the total volume, plywood production The cut, which will not affect forest management residues are 60% of the material, and pulp and and the environmental balance of regional paper production – 20% of procured raw materials. IN THE LENINGRAD REGION forests, is 12.5mln m3. The annual final cut The waste resulting from the manufacture of allowed by the forest inventory (AAC) is 9.5mln wood-based products, furniture, etc., are 50% m3. The volume of intermediate use from care, of the volume of products. The waste is partially salvage or other cuttings is 3mln m3. converted to chips and used to produce pulp and paper, while the rest is used in wood-based The Leningrad Region is located in the Northwest Federal District The annual allowable cut in regional forests panels. A significant proportion of wood residues, (NWFD) of Russia, which is extremely rich in forest resources and previously owned by agricultural organizations however, are not processed yet. This is a potential and now designed for harvest is 2,316.1thsd fuel for bioenergetics of the Leningrad Region; comparable to the resource bases of most European countries. m3 (18.5%). their proper use may help solve a range of social, Socioeconomic and other indicators verify that the Leningrad Region environmental and economic problems. is one of the most advanced subjects not only in the NWFD, but in About 42% of the regional forest fund area are forests for special purposes – forests of Group I. The The recent years have seen the implementation the whole country. The region is referred to as a miniature replicant rest of the area is referred to as Group II and aimed of a program of waste wood use as an of Russia. It is a unique area with all types of production and means for multiple forest resource use. The average species alternative fuel source, and the local industrial of transport. The enterprises (including more than 500 large entities) composition verifies the high quality of the forest and municipal boiler plants are transferring to fund: pine – 37%, spruce – 29%, birch – 26%, aspen this local type of fuel. This measure ensures represent all industries, generating 4% of Russian electricity, 8% of and others – 8%. A trend toward the expansion the effective use of wood and decreases the oil products, 19% of pulp, 4% of cement and 9% of paper. of deciduous stands is observed though now that cost of thermal energy. conifers are dominating. The spread of hardwoods, especially aspen, is speeding up. Generations of mature hardwood species are hindering the REGIONAL TIMBER INDUSTRY The region enjoys all types of transportation Vuoksa rivers. The Leningrad Region is classified regeneration of spruce, lowering the productivity POTENTIAL 134 infrastructures: automobile, railways, inland as a region with severe climatic conditions. Its of forests and prolonging the rotation period. waterways and sea transports, two airports and area is rich in wetlands and characterized by a The Leningrad Region is one of the major zones in two oil pipelines. The high sophistication of the low population density. Forests in the Leningrad Region have long been the Northwest of Russia focusing on harvesting, transport infrastructure is accounted for above used in violation of scientifically justified rules. timber processing and export. According to all by the proximity of the second largest city 53% of the territory of the region is covered The most productive forests were intensively experts, the annual timber harvest volume may 3 – Saint-Petersburg – which is the main Baltic with forests. clear-cut. In some districts, the maximum reach 12mln m . In spite of the increased volume port of Russia. allowable timber harvest volumes were exceeded; of clear-cut, the annual harvest now doesn’t 3 Having large supplies of natural resources, a highly highly productive coniferous stands suffered exceed 6mln m . It is obvious that the industry The Leningrad Region is characterized by a high qualified labor force and a quickly developing most. This resulted in the large scale succession has great potential and, at present, industrial transport density judging by Russian standards. legislative framework, the Leningrad Region is of wood species. At present, many districts have timber production in the Leningrad Region For instance, on average, one thousand square involved in active foreign economic activities and accumulated huge stocks of mature hardwood. involves more than 200 large and middle-size kilometers in Russia have 5.3 square kilometers trade. It demonstrates a high rate of economic This raw material type has a narrow market in timber harvesting and processing enterprises, of railroads, while in the north and west development; the timber industry traditionally Russia and is aimed specifically for export. including plants specializing in chemical and – 18.3, and in the Leningrad Region – 31 holds the second or third place among other local mechanical wood technologies. Most of the square kilometers. The same ratio is observed industries in terms of industrial output growth. The absence of a market for aspen and alder enterprises are engaged in harvesting activities; in automobile roads and waterways. The high According to different sources, its output varies and a stable demand for conifers and birch is a about 85 enterprises – in timber processing. level of transport infrastructure development is from 13 to 20% of the total industrial output. common problem of the whole Northwest region largely determined by the near-border location of Russia. Low-grade non-demanded timber is After the disintegration of the harvesting of the region. The advantageous geographical left lying on the cutovers as its extraction industry, which reached its climax in the position of the region allowed the establishment RESOURCE BASE doesn’t pay off. Moreover, due to vast areas early 1990’s, a lot of small logging companies of strong economic ties and channels for Investmentwise, the developed resource base of virgin forests, the quality of the stands is surfaced. The scope of those enterprises was contacting the traditional foreign markets. is a significant advantage to the Leningrad deteriorating; the percentage of fuelwood is limited by geographical location, so they didn’t Region. It includes large deposits of mineral growing while the stock of commercial timber is have a noticeable influence on the economy of The region has more than 1,800 lakes; Europe’s resources: over 80 deposits are being developed decreasing. In connection with this the problem the region. The beginning of the new century, largest Ladoga Lake, with an area of 18.135 and new resource types have been explored. of waste management and salvaged timber however, was marked by a drastic change in the thousand square kilometers among them. The However, timber still retains the status of the processing is becoming increasingly acute. situation. The specific feature of these years was total length of rivers flowing through the region major resource type. the regeneration of timber producing companies is about 50 thousand square kilometers. The The Wood Industries Confederation of Northwest and a significant restructuring of the regional largest of them are the Neva, Svir, Volkhov and The total area of the regional forest fund is Russia (WIC NWR) reports that according to the industry in whole. New effective harvesting
№ 1 2006 № 1 2006 ARKHANGELSKLENINGRAD REGION REGION
3 and processing enterprises have appeared; the • pulp and paper production – 107% (i.e. • pulp and paper production – 13,100 rubles; m more than in 2004 (107.8% against 2004). growth of harvesting and especially processing 16,695.7mln rubles); volumes has been observed, as well as the • timber processing (sawmilling, furniture, Forest leaseholders harvested 5,792.5 thousand growth of construction materials and furniture wood-based boards and plywood production) m3 (66.5% of the total harvest volume), including timber processing (sawmilling, furniture, production. Pulp and paper enterprises are also • – 8,100 rubles; 798.7 thousand m3 obtained by intermediate and wood-based boards and plywood production) undergoing an upgrade. other uses. – 144% (2,365.7mln rubles); harvesting enterprises – 7,800 rubles. Apart from the improved organization of • Aggregate FMUs’ harvest was 2,045.1 thousand harvesting operations, greater attention is • harvesting – 109% (i.e. 3,116.9mln rubles). m3, including: RESULTS OF TIMBER INDUSTRY being paid to forest regeneration. According The sum of fees and taxes paid to the 2005 to the Committee for Forest Resources and • Federal Agency for Forestry in Leningrad budgets at all levels by timber companies was a WORK FOR 2005 Region and Saint Petersburg– 1,438.3thsd Environmental Protection in the Leningrad 120% increase against the corresponding period According to the record of activities of forest m3 Region, in 2005, forest regeneration works at the in 2004 (2,320mln rubles), among them: cost of 54,762.6 thousand rubles were conducted. and timber industries located in the Leningrad The leaseholders reported an aggregate of forest • pulp and paper enterprises– 1,535.2mln Region in 2005, one of the most promising • LOGU Lenoblleskhoz - 307.8thsd m3; regeneration works at the cost of 15,439.7 rubles. results is a significant reduction of round timber thousand rubles. All timber enterprises in the exports. Thus, during 2004, the round timber FGU Sosnovsky GOLOH - 31.4thsd m3; Leningrad Region can be divided into three export was 3,074.3 thousand m3, while in 2005 • timber processing companies (sawmilling, groups depending on the major product types • – only 1,835.3 thousand m3. furniture, wood-based boards and plywood 3 – pulp and paper, timber processing (sawmilling, other agencies - 267.6thsd m ; production) – 257mln rubles. • furniture, wood-based boards and plywood) and This is due to the fact that many local timber harvesting enterprises. companies, investing into the development and • Other forest users - 867.3thsd m3. • harvesting enterprises – 528.2mln rubles. modernization of their production facilities, Statistics show that harvesting, woodworking initiate extensions of their wood processing In 2005, the local government granted forest and pulp and paper industries in the Leningrad The active development of pulp and paper plants. Upgrading of sawmilling and timber users the right to harvest timber under short- Region demonstrate continuous development and and timber processing industries, which are processing equipment is made not only by large term licenses in forests which earlier belonged production growth. According to the Committee heavy energy consumers, is largely accounted enterprises, but even by small operations. to farming organizations; the total allowed cut 136 for Forest Resources and Environmental for by the fact that the energy sector in the is 580.5 thousand m3. Protection in the Leningrad Region, over the Leningrad Region produces electric energy nearly Moreover, large foreign timber companies past seven years the volume of industrial twice as much as required by the industry and tend to move their processing facilities to Agricultural organizations were granted forest production at least doubled. At present, the population. Moreover, locally produced electrical Northwest Russia, and to the Leningrad Region, areas for free use with the allowable cut of most serious shifts are observed in the pulp energy is much cheaper than in other regions, in particular, as one of the most investment 195.5 thousand m3. and paper and woodworking sectors. as the local energy system is based on the attractive RF subjects. Sosnovoborskaya nuclear power plant and a Apart from this, as of January 1, 2006, 934.8 The pulp and paper sector is second to none developed network of large and medium-size By way of illustrating this trend, we should thousand m3 (49.1% of annual allowable cut) of regarding production growth. In 2005, it hydroelectric power stations. mention a Finnish concern, Metsa-Botnia, which available stock in forests which earlier belonged accounted for more than 16bln rubles (102% built Europe’s largest timber processing plant to farming organizations were leased. against the corresponding period in 2004) of Among the most stable regional timber in the Podporozhsky district, equipped with the 23bln rubles of the total production volume companies of these years are the following: high-tech equipment. The rated capacity of The FMUs belonging to the Federal Agency for (108% against the corresponding period in the plant will be 300,000 m3 of lumber per Forestry in the Leningrad Region and Saint 2004). It is noteworthy that the volume of JSC Svetlogorsk, JSC Syasky TsBK, JSC Kommunar year. At present, the start-up works are close to Petersburg offered for lease forest areas with sold pulp and raw paper has decreased, while Paper Plant, JSC Kommunar Paper Mill (Ilim Pulp), finishing, and the plant is to be commissioned the allowable cut of 7,627thsd m3 of timber. The the volume of finished products made out of JSC Saint Petersburg Cardboard and Printing Mill in summer. total leased area in the Leningrad Region allows this paper (school note books, etc.) has grown. (Ilim Pulp), called the best industrial enterprise the harvest of 8,561.8thsd m3 or 68.5% of the The same situation is seen in timber processing of Leningrad Region in 2005, JSC Priozersky Another large Finnish timber concern, UPM- annual allowable cut. The Leningrad Region was (sawmilling, furniture, wood-based boards and DOZ, Nevsky Laminate Plant Ltd., CJSC Forest Kummenne, has also set up its subsidiary, UPM- among the first to introduce a long-term forest plywood production): the output was 3bln rubles Complex, CJSC Viner Company, Kirishi Lesprom Kummenne Forest Russia, moving a part of the lease system. The local government believes (146% against the corresponding period in Ltd., Stroyles Ltd., CJSC Lemo-Wood, CJSC DP productions facilities into the region. that long-term leasing is the most progressive 2004); and harvesting operations – more than FIRO-O, Privus Ltd. form of interaction between the state owning 3bln rubles (101% against the corresponding Finally, this trend, accompanied by the further the forest fund and timber companies. The period in 2004). Timber enterprises of the Leningrad Region development of timber companies, means that long-term lease promotes the long-term planning employ more than 20 thousand people. The 100% of the timber harvested in the Leningrad of loggers’ activities, road construction, fire The total cost of products (labor, services), average salary in the industry has increased by Region will be processed by local facilities. prevention, forest regeneration and results in VAT excluded, in 2005, was 111% against the 20% compared with the corresponding period an effective implementation of the regional corresponding period in 2004 (i.e. 22,178.3mln in 2004, reaching 9,800 rubles. Among the In 2005, the volume of timber harvest in the budget. The organization of rational forest use rubles), among them: enterprises, the figures are as follows: region was 8,704.9 m3, which is 631.4 thousand lead to the increased volume of harvest in the
№ 1 2006 № 1 2006 ARKHANGELSKLENINGRAD REGION REGION
Leningrad Region, supplying local processing leased for cultural, recreational and sport purposes, realize that the current economic situation of the region, the government issues an annual plants with timber and meeting the wood needs including more than 500 ha by auction. demands investing into the development of guide to the location of production facilities on of the population. advanced timber processing. the territory of the Leningrad Region – the first Among the largest, most socially important and original guide for home and foreign investors in In 2005, 78 km of roads were built and 889 economically viable projects implemented in the The regional government took an active stand Russian and English versions named “Investor’s km of forest roads were repaired; about 3.5 Leningrad Region was the Skiing and Recreation in this issue. A strong economic environment Guide.” A presentation laser disk titled “Investment thousand ha of plantations were established Center on the slopes of Bashennaya mountain was reached first of all by creating a favorable Climate of the Leningrad Region,” has been issued under lease contracts for forest areas in the in the Vyborg district and Ski Mountaineering investment climate in the region, soft tax for distribution among potential investors with the Leningrad Region. Furthermore, according to the Center in the Sosnovskaya Volost of the legislation, a specialized market infrastructure aim of making them aware about the region. municipal units’ authorities, forest lease holders Priozersky district. and information accessibility. donated 31.3mln rubles toward meeting social To support the investors, the regional government needs, 25.3mln rubles for the development of The budget revenue from forest use for cultural, The Law on Investment Activity in the Leningrad follows the policy of monitoring all investment agricultural production; 100.4 m3 of fuel wood recreational and sport purposes increased 3.9 Region, which came into force in 1977, still projects and assisting in the settlement of for population and state-financed organizations, times compared with 2004. The regional budget has no analogues in the Russian Federation. various designs, construction, land, infrastructure 10.3 m3 of commercial timber, and 1.8 m3 of received 15.3mln rubles. This was the result It provides a governmental system aimed to and other related problems. Investment and lumber. of the consistent work of the Federal Agency support and protect investors operating in the tax legislation as well as their application for Forestry in the Leningrad Region and Saint region. The document guarantees equal rights are discussed with authorized consulting and During the same year, to meet the needs of Petersburg, which controls the revenue from both for Russian and foreign investors, as well insurance companies, working both with foreign state-financed organizations and the population, the forest fund use. as large and small ones. It specifies a number and Russian investors. Comments and proposals areas were leased on a short-term basis with of preferences and additional guarantees. The of investors are carefully considered and used the total allowed cut of 479thsd m3, including Leningrad Region made this step at a time when as a basis for preparing amendments toward forest areas with the allowable cut of 182thsd INVESTMENT ACTIVITY federal legislation didn’t allow RF subjects to applicable regional legislation. m3, which earlier belonged to agricultural IN THE TIMBER INDUSTRY impose a privilege income tax. In 2003, a revised organizations, offered for a short-term lease Law on the Governmental Support of Investment A strong inflow of investments enabled the An up-trend in the volume of production observed by the Government of the Leningrad Region on Activity was approved, giving investors the creation of dozens of new enterprises in various in the region in recent years can be partially the request of municipal authorities. Municipal opportunity to receive subvention from the sectors of the Leningrad Region’s economy, accounted for by the fact that timber companies units, selling timber obtained from short-term regional budget for paying income taxes. including the timber industry. Svedwood-Tikhvin began investing into production development. forest use, have received aggregate revenues Investment companies have the right to receive Company was a pioneer in the timber processing 138 According to the data of the Committee on of 12,418 thousand rubles and allocated them additional income at the expense of the income sector. It made its first steps on the Russian Natural Resources and Environmental Protection to meet the following needs: tax privilege during the initial development market in 2002. The regional government in the Leningrad Region, in 2005, the production stage, the pay-back period and then within two considered the appearance of this investor as investments made by timber enterprises doubled years after the breaking-even point. an event of particular importance not only for education and health care – 8,165 thousand and reached 4,498.8mln rubles, including the • the region, but the whole country. Significant rubles; following groups of enterprises: One of the conditions of successful investment Swedish investments into the construction activity in the region is information openness. of an enterprise located 200 kilometers from • social needs – 3,538 thousand rubles; • pulp and paper production – 3,448.6mln To support local enterprises, the Committee Saint Petersburg paved the way for other rubles; on Economy and Investments formulated an foreign investors showing that one can operate • development of agricultural production – 716 investment package, which is annually revised. successfully not only near the megapolis, but thousand rubles. • timber processing (sawmilling, furniture, The investment package includes about 100 also off the beaten track. Today we can speak large projects and 200 projects for medium-size positively about the successful implementation At present, the region demonstrates a great wood-based boards and plywood production) and small businesses. of the second stage of this project. demand for forest lands to be managed for – 842mln rubles; cultural, recreational and sport purposes on Every year the Committee compiles and issues a The regional government intends to promote lease. One of the causes is a large number harvesting enterprises – 208.2mln rubles. • “Catalogue of Investment Projects in the Leningrad industrial enterprises’ locations on undeveloped of long working children’s summer camps and The largest production investment was made in Region” and a “Catalogue of Investment Projects lands, especially in the north-west of the region, recreational centers, which registered the land 2005 by Svetlogorsk Pulp and Paper Mill. The of Small Enterprises.” Another annual “Catalogue which is rich in forests and opportunities for lots and received the land title improperly. Now PPM is implementing a system investment project of Free Production Areas,” issued and updated generating cheap electricity. Large investors, they don’t pay the required land use fees to the aimed to develop and diversify production. by the joint efforts of enterprises and municipal such as Metsaliitto, which is building a large budget of the Leningrad Region. This was the largest investment project in the authorities is in great demand among potential timber processing plant in the Podporozhsky Russian timber industry. investors, consulting and engineering companies. district, are already there. Unfortunately, the forest legislation, changed in Since 2000, the journal “Leningrad Region: Economy 2005, banned the leasing of forest lands for cultural, The Committee on Natural Resources and and Investments,” has been informing potential recreational and sport purposes due to the absence Environmental Protection in the Leningrad investors about the economic life of the region. DEVELOPMENT CHALLENGES of relative legislation regulating these issues and Region reports that investment activity growth According to the forecast of the Committee on corresponding rates of fees for this type of forest is observed not only in the pulp and paper sector In order to create optimal conditions for the Natural Resources and Environmental Protection use. In 2004, over 700 ha of forest funds were but in timber processing, too. Company managers development of investment activity on the territory in the Leningrad Region, export potential of the
№ 1 2006 № 1 2006 ARKHANGELSKLENINGRAD REGION REGION
region will rise sharply after the commissioning Among the most challenging projects are: plants in the region submitted by the following for dwelling timber houses; the total finished of the new timber terminal at the port with the companies: product output exceeded 1000 dwelling houses rated turnover of 4mkn m3 per year, which will • development and upgrading of CJSC Syasky per year. The largest house producers were: Pulp and Paper Mill (TsBK); require investments worth $160-190mln. Electropribor Ltd. is building a sawmill, • Kompania Rus Ltd. (54,000 m2 – 360 houses*, “Belaya Gorka,” in the Luzhksy district. The basic types – square log, round log); The main tasks for the timber industry have • development of the JSC Vyborgskaya Pulp supposed date of commissioning is August and Paper Company; been determined. They are: 2006. The round timber processing capacity is • Regionstroy Ltd. (20,000 m2 – 150 houses*, 120 thousand m3 per year. The output will be basic types – timber frame structure with • construction of the timber processing plant edged boards with 14% moisture. The output stimulating advanced timber processing; exterior fiber cement board sidings); • in the town of Boksitogorsk; of the plant will be 60 thousand m3 per year. The plans include the construction of a glued • Scandic Construction Ltd. (20,000 m2 – • ensuring rational forest use; • development and upgrading of regional laminated timber shop. 150 houses*, basic types – timber frame logging companies; structure with exterior clapboard sidings, • applying low impact technologies; IES-Holding Ltd. is adjusting pre-design 6,000 m2 – 50 houses*, basic types – square establishment of a timber transport • solutions considering the recommendations of log, round log); company. • production upgrading with consideration interdepartmental commission. The enterprise of the global and national markets is planning to build a sawmill in the Kirishsky CJSC Ditrich Design Concern (10,000 m2 – In 2004-2005, the Interdepartmental Commission • requirements; district with a rated volume of processed hardwood 100 houses*, basic type – timber frame for Establishment of Production facilities in the sawtimber of 30 thousand m3 of round timber. structure with exterior clapboard sidings). development of the transport and Leningrad Region addressed, and is going to • further address, tender documentation for the All of these enterprises are oriented in the communications infrastructure. Ust-Luzhsky Timber Processing Plant Ltd. construction of sawmilling and timber processing large-scale manufacture of timber modules and is planning to arrange production facilities accessories and assembling timber houses on in the Kinguiseppsky district with an output building sites. The most widely used models 3 of 50 thousand m of sawn timber and up to were high quality timber frame and panel and the supply of export round timber decreased. 3 Dedov M.A., Head 35 thousand m of other timber products; the structures using modern insulating materials. The Leningrad Region is approaching a state where total round timber processing capacity will be of the Leningrad all the timber harvested is processed on the same 3 up to 120 thousand m per year. Galina MALIKOVA 140 Regional Committee territory. This is happening even despite the fact that it is a transit region with huge amounts of PFK Quintex Ltd. is planning to build a sawmill of Natural * - permanent living house area is up to 150 m2 raw material passing through and no opportunity in the Vyborg district, Leningrad Region. The Resources and to process solely regional timber. annual volume of timber to be sawmilled is 60 Preservation of the thousand m3 of roundwood. The output is to be Wood-house-building is accelerating. In the Environment 49 thousand m3 of lumber. An additional shop Leningrad Region eight enterprises are producing for the production of glued laminated structures wooden constructions for the building of low- is supposed to be built in the future. rise apartment houses. The enterprises’ output of finished goods is more than 1 thousand Lyuban Les Ltd. ÎÎÎ intends to establish apartment houses per year. The results of sawmilling production in the town of Lyuban The Leningrad Region possesses significant 2005 reveal positive points about the equally with a rated output of 25 thousand m3. The natural resources including forests, water important sphere of the committee’s activities, plant will process small-size merchantable resources and minerals. Some 70 thousand the development of the recreational potential of wood neglected by other regional sawmills. business units and nature-users engage the Leningrad Region and mainly the specially in activities on this territory, varying from The supposed volume of timber to be processed protected environmental territories (SPEN). 3 industry giants to small private entrepreneurs. (hardwood sawtimber) is up to 50 thousand m of round timber. Nevertheless, our region keeps its ecological A new type of tourism – Ecological Tourism level stable, according to 2005 data. This - has been gaining ground lately. People grow is undoubtedly the result of both regional more attracted to nature untouched by humans MM-Yefimovsky Ltd. has started site preparation ecologists and the local population’s careful and civilization. It is the Leningrad Region for the construction of a timber processing plant 3 treatment of their natural environment. where one can spend their leisure time in such with the rated output of 500 thousand m of surroundings. timber per year. The supposed investment is Speaking more specifically about the main results 1,400mln rubles. The commissioning of the plant of the Committee of Natural Resources and The Leningrad Region is very far-reaching and is planned for 2007. The second construction Environmental Protection in the Leningrad region’s is awaiting investments in its development stage – a plant for the production of glued activity in 2005, it was the timber complex that of nature resources. The Leningrad Region laminated timber – is to begin in 2007. gained the most significant rates. Last year, the Administration, in its turn, is ready to support raw wood processing volume increased considerably any environmental-oriented business. Recent years have seen the fast development of the local production of pre-assembled wood structures
№ 1 2006 № 1 2006 ARKHANGELSKVOLOGDA REGION REGION
Vologda Oblast is a hilly plain, with altitudes But at the same time, the market was primarily above the sea level of 150 m to 200 m. The interested in large softwood. The clear felling THE VOLOGDA Oblst has 4,000 lakes, and 1,300 rivers of a at that time was performed only in 30% of the total length of over 10,000 kilometers. The areas designated for cutting. Volga-Baltic Channel runs through the region. The natural resources of the region include Most of the timber (93%) supplied outside wood, fluxing limestone, quartz sand, peat and the province was sent to the timber market in REGION FORESTS mineral water. Among the natural reserves of the Archangelsk or local sawmills and paper mills Vologda region is the Darvinsky wildlife reserve, and also exported to other countries. The rest the national park “The Russian North,” as well was sent to Volga and St.-Petersburg. Inside the as game sanctuaries, wildlife areas, cranberry province, the main consumers of timber in the The Vologda region was formed on September 23, 1937 and and water conservation bogs, protection forests early 20th century were the Sokolsk paper mill currently is one of the most economically developed regions of the along the rivers and the forests of the green and twelve sawmills, which processed 250-300 belt’s surrounding towns. thousand cubic meters of sawlog per year. In European Northern Russia. Its area is 145.7 thousand square km, total, before World War I, the wood exploitation which constitutes 0.8% of the total area of the Russian Federation. The forests are the basis of the social and industry of the Province had harvested around It borders at the North with the Archangelsk region, at the East with economic development of the Vologda region. They 3 million cubic meters of timber. cover around 70% of the area of the region. the Kirovsk region, at the South with the Kostroma and Yaroslavl The timber industry continued its development regions and at the West with the Leningrad, Novgorod and Tver HISTORICAL BACKGROUND in the Vologda region located in the former regions. Its Northwestern neighbour is the Republic of Karelia. The Province of Cherepovets. According to the The life of the population of Northern Russia data of the Russian industrial and professional climate in the region is mildly continental, with long, cold winters has always been related to the forests. Until the census of 1918, there were sawmills and timber and relatively short, warm summers. late 17th century, wood harvesting and primary processing plants all around the Province of processing was performed by the peasants Cherepovets. The census registered 22 timber- mainly for their personal needs. The demands processing establishments, which employed of commerce, industry and urban development 1097 workers (which constituted 44% of the The head of the Department of TIC, The deputy governor of Vologodskaya oblast 142 and transport led to the increasing demand total number of enterprises in the province Vladimir Grachev for timber. and one half of the total number of workers at the time of the census). All 22 timber- Forestry developed into a separate industry processing establishments were sawmills; only as a result of the development of capitalism. one of them also had a plywood unit. In 1893, The increasing demand both in Russia and in the construction of the railway to the North Europe led to the emergence of major domestic had begun, which ran across the province, so and international timber markets. the manufacturers decided to build industrial timber processing plants in that area. The province of Vologda provided very good conditions for wood harvesting: it had large During the first years after the revolution, areas of high quality softwood, numerous large the Soviet government made several decisions and small rivers suitable for timber rafting such concerning the restructuring and development as Sukhona, Sheksna, Mologa, Kovzha, Vytegra of the forestry and timber industry. In and others. December 1918, the Central Forestry Committee (Glavleskom) and local Province Forestry The most intensive period of timber exploitation Committees (Gubleskoms) were established. started in the province after 1861 and thus for the Their purposes were to manage, control and past 120 years the province has relatively developed administer the timber industry. This marked the timber exploitation and sales. The intensity of beginning of a slow but steady development of wood use was very low. On average 0.13 cubic the timber the industry. meters of timber were harvested from 3.6 acres. At the same time, selective harvesting was also The timber operators of Vologda increased the performed near the rivers and roads where the volume of annual timber felling and export by means largest and the best conifers were harvested. of organizational development, but also forced the mobilization of peasants into logging operations. The growth of industrial production and the Thus in 1923 they harvested 269 thousand Russian construction of railways in the early 20th cubic fathoms of timber, of which 142 thousand century led to the increasing demand for timber. (53%) were firewood. The share of the province
№ 1 2006 № 1 2006 ARKHANGELSKVOLOGDA REGION REGION
in the total volume of timber harvesting in the industry in Vologda has clear perspectives. It is are being developed at the federal level, that the leading industry in the Vologda region country at that time was 5.8%. necessary to make the maximum use of resources the regions follow their own developmental is the iron-and-steel industry, this will be a very and the economic potential of the industry, programs. The Vologda region has developed good result for the timber industry. During Soviet rule, the structure of the forests which means intensive development. and is currently implementing a strategy of in the Vologda region had changed significantly. controlled development of the timber industry. While even in the 1950s the coniferous forests Currently the timber industry occupies the It includes the development of the industry in WOOD ROAD CONSTRUCTION still constituted 75% of the Vologda forests, second position in Russia in production volume four main directions: 1) efficient use of forest The wood road has always been a cornerstone of they only accounted for 49%. The forests of of boards and plywood, the third place in resources including efficient exploitation of the economy, not only for the logging industry, the Eastern part of the region where millions timber hauling, the sixth place in sawn timber forests and full forest management, including but all of forestry. A developed network of of cubic meters of timber used to be drifted production. The region also has the leading reproduction, certification and the protection permanent roads is a prerequisite for the efficient along the rivers of Sukhona and Yug have been position in other areas. The export of sawn of forests, 2) The development of the logging use of forest resources and their preservation substantially damaged during the so-called timber is growing. New facilities for deep timber industry; 3) the development of wood processing and reproduction. However in Russia, the density “conditional clear felling.” As a result, the processing are launched every year. and its complex use due to investments; 4) of the roads per hectare is 8 times less than in Vologda region faced the problem of processing organizational work aimed at the development the developed countries. Therefore, the timber low-quality light hardwood, which naturally Thanks to the well-directed strategy of the regional of the timber industry including spatial planning industry unavoidably faces the problem of an replaced the harvested coniferous forests. Government and the consistent implementation (development of areas of economic development) insufficient wood road network. of all policies, production volume in the timber and systematic economic development. industry has been continuously growing for the Over the last few years the wood roads in the THE FOREST AND ECONOMICS last 8 years. Recently there emerged substantial According to developers’ forecasts, the Vologda region were mainly built at the expense The Vologda region is rich in forests: the new approaches to forest management in the implementation of the strategy of controlled of large industrial enterprises in insufficient total amount of timber is estimated at 1.6 Vologda region. The regional forest sector is development of the timber industry in the quantities: the production volume was 45-50 billion cubic meters, of which 776 million a geographically limited group of interrelated Vologda region will create a profit of 1.5 milliard km per year, which is 7-8 times below the level constitute operating stock with 320.4 millions companies and suppliers, which are united by the roubles by 2008, with the income to the budget it was in 1990. In order to make full use of of cubic meters of softwood. The design principles of interdependency and complementarity. being 2-3 milliard roubles. The share of the timber forest resources and technical capacities, at felling area enables harvesting of 22.3 million The development of the “Forest cluster,” in form of industry in the total industrial production of the least 10-15% of the production volume should m3 of timberannually. The existence of the a large stable agglomeration of timber enterprises region will double, reaching 15%. Considering be spent on road construction. transportation system as well as the proximity and related production is one of the most promising 144 of the domestic and international timber markets development trends in the Vologda region. provide good conditions for the development of large timber enterprises in the region. DEVELOPMENT STRATEGIES The Vologda region is one of the most developed Currently, the Government of the Russian industrial regions of Russia. It occupies the Federation pays a lot of attention to the second place in volume of the industrial timber industry’s problems. The meeting of production in Northwestern Russia after St. the Government, which took place in November Petersburg. It also steadily occupies the second 2005, was expected to produce a development place in Russia for volume of the industrial strategy for the timber industry and to prepare production per capita. Despite the fact that necessary measures. Although at this meeting it is the iron industry that is the leader of it was decided to postpone actual decisions, the regional production, the main growth the Chairman of the Government, Mikhail potential of the Vologda region is linked to Fradkov, expressed clear intentions to change comprehensive and dynamic use of its timber the situation. The Government of the Vologda resources. It is not a coincidence that in 2005 region actively participates in the development the timber industry placed third after the iron of the Federal Program for the development of and chemical industries in production volume. the timber industry of the Russian Federation. The total volume of timber production in 2004 Thus it has prepared developmental suggestions amounted to 12 milliard roubles. that were presented by the Governor of the region, Vyacheslav Pozgalev, at the meeting of However, the timber industry has enormous the Government of the Russian Federation. development potential. Despite the large timber resources, the share of the industry in the total The logic and structure of the development production volume in the region is only 7%. strategy for the timber industry has to consider Only 40% of the existing raw timber is exploited the place and the role of the timber industry and in some thickly wooded areas, especially in in economics and the community, its goals the Eastern zone, this amount constitutes only in long-term prospective and also possible 25-30%. Thus, the development of the timber development scenarios. While such programs
№ 1 2006 № 1 2006 ARKHANGELSKVOLOGDA REGION REGION
Wood road construction leads primarily to the and will make the logging much more cost with such work, as do other Russian regions. The Logging Industry is the basis of the whole capitalization of forest resources, that is, to a efficient. This initiative is to be supported by Earlier last year the Forest Department of the timber industry. The logging in the Vologda major increase in their market value. The wood the Government of the Russian Federation. The Vologda region took over the management of all region is performed by numerous enterprises roads are also necessary for the operations of forest resources are state property and thus it forests previously controlled by the agricultural including the holding companies, “Vologodskie logging camps. Today the wood roads are often is the state that benefits from the increase in organizations of the region. The rural forests lesopromyshlenniki,” and “Cherepovetsles,” “LPK built without following the classic western their market value and the resulting solution constitute more than one third of all forests of Kipelovo,” “Vologdalesprom Corporation,” “AO,” scheme, but depending on the existing social of social and economic issues. the Vologda region and therefore the transfer “Bely Ruchey,” and others. and economic problems. The government of process was complicated and lengthy, but the the Vologda region considers the development personnel and management of the forestry 2005 was a difficult year for the logging industry. of the wood road network to be of paramount FOREST MANAGEMENT enterprises ensured the stable work of their The situation was particularly challenging in importance. Therefore, the Governor of the Beginning January 1, 2007, according to the organizations during this period. The Vologda the Northeastern areas of the region, where region, Vyacheslav Pozgalev, suggested to amendments to the current Forest Code of Forest Department has developed 30 regional there are no large wood processing enterprises, the legislative authorities of the region that the RF, the management of all Russian forests, regulations for the rural forests as well as including hardwood. Therefore, the logging they allocate the funds in the 2005 budget apart from the one explicitly mentioned in the development of the program until 2010. enterprises had to dispatch their production to for the construction of wood roads. In the Forest Law, is transferred to the subjects of the the Kotlas paper mill, which was imposing its Chagodoschensky district, 57 million roubles Federation. Therefore, the regional governments Furthermore, experience shows that the forests own dumping prices, being a monopolist. The were invested into wood road construction as have a direct interest in correct and efficient transferred to the subjects of the Federation measures taken by the regional Government a part of a pilot project, which made it possible forest management in regional forests. are used and preserved more efficiently. For could not fully solve the problem. to harvest an additional 80 thousand cubic Apparently, the subjects of the Federation need example, the amount of forest offences in meters of timber. to work hard to adopt the management system rural forests has decreased over the 9 months Despite these difficult conditions, some of the and to develop a corresponding structure at following their transfer to the regional level logging enterprises continue to develop. In 2005 In general, the project, “The Wood Road the regional level. by 32%, the detection increased by 42% and they harvested about 6.7 million cubic meters Construction in the Vologda Region,” involves the material damage decreased by 15 million of wood. They also bought new equipment for budget investments of 1.5 milliard roubles, The Vologda region already has experience roubles. No major fire occurred during the fire bucking logging and training the operators. season and the total expenses for fire fighting Considering the difficult situation in the Belozersk port, shipment of timber for transportation by water amounted to 82 thousand roubles, while the European market, the loggers of Vologda are expenses for two major fires in the forests of changing their supplies and switching to the 146 the Forest Management Agency for the Vologda domestic market. region constituted 2.8 million roubles. During the same period the profitability of standing Sawn Wood Production is one of the most woods also increased with the average price of developed industries of forestry in the Vologda a cubic meter increasing from 36 to 48 roubles. region. Almost all enterprises of the vertically The rural forests have also been subject to integrated timber industry structures operate surveying for the last three years. in this area (e.g. Belozersky LPKh, Sokolsky DOK) as well as such enterprises as OOO Thus, the transfer of the forest management to Lespromsever, OOO Premium-les, SP Profile, the subjects of the Federation is a justified and ZAO Cherepovetsky FMK, OOO Kharovsklesprom, appropriate measure. During 2006 the Forest OAO Agrostroykonstruktsiya, ZAO Soldek and Department of the Vologda region will carefully others. develop all possible conditions, regulations and standards, that is, all regional laws, so that it Over the past few years the sawn wood will be able to ensure the smooth transfer of production volume has shown an annual growth the forest management to the regional level of 100-140 thousand cubic meters. In 2005 on January 1, 2007. This work will lead to the the Vologda region enterprises produced more creation of a management structure that will than 1 million cubic meters of sawn wood. ensure even more effective use of the Vologda Although in 1990 the production volume was forests. almost twice as large, only 10% of the sawn wood complied with the European standards and was suitable for export. Currently more TIMBER INDUSTRY than 80% of sawn wood complies with the The Vologda wood enterprises perform the entire Western standards, because it is produced by cycle of wood processing, producing sawn wood, the chipping headrigs. Thus, the quality and the furniture, paper, cardboard as well as wood merchantability of sawn wood production has chemicals. They manufacture everything from significantly exceeded the level, even before matches to houses. Currently there is an active the start of the reforms. Furthermore, over the development of all kinds of wood processing. last few years the range of hewed timber and
№ 1 2006 № 1 2006 ARKHANGELSKVOLOGDA REGION REGION
glued conduits was substantially expanded. of industrial production of wooden houses was The first company to start the production The Vologda branch of OOO Nord-class, which There are more than one thousand headrigs 26 thousand square meters. Apart from this of biofuel in the Vologda region was the focuses on school furniture production, is also operating in the region. the wood enterprises of the Vologda region “Vologdalesprom” corporation. Until now the gradually developing. also produce window and door units. In 2005 corporation has already built two production Sawn wood production has good potential. the production volume for door units in the facilities in Vologda and Veliky Ustyug with According to experts, it is possible to increase region was 186 thousand square meters and 112 an overall capacity of 20 and 50 thousand tons FOREST MACHINE BUILDING the production of high quality square-sawn thousand square meters for window units. of wood pellets per year and it is planning to The Vologda region is one of the few regions timber to 1.6 million cubic meters over the build three more factories, including the one that possesses not only forest resources, next 5 years. Pulp and Paper Production in the Vologda region in Totma with a production capacity of 50 but also several machinery enterprises that is represented by two enterprises: Sokolsky thousand tons of pellets per year. focus on the production of machinery for the Plywood and Board Production in the Vologda paper mill and OOO Drevplit and is currently timber industry. There are three large forest region is represented by such enterprises as undergoing a crisis. In 2005 the production The wood pellets are also produced by OOO machinery producers in Vologda itself: OAO Cherepovetsk Plywood and Furniture Factory, volume for pulp was 36 thousand tonnes, 21.5 Lesprom (Cherepovets). New factories are being Vologodsky stankozavod, OAO Severny Kommunar with a production volume of more than 1 thousand tonnes for paper and 51.8 tonnes for built in Kadnikov and Verkhovazhye. There are and ZAO “Vologodsky Eksperimentalny Zavod milliard roubles, Sheksna fibreboard factory, cardboard. future plans to build more such enterprises in Derevoobrabatyvayuschikh Stankov.” These Veliky Ustyug plywood factory, “Novator,” other areas of the region. companies are sufficiently large and play an Monzensky DOK, OAO Severtara, OOO Sotameko Despite the fact that the cardboard production important role in town and regional economics. Plus and others. has significantly (5 times) increased in Power Generation from Wood is one of the However, they are now facing difficult times. comparison to 1990, the situation with the most promising directions of development of Plywood production in 2005 was around 200 pulp and paper factories in the region is more deep wood processing. Already now, all wood In Soviet times the machinery factories were thousand cubic meters, which is three times complicated. The Vologda pulp and paper enterprises have boiler houses that use wooden focusing on large-scale production and thus more than before the reforms. factories reduced the volumes of pulp and paper waste and supply energy to the drying tunnels large and wealthy customers. The situation production. The Sokolsky pulp and paper factory, and other production areas. This kind of heat has changed now: the processing volumes Board production has also been developing which used to be the leader of the timber generation is used more and more widely: there have decreased and most importantly, many recently. The chipboard and fibreboard industry in the Vologda region and produced is a heat power plant operating at the plywood enterprises, especially the new ones, need new production volumes have reached Soviet 10-15% of the total volume of timber products, factory Novator that uses the production waste, equipment that would take less space and ensure levels. New capacities for MDF boards have is now undergoing a serious economic crisis. This and in 2006 the first stage of a similar plant will the quality of complex processing. 148 been launched and there is a possibility of is related to outdated production technologies be launched in Bely Ruchey. These plants, being OSB production. The chipboards production and the need for modernization. more large-scale power suppliers, will serve not The machinery enterprises listed above produce volume in 2005 was more than 500 thousand only industrial, but also social purposes by the equipment for mechanical wood processing. cubic meters, which substantially exceeds the Despite these difficult conditions, pulp and providing heat to the communities where the Now, this is the dominating and most plausible level of 1990. At the same time, quality and paper production is still developing. A waste wood enterprises are located. direction in the development of timber industry lamination significantly improved the products paper line was launched at the OOO Drevplit in the Vologda region, because the lumbering merchantability. The production volumes of located in the town of Sokol and the capacity Match Production is represented in the Vologda requires much less investments than, for other kinds of boards in 2005 were 24.6 square of two paper machines is to be increased region by only one enterprise: the match factory meters for fibreboards and 13.3 cubic meters to reach 5,600 tonnes per month. The pulp “FESKO”. However, it is the largest producer Lumber production (Sokolsky DOK) for cement boards. production is also expected to reach 4,300 of matches in Northwestern Russia. The total tonnes per month, while a third corrugated volume of match production at this enterprise is The Construction of Wooden Houses is also paperboard machine is to be launched as well more that 20% of the total production volume rapidly developing in the Vologda region. as fibreboard production with refined a surface in Russia The main manufacturer of wooden houses is at a production volume of up to 800 thousand the Sokolsky DOK, which forms part of ZAO square meters per month. The factory has been gradually increasing its “Natsionalnaya lesoindustrialnaya kompaniya.” production potential over the past few years. In Today it is the largest producer of square timber Biofuel – The Wood Pellets – is a totally new 2005 ZAO FESKO produced about 1.5 thousand houses, frame houses and bearing-wall houses but very promising direction of development for standard matchbox cases, which is more than in Northwestern Russia. The manufacturing the timber industry in the Vologda region. The during the Soviet times. Now the enterprise capacities allow processing of up to 300 biofuel production has great potential, because shows stable operation and despite certain thousand cubic meters of lumber and the most of the European countries are planning problems with sales, the production volume production of 25-30 thousand square meters to switch fully or partially to environmentally remains at the same level, which is sufficient of glued square timber houses and 10-15 square friendly fuel and thus there will always be for the normal workload of the personnel. meters of frame houses per year. The production markets for this production. The development capacities are not fully used and as a result of pellet production is also important for the Furniture. Furniture production is represented there is the potential for production growth. Vologda region from the point of view of the in the Vologda region by several enterprises. Wooden houses are also produced in smaller efficient use of lumbering waste and low quality They are the furniture factory Styling, which volumes by small and medium businesses of hardwood, for which there is no demand at the currently cooperates with Ikea and is one of the Vologda region. In 2005, the total volume moment. the leading furniture enterprises in the region.
№ 1 2006 № 1 2006 ARKHANGELSKVOLOGDA REGION REGION
example, pulp and paper factories, for which groundwood and the necessary soil preparation ZAO Holding Company “Vologodskie ZAO “Natsionalnaya lesoindustrialnaya kompaniya” millions of dollars are needed. The current trend is performed. lesopromyshlenniki” runs 11 production units, is the largest vertically integrated holding and is to use both imported and Russian equipment of which nine are involved in harvesting and is one of the leaders in the Russian timber for the investment projects. Some enterprises The holding’s work methods are fully approved two in lumbering and wood processing. The industry. NLK has substantial production opt for the best combination: western core not only by the environmental services of the holding has 4,600 employees, of which 800 work capacities both for harvesting and for wood equipment and Russian auxiliary equipment consumers, but also by the leading environmental in lumbering and wood processing. The felling processing and operates according to the global (mainly produced in Vologda). organizations including Greenpeace and the register rented by the holding consists 40% of standards using the most advanced principles World Wildlife Fund. In 2004, the company joined softwood and 60% of hardwood. of corporate management. The harvesting and The development of the forest machinery the Association of environmentally responsible wood processing enterprises of the holding are industry in Russia and in Vologda in particular harvesters of Russia. The turnover in the timber industry in 2005 located in strategically important forest areas of is especially important for medium and small was around 2 milliard roubles. Since 2001 the the European part of Russia: in the Vologda and wood processing enterprises, which cannot The Cherepovetsles holding takes an active harvesting volume of the holding company Archangelsk regions, and the Republic of Karelia. afford expensive western equipment. One of part in international projects. In 2003, the “Vologodskie lesopromyshlenniki” increased Five of the 8 NLK enterprises are in the Vologda the main goals of the machinery enterprises holding joined the Russian-Finnish project, from 960 to 1420 thousand cubic meters, that region. They are LPK Kipelovo, Sokolsky DOK, is to improve the quality and to develop new “We Share the Responsibility,” whose aim is, by 1.5. The production volume in lumbering Kovzhisnky LPKh, and ZAO Severlesprom. This is equipment that would satisfy the needs of the was to improve the economic, environmental and wood processing increased from 180 million why the company’s further development plans wood processing industry. and social components of wood harvesting in roubles in 2001 to 290 million roubles in 2005. are mainly related to the Vologda region. Russia. In 2004, Belozersky LPKh submitted After the completion of the first stage of the materials for the evaluation of the social impact reconstruction of Kharovsky LDK, the timber OAO Lesopromyshlenny Koncern Kipelovo, VERTICALLY INTEGRATED of harvesting over the life of local population processing volume will reach 250 thousand cubic which forms part of the ZAO Natsionalnaya STRUCTURES to the researchers of Yvaskyla University in meters per year and the production volume for Lesoindustrialnaya Kompaniya holding, was Finland. The research for this project continues. lumbering and wood processing will almost founded in 1996 and is the managing company It is hardly surprising that the success and Currently the holding participates in a joint double, amounting to 570 million roubles. for harvesting. The company has eight branches prosperity of the timber enterprises highly Russian-Danish project, “The Legality of Russian in Kirillovsk, Charov, Syamzha, Kadnikov, Kaduysk, depend on the development of vertically Timber,” initiated by the World Wildlife Fund The automation of processes will steadily Babaevsk, Vologda and Vozhegodsk and performs integrated structures. There are four such and WWF of Denmark. increase as foreign harvesting technologies harvesting activities in ten districts of the enterprises operating in the Vologda region. are introduced, such as automated bucking. The Vologda region. It performs the operational The Cherepovetsles holding has been three times holding has purchased five harvesting units from management of the harvesting enterprises in 150 OAO Wood Processing Holding Company 151 awarded the title of the Best Exporter of the Timberjack (John Deer) and one from Volvo. the holding: PO Vytegra (ZAO Kovzhisnky LPKh, Cherepovetsles was founded in 1994. The RF (1997, 1998 and 2001). The company has ZAO Severlesprom), OAO Ustyales. The total area holding includes 5 enterprises involved in won numerous medals and diplomas from the In 2004, the holding sold 44% of its shares of the forests rented by the holding is 771 wood processing in the North-Western part exhibition, “The Forests of Russia.” In April 2005, to Thomesto, the subsidiary of the Finnish thousand hectares with an estimated cutting of the Vologda region: OAO Babaevsky LPKh, it was awarded the National Entrepreneurship Metsaliito Group. This was done in order to area of 1318 thousand cubic meters, including OAO Belozersky LPKh, OOO Belozerskles, OAO Award, “Gold Mercury,” in the category, “The implement the wood-processing project in the 178 thousand hectares with 580 thousand cubic Vashkinsky LPKh, OOO Belousovoles. The holding Best Exporter of Consumer Goods,” and awarded village of Suda in the Vologda region and to meters of the estimated cutting area for OAO employs 3,200 people. a medal and a diploma for its contribution to improve the financial stability of the holding LPK Kipelovo. The harvesting is performed by the development of entrepreneurship in Russia. company. The participation of the Metsaliito use of bucking technology and computerized The annual production volume of Cherepovetsles In the same month the company won the timber Group to a certain extent raised the status of Timberjack (John Deer) shortwood harvesters, is 1.2 million cubic meters of lumber of all industry award Lesprom.ru in the category, “For the company, Metsaliito also is the holding’s Ponsse, harvesting units harvester-forwarder assortments, more than 70 thousand cubic the Efficient Forest Exploitation.” largest customer and accounts for 26% of its and by subcontracting. In 2003, following the meters of sawn softwood, 5 thousand cubic total sales. contract with Timberjack (now John Deer) the meters of sawn hardwood and 2 thousand cubic In November 2003, the rating agency “Expert holding purchased harvesting equipment for a meters of aspen veneer. RA,” together with WWF, conducted an Two projects are implemented in cooperation total sum of 1,445 thousand euro, and in 2004, independent eco-rating and assigned to the with Thomesto. First, the sawmill Suda, for it purchased 8 more units from the Finnish Environmental safety is an important part of Cherepovetsles the high class of environmental which there is already a secured site and a company Ponsse for a total sum of 3,400 euro. the industrial policy of the company. According responsibility, Eco-A. In August 2005, after the business plan. The sawmill will have a capacity Thus, in 2005, the OAO LPK Kipelovo used 15 to the company’s environmental policy, the second evaluation, the rating was increased of 200-250 thousand cubic meters of lumber technologically advanced harvesting units. development of cutting areas follows the to Eco-A+, denoting a company with a high per year. The construction work will start in principle of sustainable forestry. More than 30% level of environmental responsibility and minor 2006. The site also allows for the building of OAO Corporation Vologdalesprom is one of the of harvesting is done using the Scandinavian environmental risks. According to the experts a pulp and paper factory, but the final decision largest timber industry enterprises in the region. technology that ensures a similarity to the of “Expert RA,” “The high level of forest has not yet been made and this possibility is Today it includes 10 different business units natural tree generation change. The harvesting exploitation in OAO LKhK Cherepovetsles and currently being considered. The second project operating in harvesting, logging, subsequent enterprises take an active part in forest recovery. the company’s active interest in certification of involves the construction of lumbering and wood wood processing and the production of wood- The company plants up to 4,000 fir trees every its wood processing enterprises had a positive processing facilities at OOO Kharovsklesprom. chemical products. The corporation continuously year. Every year more than 3,500 hectares of the impact for the Eco-Rating.” Currently the enterprise has already reached a increases production volumes and creates cutting areas are thoroughly cleaned from the technologically new level of production. new workplaces. Over the last few years the
№ 1 2006 № 1 2006 ARKHANGELSKVOLOGDA REGION REGION
corporation enterprises have been steadily passed FSC certification, while Vologodskie THE NATIONAL RUSSIAN EXHIBITION, and wood processing. Thus, the exhibition, increasing their capacities and main performance Lesopromyshlenniki holding tried the Russian “The Forests of Russia,” contributes to the indicators. system of voluntary certification at one of its “THE FORESTS OF RUSSIA” modernization of manufacturing equipment. enterprises OOO Vozhega Les. The annual national Russian Exhibition, The corporation produces lumber, soft and hard “The Forests of Russia,” is one of the ways The exhibition also supports the community of sawlog, soft and hard pulpwood, veneer block, INVESTMENT CLIMATE to stimulate the development of the timber the Vologda region by contributing to the city match block, mine timber and sawn wood. industry. The tenth exhibition took place in and regional budget in exchange for the use of Recently, Vologdalesprom has been actively The full development of the timber industry is the Vologda region last year. local infrastructures, profitable activities of local developing biofuel production and it plans to only possible with investments. The investment manufacturers and service providers and income establish in the Vologda region 5 factories for appeal depends on multiple factors. The This event serves several purposes: advertising, from the exhibition events. Furthermore, “The wood pellet production. Two of them, in Vologda investors, especially the foreign ones, do economics, commerce, and others. “The Forests Forests of Russia” exhibition always includes (at Vologda plant of wood chemical products) not operate in the regions with unstable, of Russia,” like any other trade exhibition, events that attract the attention of the general and Veliky Ustyug, are already in operation. unpredictable situations or where the authorities provides a good opportunity for advertising the public to the timber industry, for example, the do not cooperate with the business world. enterprises and their production and allows the exhibition of wooden constructions and Vologda CERTIFICATION The Government of the Vologda region tries participants to present themselves and establish crafts that took place at the tenth exhibition. to ensure the most favourable conditions for personal contacts with business partners. Some of the exhibited items were later presented The certificates of compliance of the forest the investment projects, because any investor to the local establishments for children. management system with the international FSC creates workplaces, uses working assets, pays Furthermore, the exhibition helps to solve some standard allows a timber industry enterprise to taxes and thus contributes to the economic actual problems of the timber industry. Personal Thus, the National Russian Exhibition, “The be more confident about its future because development of the region. meetings and discussions at the seminars and Forests of Russia,” makes an important there is a high demand for the FSC approved “round tables” provide a good opportunity contribution to the development of economics production in the environmentally aware According to the rating agency, “Expert RA,” for developing joint solutions for the further both in the Vologda region and in Russia in European countries. This certificate is often a over the last 10 years the Vologda region development of the industry. Another important general. One can say that it constitutes an necessary condition for further cooperation. has been one of the leaders in the category aspect of the exhibition is the opportunity to see example of “timber cluster,” which should exist of regions with lower investment potential and show the modern timber industry machinery in every developed forest region. The first company to undergo certification in and moderate risk. Although the investment and to present new technologies for harvesting the Vologda region was LKhK Cherepovetsles. potential is average for the general Russian Prepared by Tatiana ALESHINA 152 In 2003, the company successfully passed the level, the investment risks are continuously 153 environmental audit performed by the European maintained at a low level. The fixed capital Bank for Reconstruction and Development. In investments into the timber enterprises of the August 2004, Belozersky LPKh (the largest region over the past few years amounted to harvesting enterprise within the holding) was more than 300 million dollars. one of the first companies in Northwestern Russia to obtain the FSC certificate of compliance of The RA experts note the high industrial and the forest management system with a total area financial potential of the region resulting from of 220 thousand hectares. In March 2005, the the highly developed production and processing production of the Belozersky LPKh sawmill in industries. The Vologda region is gradually Nizhnyaya Mondoma obtained a certificate for becoming more competitive at the investment the CoC chain. Other holding enterprises are market. If six years ago it shared the same level to be certified in the near future. In February of investment risks with “mediocre regions,” 2005, OAO LKhK Cherepovetsles obtained the now the Vologda region competes with such ISO 9001:2000 certificate of compliance of traditionally attractive regions like Moscow, quality management systems for the following the Nizhniy Novgorod region, the Rostov region, services: preparation, execution and full support Tatarstan and Bashkortostan. of contracts for timber supplies, including production management, storage, dispatching and Nevertheless, such areas as the support of custom clearance of timber. The certification was innovations, further implementation of the performed by Det Norske Veritas. In May 2005, program of economic diversification, and the the Holding company Cherepovetsles successfully reduction of criminal and environmental risks are passed the audit of compliance with the supply still important for further development of the chain standard 2.0 GFA, thus closing the supply Vologda region. According to the experts, the chain for the FSC certified products. development of a system of measures in these areas will preserve the high quality and stability Other lumberers in Vologda follow the same of the investment climate in the Vologda region trend, and other enterprises of the region also and secure a permanent place in the top ten undergo certification. AO Bely Ruchey also most attractive Russian regions.
№ 1 2006 № 1 2006 ARKHANGELSKKOMIKARELIA REPUBLIC REPUBLIC REGION
The total area of forestland decreased by 243 birch other pine thousand ha compared with the year of 1993 11% 1% 64% KARELIA: (See Table 1), meanwhile the forested area spruce expanded by 251.3 thousand ha or 2.8%. The 24% average annual wood increment is 13.6mln m3. Forest composition (Fig. 1) is characterized HABITAT OF THE FOREST by the dominance of the softwood species (88.1%), including pine – 5.9mln ha (64.5%), spruce – 2.2mln ha (24.2%) and birch – 1mln Fig. 1. Composition of Karelian Forests ha (10.5 %). GENERAL 19). Meanwhile, Federal Law “On Introducing 3 The Republic of Karelia is a part of the Amendments to Some RF Legislative Acts in The standing stock (Fig. 2) is 910.38mln m , 28.3% Group III Group I 28% northwestern Federal District of Russia belonging Connection with Perfection of Division of of which are forests of Group I, 30.9% – forests 41% to the far northern regions and similar areas. Powers,” ¹ 199-FZ of 12.31.2005 prescribes of Group II, 40.8 % – forests of Group III. As of January 1, 2004, the territory of Karelia the transfer of forests to Russian Federation including the water areas of the White Sea gulf, subjects starting from 1.01.2007 for exercising Exploitable forest stock is 80.3% (12.8 % the Ladoga and Onego lakes, was 180.5 thousand the rights of property, use, management, – forests of Group I, 29.1% – forests of Group km2. The population is 708.7 thousand people; protection, guarding and regeneration of the II, 38.4% – forests of Group III). 2 its density is 3.9 persons per km . Federal Budget’s account (Art. 15). Most Karelian Group II Distribution of age classes in Karelian forests forests (96.9%) are federal property, which 31% In the west, Karelia borders Finland, in the south aggravates the problems of forest use, such as (Fig. 3) is uneven: coppices occupy only 38.7% – the Leningrad and Vologda regions, in the the transition of forestlands, allocation of land of the forested area, mature and over-mature Fig. 2. Stock Distribution by Forest Groups in Karelia north – Murmansk, in the east – the Arkhangelsk strips for forest road construction, introduction stands – 31.8%, middle-aged stands – 21.9%, region, in the north-west it is washed by the of regional forest use rules, etc. However, the a vast deficit of maturing stands is observed White Sea. The republic stretches from the neighboring northwestern regions have been – only 7.5% of the total forested area, which north, southwards, and its length is about 660 much more successful in handling these matters hinders harvesting. The consequent 3.5 times maturing reduction of the allowable cut will require the middle-aged km. According to the State Forest Inventory, the than Karelia. For example, the Natural Resources stands coppices 154 enhancement of intermediate cuttings. stands 7.5% 155 Karelian forest area as of January 1, 2005 was Department of the Vologda Region permitted 21.9% 38.7% 14,824.1 thousand ha (i.e. more than 50% of the low-quality aspen trees to remain during harvest, total territory of the republic). Nearly one third because cutting these trees is economically The current deficit of maturing stands resulted of these forests are bogs and wetlands. and environmentally unfeasible. Nevertheless, from intensive clear cuttings in the mid-20th since the beginning of 2006, representatives century. In the 1950-60’s, the Soviet Union The regional timber industry accounts for about of the Karelian government have been holding felt an acute need to use timber to restore 40% of the region’s industrial output. Timber consultations with regional timber companies and develop the national economy. Karelia, companies employ nearly half of all persons in regarding work under the process of the partial with its considerable timber stock and close mature and over-mature stands the Karelian industry. These enterprises possess decentralization of forest management. The proximity to the center of the country, was 31.8% more than 41.3% of the region’s industrial condition of regional forest resources as well suitable for launching intensive harvesting assets. Karelia’s share in the national paper as problems and prospects of the Karelian schemes. Karelia was oriented in the large- Fig. 3. Distribution of Karelian Forest Stands by Age Classes production is 22.2% and more than one third timber industry after 2007 were discussed at scale harvesting of roundwood performed in newsprint. In 2004, exports were 94.7%, of the seminar “Regional Opportunities of Forest by temporary logging enterprises while the the total production volume of Karelia’s timber Management in the Republic of Karelia: Problems processing of harvested timber was done in The major problems regarding the regeneration industry. As for commodities, the largest part and Prospects,” which took place on January the central part of the country. In the 1960’s, of the forest resource base in Karelia arise out of of the region’s export costs was brought by 25, 2006. Karelia registered an historically high volume severe climate and poor Karelian soils, resulting 3 un-edged timber (58.9%). of harvesting – more than 18mln m /yr, which in relatively low forest productivity. The forest Experts proved that to make reliable forecasts exceeded the sustainable yield prescribed for fund is characterized by the dominance of of the development of the Karelian timber those conditions (Fig. 4) and led to the reduction medium density stands of yield class IV, with 3 FOREST RESOURCES industry they will need a reappraisal of available of the industrial forest resource base. a current increment from 1.2 to 1.5 m /ha (in According to the Forest Code of the Russian information on the republic’s forest resources Federation (approved by the State Duma on aimed at specifying the areas of non-productive 01.22.1997, read with Federal Law ¹ 116-FZ of and economically inaccessible stands in the Table 1. Basic Forest Fund Indicators of the Republic of Karelia forest funds of Karelia to be excluded from 07.25.2002, ¹ 171-FZ of 12.10.2003, as amended Year 1983 1988 1993 1998 2003 by Federal Law ¹ 194-FZ of 12.30.2001, ¹ 176- harvesting. At present, the federal forestland Total area, mln ha 14.84 14.78 14.77 14.76 14.53 FZ of 12.24.2002, ¹ 186-FZ of 12.23.2003, ¹ area in Karelia is 14.5mln ha (82% of the region’s Including forestland, mln ha 9.61 9.63 9.66 9.70 9.54 199-FZ of 12.29.2004, ¹ 199-FZ of 12.31.2005) area), including the forested area of 9.2mln ha Including forested area, mln ha 8.82 8.97 8.98 9.27 9.23 Russian forests are federal property (Art. (Table 1). Stock, mln m3 781.27 807.24 848.61 919.23 910.38
№ 1 2006 № 1 2006 ARKHANGELSKKOMIKARELIA REPUBLIC REPUBLIC REGION
per hectare of Karelian forested lands is 0.72 constructed. 100% use of economically accessible m3, which exceeds the corresponding national resources will supply additional volumes of raw average (0.13 m3), but is 4 times less than the materials to timber processing plants: 0.3mln average in Finland (2.8 m3). m3 of sawn timber, 0.3mln m3 of coniferous pulpwood and 0.4mln m3 of birch pulpwood. The complete implementation of the allowable Cordwood supplied for heating and other clear cut may bring about 3mln. m3 of coniferous technical uses constitutes 18% of the final cut sawn timber; 0.7mln m3 of birch sawn timber; volume and about 40% of the intermediate cut 2mln m3 of pine pulpwood; 1.4mln m3 of spruce volume. The ratio of cordwood types (firewood pulpwood; 0.5mln m3 of birch pulpwood. In the and industrial cordwood) may vary depending meantime, official data on the allowable clear on forest composition and stand conditions. At cut for a number of FMUs (leskhozes) are to be present, the share of cordwood for processing specified. For example, random audits of the is approximately 12% for clear-cut, and 30% forest management in forests of Group III in – for intermediate cut. the Pudozhsky and Loukhsky districts performed by a group of non-governmental conservation In 2004, the region continued the process of organizations revealed discrepancies between forestland’s long-term lease for bid. At present, 3 Fig. 4. Harvesting Volume in Karelia, mln m/yr prescribed and empirical figures (up to 200%) more than 136 forest lease contracts are in including the economic accessibility of low- force, including 78 bid lease contracts. Forest volume trees on high and wetlands. plots transferred for lease have an aggregate prescribed annual harvest of 6.2mln m3, which It was proved that the available exploitable is nearly 70% of the allowable cut. In 2005, the stock is uneven regarding economic conditions transfer of forest resources for lease finished. and development opportunities. Most stands located along overland and water routes are During 2004, 66 auctions were held, selling intensively used. On average, about 20% of 170.6 thousand m3 for a total amount of 34.9mln mature forests in the region are represented by rubles. The federal budget generated 8.1mln 156 undercut blocks and low-quality and deciduous rubles, the local budget – 26.8mln rubles. The 157 stands on cutover areas. These types, in price per cubic meter of timber was 204.7 rubles, aggregate, make about 65-70% including low- which was 4.3 times more than minimum forest density, wetland, mature and old-growth stands. tax rates. This will entail the deterioration of the forest resource base due to the depletion of coniferous The Karelian Forestry Agency implemented the Fig. 5. Implementation of Allowable Cut in 1993-2004 (%) forests and the need to use low-productivity programs, “Forests of Russia,” and “Forests of stands. In general, 15-20% of forested lands Karelia,” according to which, 22.5 thousand ha are underused because of the poor transport (102.3% of the planned area) of the republic’s neighboring Finland, the increment of wood both softwood and hardwood management units infrastructure of the territory and limitations territory was reforested in 2004, including sowing exceeds 3 m3/ha). The average stock per hectare were underused (from 12.5 to 41.3%) (Table placed by strict environmental requirements and planting on the area of 10.6 thousand ha of forested lands in Karelia is 98.7 m3; of mature 2). (mainly referred to forests of Group I and some (101.2%) and salvage cuttings in coppices on and overmature stands: 145.6 m3. In 1990, the other forest categories). the territory of 22.2 thousand ha (101%). Forest Karelian allowable cut was 10.6mln m3, in 1995 As the Karelian Forestry Agency reported in tending was performed on the territory of 20.2 – 8.820mln m3 and in 1998 – 9.492mln m3. 2004, the allowable clear cut was 8.9mln m3, Taking into account the conditions and dynamics thousand ha (against a planned 29.0 thousand For the period from 1990 to 1998, taking the and the harvested portion of allowable cut was of forest resources at particular enterprises, a ha). Replenishment of 6.9 thousand ha of forests overall allowable cut reduction by 11.5%, the 6.1mln m3. For the period from1997 to 2004 reduction of the allowable cut may be expected was conducted (against a planned 6.7 thousand most significant decrease referred to conifers the allowable cut implementation gradually in West and North Karelia in years to come, ha). 1,596 ha of plantations were established (by 14.1%) while the soft deciduous species’ increased from 60.3% to 67.3% (Fig. 5). The while in the south and central parts where using seedlings with improved properties. allowable cut grew by 6.9%. During that period average annual volume of timber harvested harvesting has been performed since the 1930’s, the allowable cut has a tendency to increase. The estimated forest management costs in The allowable selective cut (tending, selective 2004 were 659.4mln rubles, including 90mln Table 2. Implementation of Allowable Cut in 1990, 1995, 1998 salvage cuttings, regeneration cuttings, etc.) in from the federal budget and 31mln from the Allowable Cut, Implementation of Allowable 3 Actual Cut, thsd m3 Karelia is 2.4mln m . The economically viable Karelian budget and 513mln from off-budget Year Mln m3 Cut. % volume of intermediate cuttings is 1.8mln m3; sources (i.e. money earned by Karelian FMUs Total Softwood Hardwood Total Softwood Hardwood Total Softwood Hardwood the portion of used economically accessible from tending cuttings). Financing schemes 1990 10.60 8.74 1.86 9.27 8.18 1.09 87.5 93.6 58.7 resources does not exceed 25%. The volume of Karelian forestry are issues of concern to 1995 8.82 7.01 1.74 5.97 4.83 1.14 67.6 68.3 65.4 of intermediate harvest may be increased by local leaseholders (though these issues are 1998 9.49 7.50 1.99 6.22 4.83 1.39 65.6 64.4 70.1 30%, provided an adequate road network is common in all territorial subjects of the Russian
№ 1 2006 № 1 2006 ARKHANGELSKKOMIKARELIA REPUBLIC REPUBLIC REGION
Federation). According to the JSC Seguezhsky issues were being actively discussed. At present, inventoried planned SPAs outside HCVF. The • 204 territories of regional importance with Pulp and Paper Mill (TsBK), leskhozes have FSC certification in Karelia is being promoted by results were presented in the book “Analysis of a total area of 554.2 thousand ha; turned from governmental forest guards into the FSC Russian Office, the Karelian Voluntary Wood Harvesting Restrictions in Conservation competitors of private logging companies, Forest Certification Center, NGO SPOK, and others. Areas and Old-Growth Forests of the Republic 1 territory of local importance with an area which still are in more favorable condition, Apart from the FSC certificate, preferential of Karelia,” (Gerasimov, Yu. Yu., Markovsky A.V., • of 170 ha (Porozhky Reserve of introduced compared with leaseholders. For example, in access to international markets can be obtained Markovskaya N.V., Lapshin P.N. Joensuu, 2006. 148 wood species) 2005, on JSC Seguezhsky TsBK’s leasehold area, through a quality management certificate p, available via Internet: http://www.metla.fi/ leskhozes stealthily cut the best forest blocks issued in compliance with the requirements of julkaisut/workingpapers/2006/mwp022-en.htm). Moreover, another four SPA’s with the total along roads under the guise of current cutting, ISO 9001 standard, the “Year 2000” version; area of 113.9 thousand ha are undergoing an jeopardizing the forest base for future final at present only JSC Pulp Mill Pitkyaranta has It is estimated that at present there are 215 approval procedure (0.65% the total of Karelia’s cuttings. Cutting operations violated acting such a quality management system. Since 2005, SPAs in the territory of Karelia with a total area). They include the planned Kalevala conservation legislation, which was proved by JSC Svedwood-Karelia has passed the audit for area of 933.2 thousand ha or 5.2% of the total National Park (74.4 thousand ha), the Syrovatka control measurements made by JSC Seguezhsky compliance with FSC Principles and Criteria. Its area of the region and 6.3% of its forest funds. Landscape Reserve (31.1 thousand ha), the TsBK late in 2005, together with representatives leased forest area is 161.3 thousand ha. The These include: Voynitsky Landscape Reserve (8.3 thousand of the Federal Forestry Agency. The timber was audit is performed by NEPCon, a representative ha) and the Kumi-Porogz Natural Monument hauled over roads built at the expense of JSC of Smartwood, accredited in Eastern Europe, • 3 preserves: Kostomukshsky, Kivach and (0.1 thousand ha). Seguezhsky TsBK: there is no mechanism for Scandinavia and Russia. Also, in 2005, JSC Kandalakshsky (the major part of the collecting fees from leskhozes for road use. Seguezhsky TsBK announced a new environmental Kandalakshsky Preserve is located in It may seem that such an abundance of SPA’s policy in forest use and concluded a contract the Murmansk region), total area 59.6 does not always help nature conservation. The way out may lie in the transfer of with the FSC-accredited audit company JSC SZhS thousand ha; For instance, in the taiga zone, cuttings are forest growing and tending functions to the Vostok Limited for SGS QUALIFOR-based forest the major method of transforming the natural leaseholders (perhaps, supported by federal management certification of the plant’s 1.8mln • 2 national parks: Paanyarvi and Vodlozersky environment. Both partial and clear cuttings or local budgets), at the same time, leskhozes ha of forest area. (the major part of Vodlozersky National Park result in a change of microclimate of forest and must retain performance control functions in is located in the Arkhangelsk Region), total ecosystems, destruction of wildlife habitats (dens, order to monitor the leaseholders’ conformity The press-service of JSC Seguezhsky TsBK area 235 thousand ha; nutrition areas, etc.). As a consequence, any with the requirements of Russian forest reported that the company, demonstrating cuttings of SPA’s will bring irreversible damage legislation, enjoying relevant governmental environmental responsibility, redirects the Natural park Valaam Archipelago (2.2 to the environment, which contradicts the goal 158 support. Large leaseholders regard the law output of certified advanced wood products and • thousand ha); of SPA’s establishment – conservation of the 159 “On Introducing Amendments to Some RF strives to procure the maximum possible volume natural biological diversity of the region. That Legislative Acts in Connection with Perfection of certified raw material. To verify the new is why SPA’s harvesting should be limited. of Division of Powers,” ¹ 199-FZ of 12.31.2005 course, the Forest Resources Director of the plant • 97 federal and local reserves with a total as a possible tool for reforming the existing announced that Uhktuales enterprise, a member area of 571.7 thousand ha; As of January 1, 2006, a complete ban was leskhoz system. of JSC Seguezhsky TsBK holding, will not harvest placed on all types of harvest in the territory intact forests on its leased area, even under • 103 natural monuments with a total area of 40 SPA’s with a total area of 105 thousand ha the threat of bankruptcy. One of the problems of 29.9 thousand ha; (0.6% of the total area of Karelia). Restrictions FOREST CERTIFICATION of adapting FSC requirements to the Russian are put on 487.9 thousand ha of 42 SPA’s (2.7% The European Union (EU) is completing its forest management system is the inventory Recreation forests of the sanatorium of the total area of Karelia) – only a part of development of rules prescribing the 100% import and maintenance of all high conservation value • Martsyalnye Vody (7 thousand ha); their territory can be harvested or particular of legal forest products. This process is called forests (HCVF), i.e. specially protected areas types of cuttings allowed. 143 SPA’s with the “Forest Law Enforcement, Governance and Trade” (SPA) and valuable forest areas not included in aggregate area of 340.3 thousand ha (1.9% (FLEGT). FLEGT’s requirements of forest products HCVF, in the process of forest use. • Botanical garden of Petrozavodsk State of the total area of Karelia) can be harvested imported to EU are expected to be introduced University (0.4 thousand ha); without restriction. Distribution of Karelian in 2006-2007. The FLEGT process is an issue of Until 2005, the Republic of Karelia didn’t have SPA’s by cutting restriction regimes is shown in current concern for Karelian timber companies a public source of information about quantity, • Conservation zones of the Kivach Preserve Fig. 6. Fig. 7 illustrates the spatial distribution because export accounts for some 77% of their protection regime and location of HCVF except and Paanyarvi National Park with a total of SPA’s in the territory of the Republic of total production. One of the documents verifying for an outdated handbook “Specially Protected area of 13 thousand ha; Karelia. the compliance of supplier’s products with FLEGT Natural Areas of Karelia,” (Khokhlova Ò. U., requirements is an international FSC certificate. Antipin V.Ê., Tokarev P.N. Petrozavodsk, 2000. 5 territories having cultural and historical In 2006, NGO ROO SPOK, together with Russia’s joining of the WTO, which is expected 312 p.). This caused problems for forest • value with a total area of 14.4 thousand ha. METLA, Finland, are planning to continue to occur in 2006–2007, serves as an additional management bodies and leaseholders planning According to their status, the territories are collecting data on harvesting restrictions in impetus for timber companies having only 1.5-2 and performing cuttings in the region, as well classified as follows: the Karelian SPA not included in HCVF, and years to pass the FSC certification process to as research and non-governmental organizations conduct comparative research on protection obtain certificates. FSC certification is being monitoring the condition of HCVF. regimes and harvesting restrictions in HCVF intensively introduced in the regions adjacent • 9 territories of federal importance with a in the Republic of Karelia and the Arkhangelsk to Karelia, while Karelia itself is a little bit late, In 2005, regional NGO ROO SPOK, supported by total area of 379 thousand ha; Region. though at the end of the 1990’s, certification the Finnish Forest Research Institute (METLA),
№ 1 2006 № 1 2006 ARKHANGELSKKOMIKARELIA REPUBLIC REPUBLIC REGION
TIMBER INDUSTRY production of newsprint, 20 % of the stock belongs to Conrad Jacobson GmbH, Germany) The timber industry holds the top position in and JSC Seguezhsky TsBK (timber harvesting, the Karelian industrial rating. It employs 40 sawmilling, production of paper bags). thousand people out of 760 thousand living in Karelia. More than 13 thousand workers Until 1998, the Karelian timber industry of 256 Karelian enterprises are engaged in production volume showed a decrease, which 3 harvesting, cutting about 7mln m annually persisted for several years; in 1998-2000 (in comparison, in neighboring Finland, the (after the collapse of the ruble against the logging industry employs about 6 thousand US dollar) the region saw a period of financial 3 people, harvesting approximately 50mln m ). rehabilitation of enterprises and extensive In 2004, the Karelian timber industry had 525 industrial growth. By the year 2000, however, the operating enterprises and plants, 66% of which potential for extensive growth was exhausted. are small enterprises, 18% auxiliary production Thus, the republic modified its approaches to lines at non-industrial enterprises, 16% large and forest use within the framework of regulations medium-size enterprises, including enterprises provided by the RF Forest Code. The Karelian with foreign investments. government turned to on-site advanced timber processing, improved the technological support Among the largest Karelian timber companies of harvesting operations, production of sawn are: harvesting company JSC Karellesprom, timber, and pulp and paper [3, 4]. managing shares (stocks) by right of proprietary possession of 16 economic societies, including From the period of 2000-2004, production ten joint stock companies, one closed joint stock volume in the timber industry grew by 21.1% company and stocks of five limited liability (Table 3, Fig. 8). In 2004, the overall 12.8% companies. The largest participants whose production growth was observed in comparison shares are a property or trust stocks managed with 2003, harvesting production grew by 18%, by JSC Karellesprom include JSC TsZ Pitkaryanta, pulp and paper industry by 11.8%, woodworking 160 Mouyezersky LPK, Kodopozhskoye LPH (about by 3.5%. 2004 saw the growing production 161 10% of enterprises’ stocks are trust stocks). of commercial round timber, sawn timber, The holding also includes such companies as chipboards and paper. Lakhdenpokhsky LPH (63.5%), Lendersky LPH (32.1%), Onego-Service-LZP (20%), Pudozhsky 2004’s final profit and loss accounts (P&L) of LPH (20% of own shares, 45% – trust stock timber companies reported losses of 259.3mln of JSC Kondopoga). More than 50% of JSC rubles (including harvesting – 159.7mln rubles, Karellesprom belong to the government of the woodworking, 155.3mln rubles, paper production, Republic of Karelia. 55.7mln rubles in profit). The percentage of enterprises reporting losses in 2004’s year-end The leading companies operating in the logging P&L account was 62.1% of the total number of sector of the Karelian timber industry are holding timber enterprises, the sum of 2004’s losses was companies JSC Kondopoga (timber harvesting, 833.9mln rubles. The level of forest product sales at which they break even grew by 0.4% in 2004 compared with 2003. Expenses per 1 ruble of product price (works, services) in Harvesting Outright timber industries made up 0.96 ruble in 2004, permiting ban on harvesting which was a 0.01 ruble growth in comparison 36% 11% with 2003 (Table 4).
In 2005, timber companies continued to augment production volumes (mainly at the expense of paper production); the harvesting branch, on the other hand, reported a production slowdown, Partial harvesting ban lowering their paying capacity. In 2005, the first Karelian SPA’s where only final fellings are prohibited 53% half-year-end income of the Karelian budget Karelian SPA where cutting is unlimited was 169mln rubles (a 9.1% decrease compared Karelia SPA’s where all types of cuttings are prohibited Fig. 6. Distribution of Karelian SPA’s by Cutting with the 2004 level). Losses stated in the Regimes balance sheet for seven months of 2005 made Fig. 7. Distribution of SPA in the territory of the Republic of Karelia
№ 1 2006 № 1 2006 ARKHANGELSKKOMIKARELIA REPUBLIC REPUBLIC REGION
EXPORT 37% of the total industrial production volume of the republic and 94.7% of the industry output. The Economic Development Ministry of Karelia The total cost of forest products exported from reports a considerable growth of the Karelian Karelia was USD544.2mln (64.6% of all exported foreign trade volume at the expense of both products), including USD249.3mln (29.6%) for exporting and importing. The volume of foreign timber and products thereof and USD294.9mln trade in products and services increased 1.5 (35%) for pulp and paper products. The commodity times over the past five years. 2005 foreign trade composition of exports of timber and products turnover was estimated at about USD1, 170mln. thereof was presented by un-edged timber (58.9% Finland, sharing a border with Karelia, is its main in monetary value), edged timber (34.9%). Export business partner, accounting for 36% of Karelian of pulp and paper products included newsprint foreign trade turnover. Karelian foreign timber (74.4%), sulphate pulp (7.5%), kraft paper (17.3%), trade is export-oriented. The region’s share in the bags and cardboard tare (0.6%), other products Russian export of raw timber in physical terms (0.2%) (See Table 5, Fig. 10). was about 10% in 2000-2003 and 9% – in 2004; Fig. 8. Indices of Physical Production Volume in the Timber Industry (%) against 1998 its share in RF exports of forest and pulp and In physical terms, the export of pulp increased paper products in money terms was some 8% by 5.9%, newsprint – by 30.1%, edged timber during the period 2002-2004. In 2004, forest, – by 9.7%. Kraft paper export decreased by up 138.2mln rubles. Two thirds of enterprises 31.2mln rubles (January-September, 2004) up to timber and pulp and paper products constituted 9.7%, unedged timber – by 0.4%. bear losses regarding harvesting operations. 978.9mln rubles, or nearly 30 times. According to the preliminary report, only four companies managed to make profits in 2005, At the meeting of timber companies’ top 2000 with an average efficiency of 5%. Company managers held on October 19, 2005, the heads say that lower indicators are accounted for representatives of the Karelian government by the growing ruble-dollar rate, increased prices required that forest companies logging timber Woodworking Harvesting of energy carriers and transportation tariffs. In under leasehold agreements fulfill development 9.0% 23.8% the meantime, nine months of 2005 showed a and tax obligations (fixed in business plans and 162 significant rise of pulp and paper production other relevant documents regarding the lease 163 volume against the same period in 2004: pulp of forest areas via bidding during 2004-2005), – by 19.3%, paper – 12%, cardboard – 61%, and promised that those who failed would lose paper bags – 19%. The balance profit grew from their leaseholds [5].
Table 3. Production Volume of Major Product Types Product Type Measurement Units 1998 1999 2000 2001 2002 2003 2004 Timber Extracted thsd m3 4,468.5 5,946.7 5,652.6 5,852 5,940.4 6,097.4 6,730.6 P u l p a n d p a p e r 3 Sawn Timber thsd m 489.1 743.8 931.1 804.5 722.8 741.0 759.7 67.2% Glued Plywood thsd m3 1.2 12.2 16.1 20.6 22.1 22.7 19.2 Pulp thsd t34.3 64 72.5 73.3 73.7 80.8 89.8 Paper thsd t518.9 659 724.7 700 711.1 758.9 862.4 2004 Including Newsprint thsd t 416.3 509.9 540.5 533.4 534.2 573.6 693.2 Harvesting Cardboard thsd t6.5 9 44.5 82.8 63.1 64.9 54.1 Woodworking 24.1% Paper Packs mln pieces 142 199.6 178.2 195.1 235.9 269.0 257.9 14.7%
Table 4. Main Indicators of Karelian Timber Industries, 2000-2004 2000 2001 2002 2003 2004 Number of Operating Enterprises as for the End of the Year 636 493 515 525 525 Production Volume, mln rubles 14,113.1 14,600.0 15,598.4 17,601.4 19,955.2 Share in the Total Volume of Industrial Production of Karelia, % 55.8 48.7 45.2 45.3 41.2 Average Annual Personnel Engaged in Production, Persons 43,336 44,222 42,665 38,651 34,061 Average Aggregate of Monthly Salaries of Production Personnel, 3,022 3,597 4,368 5,400 6,673 thsd rubles P u l p a n d p a p e r 61.2% Main Assets (overall reported value) as for the End of the Year, 6,885 9,237 10,378 13,460 16,702 mln rubles P&L Account (profit (+), losses (-)), mln rubles 2,231.7 2,067.1 667.8 -143.2 -259.3 Fig. 9 – Production Structure of the Karelian Timber Industry [1]
№ 1 2006 № 1 2006 ARKHANGELSKKOMIKARELIA REPUBLIC REPUBLIC REGION
Table 5 – Main Export Articles of the Timber Industry, Republic of Karelia with 40.4% in 2003); the proportion of owner’s organization of furniture production from equity was 30.7% (59.6%). cross-laminated wood panels at Boumeks 2000 2001 2002 2003 2004 Ltd; Unedged timber, thsd m3 3217.5 3673.9 3688.2 3563.7 3548.7 According to the Economic Development Ministry Edged timber products, thsd tons 319.8 301.1 290.5 301.8 331.1 of the Karelian Republic, the Karelian economy Sulphate pulp, thsd tons 51.8 59.8 60.2 64.4 68.2 • a woodworking plant with the rated annual today is showing signs of investment-driven 3 Paper, cardboard and products thereof, thsd tons 501.1 549.5 520.4 546.7 656.4 output of 38 thousand m of furniture development. The investment/GNP ratio has components to be constructed by Swedwood reached 21-23%, which exceeds the average Karelia Ltd (IKEA concern, Sweden); Russian analogue and is in tune with global The republic delivered forest products to INVESTMENTS IN THE TIMBER practice. In the meantime, the portion of 79 countries. Among the major buyers were direst foreign investments in Karelia is larger • two woodworking plants with a total capacity INDUSTRY 3 Finland, Great Britain, Turkey, Germany, and than the Russian average; this is explained by of 100 thousand m of sawn timber per year India. Deliveries to Finland account for 98.2% Since 1998, the Karelian economy in general, the implementation of specific projects not in the Pudozhsky and Mouyezersky districts of un-edged timber, 24% 24.0 % of edged and the timber industry, in particular, underwent related to capital movements on the stock and an edge-glued furniture panel factory timber, 12.3% of pulp, 7.7% of newsprint. The several stages of development. The period of exchange. The Karelian Statistical Committee with the annual output of about 40 thousand 3 largest buyers of newsprint were Turkey, India, 1999-2001 was characterized by quite rapid reports that in 2005 the capital inflow to m in Petrozavodsk to be constructed by JSC Germany and Great Britain (over 50% of the total industrial production growth, justified by post- the regional economy was over 9.8bln rubles, Karellesprom; turnover). The cost of forest product imports default factors, and increased self-investments. including foreign investments. The major in 2004 was USD11.4mln or 5.8% of the total By the end of 2001, the development of the part of foreign investments was aimed at • a woodworking shop of Setles Ltd. (Stora import of the republic. The imported range republic slowed down (the annual rate was 1- woodworking enterprises (USD8.9mln) and Enso concern, Finland-Sweden), reaching a included sulphate pulp, paper, cardboard and 3%). In 2002, the government of the Republic harvesting (USD6.1mln). The largest investors rated capacity of 115 thousand m3 of sawn products thereof. of Karelia declared an open-door-policy, which were Finland (USD9.7mln), Canada (USD3.5mln) timber (aggregate investments in 2004-2005 attracted extra investments from abroad and and Cyprus (USD1.3mln). – USD4.8mln); Today, following the advanced processing- pushed up economic growth. In 2004, industrial oriented policy of the Karelian government, the growth was 116.8%; in 2005, the estimated Logging companies allocate invested funds to upgrading and modernization of woodworking regional authorities are discussing prospects of growth index was about 119%. • the development of cut-to-length harvesting facilities at Kemsky LDZ Ltd, Medvezhyegorsky cooperation between the Karelian timber industry systems using imported machines (harvesters and LDZ Ltd, JSC Mouyezersky LPH; 164 with its Finnish counterpart. On the one hand, In 2004, the timber industry received 3,302.5mln forwarders). This technology is being introduced 165 the Republic of Karelia has traditionally supplied rubles in the form of capital investments for at 20 out of the 28 largest enterprises of the Finnish forest industries with raw materials in development purposes (free of VAT), which was republic. JSC Ladenso, JSC Lakhdenpokhsky • a new modern saw mill with a rated output 3 prejudice of the interests of Karelian companies, a 1.5 time growth in comparison with 2003 and LPH, JSC Lendersky LPH and JSC Volomsky LPH of 100 thousand m of sawn timber at JSC while there are timber products ignored by local accounted for 56.2% of the total industrial harvested 100 % of its timber in cut-to-length Zapkarelles. plants (aspen and birch pulpwood, above all). investments (in 2003 – 58.6%). Investments form. For example, in 2004, the largest local Development challenges of the Karelian Exportation of these products may be beneficial into large and middle-size enterprises were enterprises produced 2.1mln m3 of cut-to-length pulp and paper industry come from existing to both parties in the future, as many Karelian made through transactions using raised funds timber (44.5% of total harvest); the annual technical upgrading plans. Planned technical districts are rich in hardwood produced by and accounted for 69.3% in 2004 (compared cut-to-length harvesting growth rate is 10-15% upgrading is expected to bring 2 – 2.5 times regenerating cutovers. [6]. The introduction of new techniques can growth of the volume of commodities of JSC be illustrated by the experiences of Onego- Seguezhsky TsBK in compliance with the “2010 Service-LZP Ltd., set up by JSC Karellesprom in Development Strategy” of the enterprise. It 2004 for camp-type logging in the Pudozhsky was granted a €410mln credit by Sberbank of district using “harvester-forwarder” systems. In Russia to modernize its production lines (in 2005, this enterprise harvested and extracted comparison – the total budget of the republic 157.6 thousand m3 of timber with 100 m3 per is 5bln rubles). In 2004, JSC Seguezhsky TsBK machine shift. allocated 100mln in investments. The money was spent on the upgrading of paper-making Karelian timber processing industries use machines, pulping lines and a new color print investments to improve the quality of their machine. Production upgrading will augment products and establish new production lines sales of micro-crepe tough paper and cardboard including processing hardwood and low-grade used to produce packaged materials. timber. In order to stimulate raw material procurement, The Program of the Karelian Government [4] the plant has started developing a pilot project identifies the following priority projects: (the launch date is 2008) of forest management for special purposes under which the enterprise • a new large sheet plywood production line leased a forest area with the stock of 403.1 3 Fig. 10 – Cost Structure of Wood-Based Products Export, % [1] with the output of 60 thousand m and thousand m3 on a long-term basis (up to
№ 1 2006 № 1 2006 ARKHANGELSKKOMIKARELIA REPUBLIC REPUBLIC REGION
2054). If implemented, the business plan of PROBLEMS AND PROSPECTS shall be managed by forest management • to prohibit timber cutting in specially- JSC Pitkyaranta for the period to 2010 will agencies of an RF subject compensating its protective areas identified in the habitats The major problems of the Karelian timber increase the production volume of market expenses from the federal budget. of rare and endangered wildlife species industry are similar to those of the national pulp up to 115 thousand tons per year. The (Art. 55 and 59, Forest Code of the Russian industry: depleted forestlands, lack of road project of upgrading and installing the second Federation). networks, considerable wear of the machine • The national status of forest planning paper-making machine is being realized by and surveying organizations should be Suoyarskaya Cardboard Plant, which joined park of logging enterprises, and a need for new maintained. Forest planning expenses may to set up a regional body governing SPA’s of the JSC Kondopoga-based holding. In 2004, timber advanced processing facilities, including • be reduced by the introduction of a two- the Republic of Karelia (taking into account the volume of cardboard production doubled, hardwood. level system: at lower levels, a generalized the experience of the Water Resources reaching 40 thousand tons. Commissioning of inventory of the forest fund on all territories Department as well as the environment the 10th papermaking machine with a rated The problems to be solved on a federal level should be performed; at the higher level, a and wildlife protection experience of the capacity of 200 thousand tons resulted in include: abolition of VAT and customs duties survey of specific purposes of forest use in Ministry of Agriculture, Fisheries and Food, the 20% increase of paper produced by JSC on technological equipment, which are not a specified territory should be conducted. Republic of Karelia). Kondopoga in 2004 (703.5 thousand tons). By manufactured in Russia, imported by timber 2007, yet another machine to produce coated companies; an increase of export duties on paper will have been installed; thus JSC raw timber; development of mechanisms of 2. Forest management improvement measures • to maintain landscape reserves falling Kondopoga will pioneer coated paper-making in governmental support of forest road construction aimed to increase effectiveness and the under the complete harvesting ban, intact Russia. The enterprise is planning to introduce as well as mechanisms of raising loans on lease profitability of logging operations under forest areas that are natural environmental a new line for thermomechanical pulp with a rights for forest areas. Forest leaseholders and applicable legislation are as follows: ecosystems, landscapes and complexes, rated capacity 240 thousand tons per year. forest product processors hope that the transfer including objects of special protective, of forest management powers to the region in • to permit leaving small-leaved species and scientific, historical, aesthetic and To encourage the development of timber compliance with Federal Law ¹ 199-FZ of Dec undercut areas of other low-quality timber recreational value (Art. 3, 4 of Federal Law companies, the Karelian Governmental Program 31, 2005, will help solve these problems. without fining, as the punishment is neither “On Environmental Protection” ¹ 7-FZ of [4] offers support for the creation of an environmentally nor economically justified. January 10, 2002 (read with Federal Law industrial group of three timber companies The most topical problems and possible solutions This is proven by good practices exercised of August 22, 2004 ¹ 122-FZ). (JSC Kondopoga, JSC Seguezhsky TsBK and JSC at the federal and local levels were discussed at by adjacent regions. Coppice systems should the seminar “Forest Management Opportunities be allowed not to pile cutting residues Karellesprom), which will close the cycle of to recognize the allocation of area and in the Republic of Karelia,” held on January during cuttings, the performance records • 166 production and sale of forest products, increase the development of quarries for forest road 167 25, 2006. The final statement of the seminar should be made based on the cut area. budget revenues and improve the effectiveness construction as forest management/use- formulates the following recommendations (pursuant to p. 46 of Rules of Standing of timber companies’ management. related activities. The registration procedure and offers the government of the Republic Timber Sale in Forests of the Russian is carried out following Article 64 of the RF of Karelia: Federation, governmental bodies in the RF A remarkable event of 2005 was the purchase Forest Code (Art. 64 RF Forest Code). of JSC Seguezhsky TsBK by Swedish Korsnäs subjects may settle issues, regarding cutting Packaging; the cost of the deal was €73.5mln. 1. Suggested amendments to federal legislation systems, tending, tapping, width of cutting This takeover will make the plant the second for the optimization of forest use at the RF areas, cutting cycle and leaving tees of 3. In relation to the planned partial transfer of largest world producer of paper bags with an subject level, given the planned transfer of some particular species on cutovers, which arise forest management powers there is a necessity annual output of about 1.1bln paper bags and forest management powers from the centre to during the demarcation of cutting areas). to: 300 thousand tons of bag paper. According to the regions, are as follows: develop a regional “Rules of Forest Use” V.F. Preminin, director general of JSC Seguezhsky to identify habitats of Karelian and/or RF • The powers should be transferred to the • for subsequent approval at the federal level TsBK, the deal is a part of the enterprise’s • red-listed species during the forest planning government authorities of RF subjects and involve Karelian forest management strategy aimed at enlarging its global market process or environmental impact assessment (consequently, additional subventions from agencies, businesses, research institutions share, strengthening its position in the markets and grant them SPFA status (p.2 of RF the federal budget); departmental acts and environmental NGOs in the process of of Eastern Europe, CIS and Russia. Government Regulation of February 19, 1996, regulating issues of transferred forest- developing the Rules. N 158 “On Red Book of Russian Federation;” related powers, compulsory methodological Another interesting event was the opening Art. 60 of Federal Law “On Environmental recommendations and guidelines on their of an assembly and maintenance line Protection” ¹ 7-FZ of January 10, 2002 • Due to the significant depletion of Karelian implementation by the RF subjects’ executive for harvesting machines (harvesters and (read with Federal Law of August 22, 2004 forest resources, a detailed quality assessment agencies should be approved. Regional acts forwarders) by Harvi Forester, Ltd. at the ¹ 122-FZ); Art. 55 and 59 of Forest Code of of available forest information based on should not contradict federal legislation and Medvezhyegorsky Repair Plant under the the Russian Federation; p.2 of the Karelian current inventory data is needed. This means must undergo a check at the federal level. license of Finnish Pinox Company. The total Government Chairman Regulation of May the identification of softwood and hardwood investment sum was €4.5mln. Unfortunately, 19, 1997 ¹ 268 “On Red Book of Republic sections, as well as mixed sections specifying JSC Karellesprom failed to implement a • Forest leaseholders should be trusted of Karelia;” “General Regulations on the the proportion of small-leaved forests. The construction project regarding two new timber with management of leased forestlands Identification of Specially Protective Forest assessment should also specify the number plants (in Lendery and Pudozh) and a furniture compensating their expenses from the Areas,” approved by Rosleskhoz order ¹ 348 of non-productive stands in the forest funds plant in Petrozavodsk by 2005 (supposed republican fund replenished by stumpage fees on December 30, 1993. of both the Republic of Karelia and specific investment sum was $35mln). as a part of lease duties. The forest areas territories to exclude them from forest use
№ 1 2006 № 1 2006 ARKHANGELSKKOMIKARELIA REPUBLIC REPUBLIC REGION
plans. For this purpose, an order should be the export of un-edged raw materials. Karelian population and an increase in local budget supply the federal budget with required revenues placed with research organizations for the advanced processing plants will not be able revenues. These three largest industrial holdings and making the heads of RF subjects bear assessment of Karelian forest resources taking to rely on raw timber supplies from central are expected [3, 4] to join their efforts (their responsibility for the fulfillment of the plans. into account their economic feasibility, social Russia, because major timber sources in areas heads signed a memorandum of intent in 2003) and environmental importance for adequate adjacent to Karelia have already been divided to upgrade timber enterprises of the republic, Markovsky А. V., Rodionov А. V., Sofronova Е. А. evaluation of exploitable forest stock of between integrated industrial organizations, sharply reduce the export of raw materials at Regional NGO SPOK; Petrozavodsk State University; Karelia, and prospects of the timber industry. with processing facilities, competing with JSC the expense of the redirection of timber to Institute of Economics of Karelian Research Centre, RAS This will help analyze the accessibility of Seguezhsky TsBK and JSC Kondopoga. The absence the processing plants, expand the harvesting forest stock and exclude economically and of ‘free raw materials’ will result in a production volume up to 14mln m3 and reach at least a environmentally unacceptable sources from slump and the decreased competitiveness of 2.5 time increase (up to USD160-180) of the REFERENCES 3 the plan. Karelian pulp and paper and timber products, price of products obtained out of 1 m of timber 1. Forest Complex of the Republic of Karelia in entailing reduction in the local budget revenue harvested in the republic. On the other hand, the Karelian timber industry 2000-2004 / Kareliastat. Petrozavodsk, 2005. for advanced processing enterprises. After the 53 p. is not free of problems. A near-border location, year 2010, raw materials importers may take an So, what should regional officers do now growing transport tariffs and an overall production advantage of their strengthened monopolistic that forest management powers are being 2. Timber Industry of the Republic of Karelia (1990–1999) / Ed. by Å. G. Nemkovich, À. M. slump in the late 90’s predetermined the isolation position on the Karelian market by implementing transferred from the federal level to the level of the regional timber industry from central Tsypouk, À. I. Shishkin. Petrozavodsk: Publishing a contracted export price reduction strategy of RF subjects? house PetrSU, 2000. 164 p. Russia and its transition to roundwood export. further decreasing the profits of the budget Specialists believe that the export orientation from the export of raw materials. Successful 1. Require that the federal center permit 3. Forest complex assessment and analysis, Republic of raw materials sector and the remoteness of implementation of this strategy in Karelia, which the regions to retain the money needed for of Karelia: Research report (final) / Supervisor À. alternative suppliers underlie the high prices of is traditionally dependent on the use of forest forest management starting in 2007 (at least I. Shishkin; Institute of Economics of Karelian the raw timber (compared with other regions resources, will be a threat to its social and the current sum, ideally), provided all unspent Research Centre, RAS. Petrozavodsk, 2003. 51 p. of the Northwest Federal District) for Karelian political stability and financial independence money allocated for forest management will 4. Economic and social development program of the processors as well as the development of timber as an RF subject, turning the region into an be transferred to the Russian budget as Republic of Karelia for 2004-2006 / Government processing plants with foreign ownership. economically depressive state-aided region. The before. Perhaps the federal center will share of the Republic of Karelia. Petrozavodsk, 2004. consequences for Karelia are comparable to the its revenues with regions and shift from the 155 p., annexes. If the current situation persists, the workload causes of ‘perestroika’ when oil and gas profits “big circle” circulation scheme (i.e. region 5. Sabourov N. Republic-wide event / N. Sabourov of facilities of Karelian timber companies 168 were not able to cover the losses incurred via – budget of the Russian Federation – region) // Forest Karelia. 2005. ¹ 9. P. 1. 169 manufacturing value-added products will become ineffective socialistic production schemes in the of forest management funds to the “small 6. Nikonov S. Via modern technologies / S. Nikonov insufficient in the near future. For instance, Soviet Union. In order to overcome identified circle” scheme providing for the extraction // Forest Karelia. 2005. ¹ 10. P. 4. by 2007, JSC Seguezhsky TsBK will be able to negative trends and create conditions for the of revenues in excess of forest management 3 process up to 2.6mln m of raw timber against intensive development of the Karelian timber expenses. This scheme eliminates the necessity 7. Zouyev D. B. Scientific justification of forest 3 the current 1.3mln m , JSC Kondopoga – 2mln industry, a system of development projects for redistribution and control of RF subjects’ industry management ideology in the Republic 3 3 m against 1.6mln m respectively. Raw material (under governmental control) for domestic raw spending on forest management. The promotion of Karelia / D. B. Zouyev, À. V. Rodionov, À. Ì. importers keep roundwood prices up (excessively materials and finished product markets at the of the forest sector development in RF subjects Tsypouk, À. I. Shishkin // Pulp. Paper. Cardboard. 2004. ¹ 8. P. 46–51. high prices in comparison with average Russian expense of the gradual increase of export duties can be made by federal budget revenue plans market prices), discouraging Karelian loggers on un-edged timber, and a complete ban on generated by the center, supposing that above- from supplying the domestic market (namely, round timber exports in the future (following plan profits are retained in the regions. the Karelian market). the historical example of neighboring Finland) is necessary. 2. Require that the federal center transfer to RF In the meantime, until 2007 the financial subjects the right to approve and use regional environment for Karelian logging companies JSC Seguezhsky TsBK, in conjunction with regulations regarding exercising the transferred may remain stable, or perhaps get worse, and the the Institute of Economics of the Karelian powers starting in 2007, on the condition that export of round timber may increase. Advanced Research Centre, Russian Academy of Science, they are in compliance with federal laws and processing enterprises – JSC Seguezhsky TsBK, put forward a number of priority actions to undergo a check at the federal level. The centre JSC Kondopoga – exhibiting hunger for raw develop the Karelian timber industry, presented may reject the proposal in cases when forest materials, will not be able to maintain their in the document, “Forest Industry Management management uses cost planning, since cost competitiveness on the global paper market; the Ideology of the Republic of Karelia.” The planning allows RF subjects to justify larger lack of raw timber may result in the reduction document suggests creating a unified regional forest management expenses and, consequently, of production volumes. Karelian budget revenues industrial group comprising of three holing demand a larger piece of the profit. However, from the timber industry will depend on the enterprises of the republic (JSC Kondopoga, once the plans to collect forest profit for the financial soundness of processing plants located JSC Seguezhsky TsBK, JSC Karellesprom), thus federal budget are set, the federal center may in the republic. reaching sustainable and highly effective forest approve them. At the same time, the center use, maximum added values from advanced will be able to monitor the performance of During the period from 2007 to 2010 there is timber processing, competitiveness of high- regions via simple economic mechanisms, giving the risk that all logging companies will shift to quality products, the employment of the local regions the right to determine methods to
№ 1 2006 № 1 2006 ARKHANGELSKVOLOGDANOVGOROD REGION REGION REGION
fertilizers. According to the Novgorod customs thousand cubic meters of sawn wood, and 245 office, the volume of exported timber increased thousand cubic meters of pulp chips. THE LAND OF BIRCH by 16.3% in 2005. The Novgorod timber has been exported to 34 countries worldwide. The major In 1990, in cooperation with Finnish partners, importers are Finland, Denmark, Great Britain, Novgorodlesprom built the closed joint stock Greece, the USA and the Baltic States. In the company, Tchudovo-RWS, producing large- The Novgorod Oblast, situated in the Northwest of the Russian area under the authority of Novgorod customs, sized plywood in the town of Tchudovo in the over 150 foreign companies were trading wood, Novgorod Oblast. The plant was constructed Federation, borders on the Leningrad, Pskov, Vologda and Tver and 149 stakeholders of external economic in record time and was supplied with modern regions and occupies 655.3 thousand square meters. The main value relations dealt with exports. equipment, applying the most progressive and of this country is the forest that covers about 62% of its territory and environmentally friendly technologies. Tchudovo- The timber complex of the Novgorod Oblast RWS became one of the first companies in amounts to 4101.7 thousand hectares, of which 4068 thousand ha is represented by forest companies, wood- Russia with foreign investment contributions. are under the authority of the Russian Ministry of Natural Resources processing plants and pulp and paper mills. The Investments in this Russian-Finnish project for the Novgorod Oblast, including 3468.3 thousand ha of lands leading companies of the field are investment came to 62.6 million DEM. The Finns found this firms. Investment influx to the timber companies partnership to be successful, and in the beginning covered by forest vegetation. of Novgorod Oblast became the direct result of a of 2003 Novgorodlesprom and Schayman Wood favorable economic environment for investments. (Finland) launched the production of birch A regional law on tax benefits for companies thin veneer (0.6 mm) with the capacity of and organizations in the Novgorod Oblast has 7.5 thousand cubic meters per year within been in effect since 1994. In accordance with Tchudovo-RWS. Project investments amounted the laws of those companies, foreign capital to 16.3 million EUR. In 2004, in conjunction investments that run production and are with UPM Kymmene (Finland), Novgorodlesprom The Novgorod forests have been exploited since were taken on lease with 3757.4 thousand cubic registered in the oblast are exempt from the launched one more enterprise in the town of the beginning of the 18th century, when the meters of allowed volume of timber removal. local budget taxes until there is a complete Pestovo – Pestovo-Novo sawmill – bringing Russian Emperor Peter the Great ordered the Over 1620 thousand cubic meters of timber was payback of the laid-down capital. the total value to 47 million EUR. The annual logging of oak forests in the neighborhood of removed under felling contracts. Timber removal output of the sawmill is 300 thousand m3 of Staraya Russia for shipbuilding. At present, oak does not exceed the yield calculation and is Thus, companies investing their own capital for coniferous wood. 170 forests remain only in the north and south of determined by the State Forestry Agency for the 171 implementation projects in the Novgorod Oblast the Novgorod Oblast and cover an area of 3.8 Novgorod Oblast by the results of forest auctions pay a reduced tax in the average of 30% of the The biggest enterprise of the Novgorodlesprom thousand ha. A prevailing tree species in the and according to the lease contracts. total tax amount. holding is its 100% branch, open joint stock region is birch, which takes up 42% of the company “Parfinsky fanerny kombinat,” which forest stock, while other species are distributed Reforestation is a new responsibility of forest In accordance with the Economic Committee mainly produces scale board. The enterprise as follows: pine – 19%, spruce – 18%, aspen users. In 2005, the State Forestry Agency for of the Novgorod Oblast’s data, the region has was founded in 1910 by Dmitry Nikolayevich – 11% and alder – 9%. the Novgorod Oblast stored 35 tons of forest attracted over 1 billion US dollars in foreign Lebedev - a merchant of the first guild - of seed raw material and extracted 352 kg of seeds investments over the past 11 years. Timber, wood- St. Petersburg. In March of 1993 the plant The multiple uses of forest resources are to provide local sites with their own saplings. processing, and pulp and paper industries are was reconstructed into a share-holding, and in recognized as the basis for the structural Forest planting with preliminary soil cultivation leaders in attracting investments from abroad. September 1998 reorganized into the Parfinsky reorganization of the local economy. The covered 5.3 thousand ha instead of 5 thousand In 2005 these industrial fields obtained over 60% Plywood Complex. At present, over 80% of the total forest area in the oblast comes to 3.5 ha as planned. Moreover, the care of forest of the total investment volume, and incidentally, production at the plant is exported abroad (USA, million ha. The annual allowable cut of recent plantations was fulfilled with 10 thousand ha. about half of it was received from Finland. Finland, Sweden). In 2004 the Parfinsky Plywood years has been increasing: in 2002 it was 7.6 The plan for 2006 is to conduct reforestation Complex produced 100 thousand m3 of scale million cubic meters, in 200 – 8.8 million cubic works in the Novgorod Oblast in the area of The list of investors includes such companies board, exceeding that of the Soviet period, when meters, and could easily reach 12 million cubic 11 thousand ha, including the growing of as Wood Schauman, Raute, UPM Kymmene, Stora the biggest annual production volume reached meters per year, which is 4 times the size of forest crops in the area of 6 thousand ha, the Enso (Finland), Pfleiderer (Germany), Forte 50 thousand m3 of plywood. Now the owner the current volume of logging (3.3 million transfer of young forest stands to the category (Poland), and Amcor (Australia). of the Novgorodlesprom complex is extending cubic meters). Lately there has been a stable of valuable stands in the area of 7 thousand ha, its capacities by starting the production of growth in the logging volume of the Novgorod and the cleaning of 16 thousand ha. It is also The basis of the Novgorod timber complex large-sized plywood. It is expected that the Oblast in connection with the construction of planned to grow 29 million saplings at forest consists of enterprises of one of Russia’s leading complex will produce up to 60 thousand m3 new wood-processing plants (sawing and board nurseries, which will enable the extension of the producers and exporters – Novgorodlesprom – a of large-sized plywood per year, 20 thousand production) and new capacities of the existing planting area up to 7 thousand ha in 2007. close corporation. This integrated industrial m3 of which will be contributed by laminated enterprises. association, presently involving dozens of plywood. Implementation of the project is Timber is traditionally considered to be one logging and wood-processing enterprises, planned for 2006. Currently, 43% of the total cutting area in the of the key shares in export from the Novgorod was established in the 1980’s. Currently, Novgorod Oblast is on lease. In 2005, 234 of region. In the marketable export structure, Novgorodlesprom produces 180 thousand cubic In the Lubytinsky region of the Novgorod Oblast, the 1453.7 thousand ha in concession areas timber takes second place, giving way to mineral meters of scale board and birch veneer, 300 over 90% of all production volume belongs to
№ 1 2006 № 1 2006 ARKHANGELSKVOLOGDANOVGOROD REGION REGION REGION
forest companies. The central enterprise of waste production will substantially ameliorate BAT, JTI, Gallagher, and also Russian companies According to Hans-Peter Sattelkoff, CEO, Pfleiderer the region is the limited liability company, the ecological situation in the region. The total – Balkanskaya Zvezda and Nevo. At present, (Novgorod), project investments have exceeded Setnovo, which produces sawn wood in the amount of the investment input is 154 million Amcor Rench Novgorod supplies one-third of the 20 million EUR. The total amount of investments village of Nebolchi. The company was built in Russian Rubles. Russian market with hard cigarette packaging. is valued at 70 million EUR. In August 2005, 2004 by Stora Enso, whose share in the industrial Currently, there are five technological lines the plant carried out a test acceptance of wood production volume of the region is made up Thanks to the contribution of Russian investors, operating at the mill, and in five years there supplies. It is planned to process deciduous trees of about 50%. The Setnovo company became sawing is also being developed in Valday. In will have been 39.1 million US dollars invested – mainly aspen, which is in abundance and of low the second Russian wood-processing division 2002, a Moscow holding, Sokofeksdrevstroy, in the company’s development. There are 294 interest in the Novgorod Oblast. The first process of Stora Enso Timber. Currently the processing owning a network of wood-processing plants working positions for Novgorod citizens at the line will require 600 m3 of low-quality aspen per volume at Setnovo constitutes 240 thousand in Siberia, Krasnodar Krai and the Moscow mill. year. The Novgorod administration counts on the m3. The manufacture of finished products by region, invested approximately 1 million EUR fact that the launch in 2006 of the Pfleiderer the end of 2005 exceeded 100 thousand m3 to the Valdaylesstory enterprise that had Pfleiderer limited liability company, which plant will enable the involvement of unclaimed per year, reaching its productive capacity. The previously gone bankrupt. On the basis of produces wood particle boards, promises to deciduous stock in a production cycle, including finished products of the sawmill are in the main this bankrupt enterprise a new sawmill was become the biggest wood-processing plant not firewood, increasing the exploitation of allowable assortment of the Stora Enso Timber production, launched. Valdaylesstory production has 2 only in the Novgorod region, but also in Russia. cut wood to over 40% per year, and to ensure which is being traded worldwide. A fraction of directions: sawn timber to supply a factory of The plant is currently under construction in succession of species in the forest areas under the products are exported to Germany, another lined wood constructions in Volokolamsk, as well the Podberezye village near Veliky Novgorod. operation. Pfleiderer expects to employ 260 to the Stora Enso Timber divisions in Estonia for as cylinder logs, gauged sized beams and ready- Pfleiderer is a branch of the joint-stock company specialists in the Novgorod Oblast, and to open further processing, and the third is on the home made constructions of log houses produced by Pfleiderer Grajewo (Poland), part of Pfleiderer 2000 working positions for the local population market. At the end of 2004 Stora Enso bought specially purchased Finnish equipment. The AG (Germany). The construction of the plant in logging operations and transportation. another logging company in Nebolchi called sawing operation has new equipment installed in Podberezye started in 2004. The projected the “Terminal” limited liability enterprise. The – making the technological process now annual capacity of Pfleiderer is ca 350 thousand At present, over 17.5 thousand people are company harvests over 100 thousand m3 per year, completely mechanized: 2 powerful German-made m3 of wood particle boards, quality class E1, 80% employed in the forestry and timber industries and supplies a sawmill in the Nebolchi village driers with a simultaneous loading of 150 m3 of which are laminated boards. This production of the Novgorod Oblast. and other mills situated in Finland. of sawn wood in each. Presently, Valdaylesstroy is to supply the Russian market. produces 3 thousand m3 of commercial sawn Olga ZYKOVA A Novgorod branch of the Sodruzhestvo timber timber per month. In the production space of company (St. Petersburg) is also intensifying Valdaylesstroy, a joint Russia-Bulgaria company 173 its capacities. This sawmill, with an output was built, producing pellets called “Biotop” of 100 thousand m3 per year, supplies its own from low-quality wood and timber waste (chips, production of doors and window-frames. In sawdust, particles). 2005, a second sawmill was launched within the company, and for 2006 it is planned to In the Okulovsky region, the Torbino industrial increase the output of sawn timber by 25%, company has been functioning for 10 years, with with a output of dried board production at a capacity of about 50 thousand m3. The owner nearly 80% of the total volume. of Torbino – Novtekhles – invested over 500 thousand EUR in 2004-2005 for its development. Sawing is one of the main industries in the The funds were spent on a bulk purchase of Malovishersky district of the Novgorod Oblast. harvesting machinery: hydro manipulators, The key company of the district is Madok forwarders and a SISU heavy hauler. Re- (Malodok wood-processing complex with limited equipment enabled Novtekhles to switch from liability), owned by Holz Industries Leitinger caterpillar machinery to the Scandinavian (Austria). The complex started functioning in logging technology to eliminate log depots the Malovishersky district in 1994, and over 11 and to significantly improve accident prevention years it has become a key industrial company. procedures and environmental issues. The Madok complex deals with wood-processing, production, and trading timber. It also provides The biggest pulp and paper mill is located in after-sale service and maintenance of logging Veliky Novgorod and is a branch company of machinery. The complex intends to enlarge AMCOR (Australia) and has 100% foreign interest its capacities by establishing a chain of three capital. It is an open company with limited production lines, which will include drying (heat liability Amcor Rench Novgorod, which produces will be received by the incineration of industrial hard cigarette packaging. The mill has been lumber waste), planning (ready sawn timber is to operating since September 2000 and at present be exported to the Eastern market, particularly is a leader in the regional printing market. It to Japan), as well as the processing of deciduous produces packaging for such tobacco companies wood. Construction of such a network of non- working in the Russian market as Philip Morris,
№ 1 2006 № 1 2006 ARKHANGELSK REGION
It is no wonder that in the Soviet era the received new owners interested in continuous Arkhangelsk Region was known as ‘all-Soviet development and expansion. The growth, ARKHANGELSK REGION: sawmill’ or ‘the country’s currency maker’. however, was hindered by an insufficient supply The region demonstrated the second largest of raw pulpwood and sawn timber. Logging production of main product types – timber operations were unable to provide the plants and sawn materials – in the USSR. Having with raw materials as they were at a crisis point, PAST, PRESENT AND FUTURE easy access to the sea, the enterprises had no under accumulated wage and tax debt burdens, problem shipping timber products for export, operating worn-out equipment, which in its turn thus, 90 percent of sawn timber, pulp, paper and caused a drastic fall in harvesting volumes and Alexander GREVTSOV cardboard were delivered to foreign buyers. Now put the operations on the verge of bankruptcy. the timber industry of the Arkhangelsk Region At that time the new owners began establishing remains export-oriented. For example, in 2005, their own resource base by purchasing control 1,785,000 m3 or 87.3% of a total 2.045 thousand stock of active logging operations and setting up It is not necessary to introduce the Arkhangelsk Region to the m3 of timber went abroad. For large woodworking new enterprises instead of liquidated ones or in global industrial timber community. Some of its enterprises are and timber processing enterprises, the share of the regions unfamiliar with timber harvesting. exported products reached 97-98%. recognized as the largest in Europe. Arkhangelsky TsBK and As a result, the Arkhangelsk Region has several Kotlassky TsBK, Solombalsky LDK, Lesozavods #3 and #25 as THE ARKHANGELSK TIMBER large and active vertically integrated industrial well as many others, create the image of the region, and the claim groups aiming to create an integrated timber INDUSTRY: STAGNATION harvesting and processing cycle ‘from stump ‘made in Arkhangelsk’ is a guarantee of the high quality and to finished product’ (sawn timber, cellulose, Over the past several years, the output of traditional environmental friendliness of their timber products. paper). The pioneers in the process were the product ranges in the timber industry remained two largest European PPMs – Arkhangelsk PPM stable or decreased insignificantly. For example, and Kotlas PPM (Ilim Pulp). The early 2000’s Arkhangelsky TsBK the harvesting industry, the basic division of the saw the formation of another industrial group timber industry, has not undergone any substantial in Solombalsky LDK and Lesozavod #3, which changes recently and is reporting about 10mln m3 now includes eight forest operations and two of timber hauled annually. The year of 2005 was not subsidiaries. Some time later, several other 174 an exception: harvesting enterprises produced only 175 companies came into light: Onegales (Onezhsky 9,910,900 m3 of timber, which is 0.8 percent less LDK, Orimi Concern) and North-West (Continental- than in 2004. Sawn timber production was about Management). 2,045,000 m3, which is 0.8 percent less than in the previous year. Railway is the most popular means The growth is observed only in the pulp and of transporting forest products. paper industry. In 2005, the Arkhangelsk The photo illustrates Konosha railway station pulp and paper sector recorded two cases of historically high pulp output. Arkhangelsk PPM reported breaking the record of 800,000 tons – the output was 826,600 tons, which is 4.9% more than in 2004, Kotlas PPM in its turn ‘made a million’ – it reported 1,002,000 tons of pulp or a 4.9% increase compared with the previous year. In total, pulping volume has grown by 3.2% and reached 2,036,800 tons. This amount is the maximum; a further increase is limited by the lack of facilities, and the work load of PPMs is nearly 100 percent. Only significant financial input can enable further growth.
The next two years are expected to see the increase of pulp output by 175,000- 200,000 tons at Arkhangelsk PPM, while the production rate of Kotlas PPM will remain the same.
In the mid-late 90s of the 20th century, practically all large timber processing plants
№ 1 2006 № 1 2006 ARKHANGELSK REGION
Volume of Timber Produced by Vertical Integrated Holdings with 2004, when forest products (roundwood, The uniqueness of the Arkhangelsk Region lies of the Arkhangelsk Region in 2005 sawn timber, cellulose, paper and cardboard) in the dominance of conversion products – sawn Thousand m3 constituted 52.7% of all exports. In 2005, timber and pulp and paper products. Despite the Timber Production Volume there was a considerable shift in export slight growth, the share of roundwood in 2005 Vertical Integrated Holding % towards crude oil – it accounts for 60.2% was only 0.4% of the total exports of the region. 2004 2005 to 2004 of the total exports or $1,354.1mln, which is During the year 2005, foreign buyers received 3 Solombalsky LDK and Lesozavod #3 840.8 837.2 99.6 a five time increase against 2004. It is also 198,000 m of roundwood (+ 50.2% against JSC IlimSeverLes (a part of Ilim Pulp) 2168.7 2371.2 109.3 worth mentioning that the volume of crude 2004) to the amount of $8.1mln (+42.6%). GC Titan (in Arkhangelsk Region) 1410.7 1389.6 98.5 oil exportation has grown nearly three times. The oil export growth dynamic is no surprise The growing export of roundwood can be PLO Onegales 777.9 758.4 97.5 – booming global demand and crude oil prices regarded as a limiting factor for the development LPK North-West 630.1 537.0 85.2 give Russian companies (Rosneft, first of all, of the timber processing industry. It should be National Timber Company 376.0 342.2 91.0 in the Arkhangelsk Region) an opportunity noted, however, that the Arkhangelsk Region still TPG Capital 125.1 118.5 95.0 to make the most of the favorable market looks quite optimistic compared to other regions Articles 63.7 80.4 126.2 situation. (especially Siberia and the Far East) where the TOTAL 6393.0 6434.5 100.7 majority of timber is exported as roundwood. Volume of timber produced by all enterp- 9990.8 9910.9 99.2 In 2005, the share of timber exports was only About 0.2% of the roundwood harvest of the rises of the Arkhangelsk Region 31% or $698mln. Nevertheless, the decline in region is supplied from abroad. This is largely Share of vertical holdings in total timber 64.0 64.9 +0.9% harvesting timber cargoes does not signal a decrease in the due to a high degree of integration of forest volume of timber exports in volumetric or cost operations into big holdings and demand for terms. According to final reports of the year, raw materials by leading timber processing Due to the creation of an effective vertical This is related to favorable conditions created the cost of exporting rose by 10.9%. plants. economic coordination scheme in the timber by regional authorities for the transshipment industry, these holdings account for two-thirds of oil products. of all timber currently produced in the region. Their market share is expected to increase even In 2005, foreign trade turnover on the Timber landing is a costly, but essential element for the enterprises using tree more. territory covered by Arkhangelsk Customs was length harvesting systems. The photo shows the timber landing of JSC Konoshales $2,377.5mln which is 77.2% more compared 176 The table shows that in spite of the region-wide with the corresponding total last year. Exports 177 decline of timber harvesting, industrial holdings account for $2,250.1mln (94.6%), while imports gradually augment their production volumes, – only $127.4mln (5.4%). All of this proves which is quite natural. Considering the current that the region thrives mainly on exports. economic situation, only holding companies are The positive foreign trade surplus in 2005 was able to invest in the development of harvesting $2,122,700,000. techniques and purchase up-to-date harvesters and bucking lines for upgrading and enhancing In 2005, the Arkhangelsk Region maintained logging efficiency. This is illustrated in the business contacts with nearly 90 counterparts example of the Arkhangelsk Region. Over the in other countries. The major users of products past several years it received more than 100 of passing through Arkhangelsk Customs are the cut-to-length harvesting systems “Harvester- western countries. As for CIS countries, Ukraine Forwarder,” the lion’s share of which was sent to was the most active counterpart, accounting integrated logging and processing enterprises. for 80% of trade turnover. Among western Most “non-integrated” logging companies are counterparts, the most extensive trade was still accustomed to the tree-length harvesting recorded with the Netherlands, the Virgin Isles, system. Great Britain and Ireland. The most active trade participants on the Russian side are Kotlas PPM, Arkhbum, Arkhangelsk PPM, Solombalsky LDK, EXPORT ABOVE ALL Onezhsky LDK, Lesozavod #3 and Lesozavod #25. As mentioned before, the timber industry in These enterprises, together with oil companies the Arkhangelsk Region is export-oriented, and machine-building plants from the city of and until recently, timber-based products Severodvinsk, constitute over 90% of the foreign accounted for up to 70 percent of the foreign trade turnover. trade turnover of the region. The past two years, however, have seen drastic changes in the The structure of exportation from the territory market situation: today, the main exports going covered by Arkhangelsk Customs underwent through Arkhangelsk Customs are oil products. significant changes in 2005 in comparison
№ 1 2006 № 1 2006 ARKHANGELSK REGION
Pulp became the leader in cost growth. For 12 Based on the given data, we may conclude that CERTIFICATION Forest Management Certification in months, the export of pulp reached 659,300 despite the decreasing market share, the timber the Arkhangelsk Region tons (+5.9%), customs cost being $255.2mln industry remains one of the major foreign trade Export-oriented policy of the Arkhangelsk (as of January 31, 2006) (+13.1%). Thus, the price rose by 7-8% in groups in the region. The expected turnaround Region calls on timber producers to pay special Certi- Certified Audit attention to the requirements of European Enterprise ficate dollar terms. Now pulp accounts for 11.3% of crude oil prices may entail the decrease of forest area company validity of the total export of the region. oil shipments in the foreign trade turnover and timber markets. It is common knowledge that timber-based products should meet Industrial group of Solombalsky LDK and Lesozavod #3. a consequent growth of timber supplies. Total certified forest area 338.3 thousand ha Experts also report the growing export not only technical specifications, (species, GFA consu- grade, length, thickness) but also strict JSC Svetlozerskles 171,900 ha 2009 of other products of local PPMs – paper, In 2005, the federal budget generated about lting group environmental requirements. Arkhangelsk cardboard and products thereof. In 2004, $1 billion in customs duties and fees of timber Toyma-les, subsidi- GFA consu- enterprises interested in retaining their ary of Solombalsky 166,379 ha 2010 it was 445,100 tons, which is 10.4% higher exporting companies sending their products lting group compared to relevant figures last year. The through Arkhangelsk Customs. The total sum market positions are forced to follow these LDK cost of exported paper products grew by of duties transferred by exporters was nearly requirements. Certification, mainly forest PLO Onegales (Onezhsky LDK, concern “Orimi”). Total certified forest area 1679.9 thousand ha 13.1% to $175.8mln. So, the paper, cardboard 16 billion rubles, the largest part of which was management certification, is one of the ways JSC Maloshouy- GFA consu- to verify the environmental friendliness of 336,445 ha 2008 and products thereof accounted for 7.8% of gained from crude oil. kales lting group the total export. timber products. GFA consu- JSC Nimengales 187,415 ha 2010 The largest exporters of timber and paper products lting group According to the latest data, 2,752,700 The contributions of Arkhangelsk sawmillers are the pulp and paper mills (in descending order) GFA consu- JSC Kargopolles 51,507 ha 2010 to the foreign trade turnover were a little – Kotlas PPM, Arkhangelsk PPM (through its trader ha of forests in the Arkhangelsk Region lting group bit more: $1.785mln m3 of sawn timber for Arkhbum) and Solombalsky TsBK. Among sawmills, are certified. The affiliated WWF Russia GFA consu- JSC Yarnemales 236,079 ha 2010 12 months, which is 2.8% up against 2004. the largest exporter is Solombalsky LDK, then office and its active position exerted a lting group decisive influence on the choice of timber GFA consu- At the same time, the export cost grew faster Onezhsky LDK, Lesozavod #25 and Lesozavod JSC Onegales 660,544 ha 2010 – by 4.8% – and reached $232.9mln. Thus, the #3. producers in favor of the certification lting group JSC Onezhskoye scheme. All timber companies holding GFA consu- input of sawmilling enterprises in the total Timber Rafting 207,882 ha 2010 certificates verified the compliance of lting group export is 10.3%. PPMs account for the largest share of customs Enterprise forest management with requirements duties and fees paid by timber exporters: Kotlas Titan Group of companies. Total certified forest area The volume of the export of fiberboards has PPM – nearly 400mln rubles, Arkhangelsk PPM of international standards of the Forest 578.7 thousand ha 178 increased by 27.5% to 5,000 tons since the and its exclusive trader JSC Arkhbum – about Stewardship Council (FSC). JSC Shalakoushales 274,172 ha 2010 Smartwood 179 beginning of the year; their rated cost increased 320mln rubles, Solombalsky LDK – about 270mln JSC Ust-Pokshengs- 236,541 ha 2010 Smartwood by 63% to $1.1mln. rubles. Certification is a costly process, and small ky LPKh harvesting operations are unable to pay JSC Velskoye LPP 68,035 ha 2010 Smartwood auditors and consequently certify their forest Dammers Company (Germany). Total certified forest area management systems. This is the main reason 65.9 thousand ha Export of Main Product Groups why certificates were issued only for the forest JSC Holz Dammers 65,905 ha 2010 IMO January-December, 2004 January-December, 2005 Ratio management systems of logging enterprises GmbH Arkhangelsk Rated cost Share in Weight Rated cost Share in Weight Arkhangelsky LDK #3. Total certified forest area 89.9 Product Group gr.5/ gr.7/ included in vertically integrated holdings. (thsd, total vol- (ton/thsd. (thsd, total vol- (ton/ thousand ha gr.2 gr.4 The undisputed certification leader in the USD) ume, % m3) USD) ume, % thsd. m3) JSC Zelennikov- Arkhangelsk Region and Russia in general is 89,872 ha 2010 Smartwood skoye Total export volume 1193982 2250058 188,5 the Onegales group of companies (Onezhsky Total certified fore- Crude oil and crude oil 2,752,676 275134 23.0 1339587 1354125 60.2 3903413 492.2 291.4 LDK, Orimy Concern). st area in the Arkh- products ha angelsk Region Oil products 239362 20.0 734877 103041 4.6 247530 43.0 33.7 (except crude) The first FSC group certificate of forest Round timber management for four enterprises of this 5630 0.5 126 8029 0.4 198 142.6 150.2 (thousand m3) industrial group was issued on December According to FSC Russia, a total of 24 certificates Sawn timber 14th. The certificate confirms that the forest were issued covering the area of 6,695,498 ha. 222169 18.6 1736 232858 10.3 1785 104.8 102.8 (thousand m3) management system of the four enterprises Thus, the Arkhangelsk Region accounts for 41.1 Fiber boards 653 0.1 3899 1065 0.0 4972 163.0 127.5 of PLO Onegales (Kargopolles, Yarnemales, percent of all certified Russian forests. Today, the Glued plywood Onezhskoye Timber Raft Enterprise) is in region can be referred to as a forest certification 3 20454 1.7 69 23783 1.1 67 116.3 97.9 (thousand m ) compliance with FSC requirements. Earlier, leader: the year of 2005 saw an increase in more Cellulose 225648 18.9 622575 255198 11.3 659279 113.1 105.9 conformity certificates were issued for the than five times of the certified forest area! An Paper, cardboard and 152840 12.8 403103 175755 7.8 445145 115.0 110.4 other two enterprises of the group – JSC international joint forest management certificate products thereof Maloshouykales and JSC Nimengales. Now is expected to be granted in the near future to Wooden furniture 1779 0.1 89 1296 0.1 5 72.9 5.1 twelve member companies of JSC IlimSeverLes (thousand pieces) Onezhsky LDK member enterprises account for 20% of all certified Russian forests and more holding (a baseline appraisal was held the fall, Total timber export, 629173 697984 110.9 thousand USD than half of the forests in the Arkhangelsk 2005). Apart from this, timber producers of the Share of timber export, % 52.7 31.0 -21.7% Region. Titan Group are in the certification process.
№ 1 2006 № 1 2006 ARKHANGELSK REGION
Another condition of getting access to international put forest lands on 49-year leases, which will Construction of Haulage Roads Germany the number of roads per one thousand markets of FSC-certified products is a chain-of- undoubtedly raise the regional enterprises’ in the Arkhangelsk Region ha is 40 times more than in Russia. Thus, the custody certificate. At present, the Arkhangelsk investment attractiveness. Such contracts are Years richest forest country has only 1.2 km of forest Indicators Region has five chain-of-custody certificate still very few in number. 1979 1980 1981 1985 1990 1991 roads per one thousand ha. holders: Onezhsky LDK, PKP Titan, Lesozavod #25, Length of Solombalsky LDK and JSC IlimSeverLes. The initial built haulage 532 533 521 584 470 312 Meanwhile, another consequence of the long-term • illegal cuttings (the country where, according roads, km consignments of FSC-marked timber produced by to unofficial statistics, up to 20% of timber intensive exploitation of forest areas is longer Onezhsky LDK and Lesozavod #25 have already Road length haul distance: the average haul distance in the is harvested illegally, is hardly attractive to per 1mln m3 31.0 30.0 30.2 32.0 28.4 16.8 been sent to European markets. investors). of hauled Arkhangelsk region is 60-70 kilometers, and even timber more than 100 kilometers at other enterprises. The longer the haul distance, the higher the cost Underwater Part • lack of legal protection of ownership of timber harvesting. For example, in 1985, it (western investors believe that corporate Today the so called ‘forest road issue’ has become was 38 km, in 1990 – 40.5 km. of the Iceberg conflicts of interest contribute to the timber critical; in fact, it turned into a forest road industries instability). crisis followed by a bulk of problems regarding In recent years, federal and local authorities the implementation of cutting plans. It is the have come to understand the necessity of The optimistic perspective pictured above is the • low profits from timber business (nowadays absence of roads that presents an obstacle for governmental participation in building forest tip of the timber industry iceberg. Unfortunately, the sale of low value-added products brings harvesting expansion. The 2003 report said that access roads. “Today, road building investment the situation in the region is not as sunny as higher profits). the total road length in the Arkhangelsk Region programs offering multiple funding schemes are it may seem at first glance. The most serious was 22,865 kilometers, whereof the length of being prepared,” says Valery Roschupkin, chief problems facing the industry are: paved all-season haulage roads was only 1,961 of the Federal Forestry Agency. The schemes • absence of a specialized machine-building kilometers. industry. will use the money of forest users, credits from financial institutions, and budget allocations of • considerable wear of equipment; Nevertheless, Arkhangelsk timber producing So, the turn of harvesting to seasonal schemes RF territorial subjects. companies are ready to offer a number of large- is proved by varying volumes of timber harvest (in summer months the harvest is 2.5-3 times insufficient number of all-season forest scale projects for implementation, including the At the end of the previous year the government • less than in wintertime). In general, Russia roads; organization of production lines for edge glued discussed the allocation of 500 million rubles 180 furniture panels, MDF boards (Solombalsky LDK), is far from the leading positions in terms of from the federal budget for the construction of 181 coated paper (Arkhangelsk PPM) and many other forest roads. As can be seen in the diagram, in • conflicts of interest with successful items which can be implemented with the help enterprises; of foreign investment. Forest Roads Length in Russia Five districts in the Arkhangelsk region and Abroad (Bar Diagram) have no regular transport connection • drying out of spruce stands between the The problems listed above are not unique to the regional centre, so they are forced to use this rivers of North Dvina and Pinega. features of the Arkhangelsk Region; in fact, (km/thousand ha) means of transport to extract harvested timber they are national. Apart from this, the region CONSIDERABLE WEAR has internal problems requiring solutions for OF EQUIPMENT its wellbeing. Germany According to the statistics, the average degree INSUFFICIENT NUMBER of wear for the main facilities at all stages of Switzerland timber production today is up to 80% (average OF ALLSEASON ROADS industrial wear parameter – 50%). This alone In the 1980s the government financed construction justifies the need for significant investment Austria of up to 600 kilometers of all-season haulage roads in the industry’s development. The region, in the region annually. However, small, low-profit however, is unable to finance such a sum (at enterprises cannot afford building the required least, hundreds of millions of dollars; ideally it Sweden road network. The report of the Timber Industry would cost billions), so fund raising largely relies Department states that current road construction is on foreign partners. The latter, nevertheless, are no more than 40-50 kilometers a year, which hinders reluctant to put up their money for the Russian USA the development of inaccessible forestlands. Moreover, timber industry due to several reasons: above 90 % of existing forest roads became seasonal due to intensive use (i.e. suitable for haulage only Norway • short lease terms for forest plots: foreign in wintertime), which entails the overexploitation partners want to feel safe, but how can they of cutting areas adjacent to highways while the if the lease period will expire in five years? backwoods remain unused. Certainly, timber producers Russia Recently, the tension has been released – the are trying to solve this problem by themselves, but Federal Forestry Agency (Rosleskhoz) tends to their efforts are insufficient.
№ 1 2006 № 1 2006 ARKHANGELSK REGION
haulage roads. According to the Rosleskhoz chief, DRYING OUT OF SPRUCE STANDS 100 million m3 of dried-out timber. The local identify environmental and socioeconomic problems the Arkhangelsk region was to receive about authorities are considering several salvage projects. of the region and offer possible solutions. 140 million rubles, which would be enough to BETWEEN THE RIVERS OF NORTH Production processes may vary from pellets to build about 70 kilometers of forest roads, but DVINA AND PINEGA MDF boards. The project may be economically the spending plan is still unclear. Consequently, profitable due to the continuous raw materials WISH IT WERE STABLE! we cannot be sure that the federal funds will At present, up to 2.5 million ha of drying out inflow guaranteed by the planned abolition of Nonetheless, the problems mentioned above can be 3 be spent on building even several kilometers of spruce forests with the stock of 100 million m stumpage prices by the government. At present, called temporary regarding the development of the forest roads. So, the harvesting boom is very are recorded in the territory of the Arkhangelsk apart from salvage projects, the issue of attracting timber industry in the Arkhangelsk region. If we unlikely to occur in the near future. region. The affected area hosts dozens of investments is also under discussion. consider the Arkhangelsk regional timber industry as settlements and leaseholds of 28 logging a part of the Russian forest industrial complex, it is operations, many of them incurring considerable Last month the Federal Forestry Agency demonstrated affected by imperfect legislation and amendments CURRENT CONFLICTS OF INTEREST losses, e.g. Boretsky and Kontsegorsky harvesting an understanding of the necessity to solve this continuously proposed by the major Russian forest WITH SUCCESSFUL ENTERPRISES enterprises (Vinogradov district), JSC Dvinles problem. To eliminate the consequences of forests governance – the Forest Code. (Verkhnetoyemsk district) and others. drying-out in the territory of the Arkhangelsk Recently, the Arkhangelsk regional timber industry region, Rosleskhoz began developing a target Many issues of concern faced by the Arkhangelsk has been suffering from corporate conflicts aimed at Specialists say the main reasons for the drying out departmental program, “Forest Rehabilitation in timber industry could have already been solved, gaining control over successful enterprises. Foreign of spruce stands are natural ageing (the average tree the North European Part of the Russian Federation.” but investments and the establishment of new investors are expressing concern about this instability age is 200-250 years), several consecutive years of Rosleskhoz experts worked out new interim production facilities need, above all, clear, open and are unwilling to invest in industrial development hot summers (especially 1997), the mass snow-break harvesting rules, cancelling the requirement of and consistent rules of the game. Unfortunately, and the updating of production facilities, which will of spruce tree tops in the winter seasons of 2001- the retarded harvesting of forest plots adjacent to the applicable Forest Code is recognized by the certainly affect the demand for Arkhangelsk timber 2002, and pest outbreaks, mainly lps., Typographus, cut areas. Final Harvesting Rules demand adjacent government as inadequate. The lawmakers regularly products in the global market. spruce bark beetle, and Monochamus sutor (Capricorn forest plots to be left intact for the so-called initial ‘improve’ it by introducing further amendments, beetle). Field examination showed that the most regeneration period and harvested only after five turning the whole system of forest management Among the enterprises that suffered most from heavily damaged forest plots are located along years. This practice is used for the regeneration upside-down. unfriendly actions are the two leading PPMs of clear cut area borders where they were left for the and stimulation of growth in healthy stands. As the region – Kotlas PPM and Arkhangelsk PPM. period of initial regeneration. Specialists from Centre for diseased stands, these plots further aggravate At the same time, an alternative Forest Code is While the former has already overcome a fight for “Roslesozaschita” predict that in 2006 the drying the situation favoring pest reproduction. being prepared, and some of its provisions are control over the plant, the latter is approaching the out of spruce stands will persist, which will affect revolutionary for the forest industry, although they 182 climax of the ‘corporate conflict.’ There is a threat of 183 the properties of timber and harvesting volumes of In addition, Rosleskhoz considered alternative ways don’t add to the economic attractiveness of the armed seizure against local sawmills with improved high quality timber. Even in 2005, the enterprises of processing wood salvaged from drying forests. timber industry, so industrial practices are very performance. harvesting in the affected area were forced to For example, salvaged timber may be used in wood unlikely to improve until the enforcement of the dispatch rafts of dried-out timber to their clients house construction, the production of sleepers, new Forest Code. Potential investors watching such an acute at lower prices and incurred losses. cement-fiber boards, chipboards, MDF, and, in the long confrontation are in doubt about their rights run, pulp and paper production. Valery Roschupkin, Development requires stability. If the industry and protection in Russia, and have postponed Nevertheless, every cloud has a silver lining, and Rosleskhoz chief, said that the target departmental is stable – it will raise investments. If the their investment projects. the crisis may be a source of profit, too. First, program “Forest Rehabilitation in the North European money flows into the market – it will speed up something should be done with the more than Part of the Russian Federation,” is designed to industrial growth, and the profits will come.
Arkhangelsk Region: Resource base: Production of cellulose, wood pulp, Volume of Hauled Timber and Sawn Products of (forests belonging to the Federal Forestry Agency): paper, cardboard and products thereof 4 Enterprises in the Arkhangelsk Region in 1940 - 2005 Small enterprises, total 501 Summary Total forest area, million ha 20.2 Volume Volume 3 Sawn timber Sawn timber Location North of European Russia Total stock, billion m 2.2 Individual entrepreneurs, total 533 of hauled of hauled 3 Year products, Year products, Area 587.4 thousand qu km Annual allowable cut, million m 19.7 timber, 3 timber, 3 3 thousand m 3 thousand m Population 1,318 thousand people Production facilities as of Jan 1, 2005: Share of Timber Industry (percentages) as of mln m mln m Forest area 230 thousand km2, 39% of Region area Pulping, million tons 2.0 Jan 1, 2005 1940 16.0 3,353 1996 7.1 1,605 3 1950 13.1 2,978 Exploitable stock 1,580mln m Paper, thousand tons 338 Russia North-West Federal District 1997 8.2 1,590 1960 26.1 6,411 Forest composition: Cardboard, thousand tons 730 Industrial Timber 6.7 28 1998 7.8 1,523 3 1970 25.7 7,057 softwoods: hardwoods: Glued plywood, thousand m 85 Sawn Timber Products 10.2 37.7 1999 8.8 1,754 3 1980 23.9 5,957 spruce 55.7%; birch 16.3%; Fiber boards, million m 21.8 Pulp 33.4 52.7 2000 9.0 2,028 pine 26.6%; aspen 1.1%. Timber industry structure as for Jan 1, 2005: 1990 22.6 5,011 Paper and Cardboard 15.7 29.0 2001 9.3 2,091 Total number of people employed: 75,000 Large and middle enterprises, total 114 1991 18.5 4,097 Fiber Boards 5.2 31.0 2002 8.0 1,904 45% of all people employed in the industry divided by types of economic activity: 1992 17.6 3,488 Plywood 3.8 9.5 Largest enterprises: Timber harvesting 70 1993 13.8 3,201 2003 8.0 1,900 Percentage of RF Paper 9.4 Arkhangelsky TsBK, Kotlassky TsBK, Solombalsky LDK, Lesozavod Woodworking and manufacture Products Export 1994 9.3 2,292 2004 10.0 2,233 #25, Onezhsky LDK, Lesozavod #3 of wood-based products 36 Industrial enterprises and production unit personnel as of 1995 9.0 1,737 2005 9.9 2,045 Jan 1, 2005 - 65 thousand people № 1 2006 № 1 2006 ARKHANGELSK REGION
PRODUCTION OF WALL TIMBER AND MOLDING INVESTMENT PROJECTS 3 CO PRODUCTS TO BE IMPLEMENTED BY Project initiator: JSC Solombalsky LDK Project summary: The project provides for the production of construction materials from local THE ARKHANGELSK TIMBER INDUSTRY timber in compliance with European quality standards. Glued laminated timber is designed for walls, window and door framing, sinks and other wood-based products. Project aim: Establishment of a processing line for the production of glued laminated profiled timber TECHNOLOGICAL UPDATING PROGRAM FOR at JSC Solombalsky LDK. 1 LOGGING ENTERPRISES Project location: Arkhangelsk Feasibility report: Predicted sales - 5.800 m3 per year Total project cost: $0.67 million Required investment: $0.67 million Project initiator: JSC PKP Titan Expected profit: Project summary and aims: Purchase of imported harvesting systems for PKP Titan enterprises NPV - $0.013 million IRR – 16% The aim is to introduce harvesting systems (harvester – Caterpillar, forwarder – Ponsse) to optimize the Cost recovery period – 39 months Annual profit – $0.34 million harvesting process, cut the cost of timber, replace the worn-out, obsolete equipment, and increase harvesting The enterprise will include a new subdivision with an enlarged staff (52 persons). volumes. Project status: Business Plan developed. Project implementation period – 9 months. Project location: Arkhangelsk Region Feasibility report: Production capacity of five harvesting systems - 250 thousand m3 of timber per year. WASHER RECONSTRUCTION IN THE PULPING SHOP Total project cost: $4.1million Required investment: $4.1million 4 OF JSC SOLOMBALSKY LDK Expected profit: NPV - $1.1million IRR - 42.67% Cost recovery period - 26 months Project initiator: JSC Solombalsky LDK 184 Average annual profit - $0.53million Number of new jobs - 30 185 Project summary: Establishment of the fifth washing stage facilities for after-wash filter press in Project status: addition to the two existing washers of the pulping shop. A feasibility study of the project made. Project implementation period – 6 months. Resources offered by the enterprise – allowable cut (partial), supplementary production lines. Possible forms of investor’s participation Project aim: Increased pulp output, lowered production costs, enhanced environmental friendliness, improved – leasing. properties of market pulp. Project location: Arkhangelsk 2 PURCHASE OF TIMBERJACK HARVESTING SYSTEM Feasibility report: Increase of cellulose output to 250 thousand tons per year Total project cost: $4 million Required investment: $3.4 million Project initiator: JSC Solombalsky LDK Expected profit: The enterprise is expected to increase harvesting volumes by Project summary and aims: Annual profit - $3 million Cost recovery period – 2.34 years introducing up-to-date and efficient machines at its logging enterprises. The aim is to purchase a harvesting The project will allow minimizing the amount of sewage water and gas discharge. system from the Timberjack Company and use it to implement planned harvesting operations by Solombalsky LDK group of companies. Project status: Business Plan developed. Enterprise’s investment – $0.6 million. Possible forms of investor participation – project crediting. Project location: Arkhangelsk Region Feasibility report: Production capacity of Timberjack cut-to-length system is 35,000 m3 of timber per year, including harvesting and skidding to the log yard. ESTABLISHMENT OF A FUEL GRANULES (PELLETS) Total project cost: $0.6 million Required investment: $0.6 million 5 PRODUCTION LINE WITH AN ANNUAL OUTPUT OF Expected profit: 50,000 TONS NPV - $0.05 million IRR – 19.5% Project initiator: JSC Bitewood Cost recovery period – 32 months Annual profit – $0.13 million Introduction of up-to-date, efficient machines allows for creating qualified jobs and performing low impact Project summary: Establishment of fuel granules (pellets) production line. harvesting operations. Project aim: Establishment of an integrated timber processing enterprise. Project status: Business Plan developed. Project implementation period – 6 months.
№ 1 2006 № 1 2006 ARKHANGELSK REGION
Project location: Arkhangelsk Region, town of Nyandoma. Feasibility report: Production capacity - 50,000 tons of fuel granules per year Total project cost: $2.82 million Required investment: $2.82 million Expected profit: NPV - $3.48 million IRR – 240.8% Cost recovery period – 2.2 years 23 new jobs Project status: Itinerary feasibility study conducted. Enterprise’s investment – $0.135 million. Possible forms of investor participation – project crediting. 6 UPGRADING OF JSC SHALAKOUSHSKY LESOZAVOD Project initiator: JSC Shalakoushsky Lesozavod. Project summary: Production upgrading includes the installation of drying chambers and grading and treatment facilities for dried sawn timber. At present the plant produces fresh sawn timber whose properties deteriorate during storage and transportation to the customers. The enterprise can allocate a ground for the construction of the sawn timber drying and finishing shop. The energy for driers can be supplied by the existing boiler house using sawmilling waste. After the installation of drying chambers, the enterprise will be able to finish and grade kiln-dried sawn timber. A packing line for the preparation of timber for shipment will be fully automatic. Project aim: Upgrading of production lines of JSC Shalakoushsky Lesozavod. Project location: Arkhangelsk Region, Nyandoma district, s. Shalakousha. 186 Feasibility report: Drying and treatment facilities for exporting oven-dried sawn timber with the annual output of 50,000 m3. Total project cost: $3.44 million including installation of drying chambers - $1.1 million grading and treatment of kiln-dried sawn timber - $2.34 million Required investment: $2.57 million Expected profit: Annual profit - $0.56 million Cost recovery period - 6 years Number of retained and new jobs - 15 Project status: Business Plan developed. Project implementation period - 18 months. Enterprise’s investment– $0.87 million. Possible forms of investor participation – project crediting.
NEW DRYING AND INTEGRATED TIMBER 7 PROCESSING LINE Project initiator: JSC Niva Project location: Arkhangelsk Region, Plesetsk region. Project summary: Establishment of up-to-date processing line for the drying and deep processing of timber. Project aim: Expansion of production capacity. Total project cost: $0.4 million Required investment: $0.3 million Expected profit: Net profit – 30% Cost recovery period – 30 months Increased number of jobs (by 25) Project status: Investment offer developed. Enterprise’s investment – $0.1 million. Possible forms of investor participation: project crediting, establishment of joint production.
№ 1 2006 ARKHANGELSKKOMI REPUBLIC REGION
first six months of 2005 as compared to the planting in 2005. In 2004, 93% of 42 thousand same period in 2004. For the timber companies ha of young growth was attributed to the group UNDER AIRPLANE WINGS of the Komi Republic, 2004 became a period of of valuable forest stands (coniferous species stability and growth for the main production make up 40% of the whole massif). According and economic indexes. to Petr Perchatkin, Deputy Head of the State STRETCHES THE GREEN Forestry Agency for the Komi Republic, the main work plans in reforestation were managed better FOREST REGENERATION in 2005 than in previous years. The situation IN THE KOMI REPUBLIC with forest fires was more auspicious in 2005. PLAIN OF A PARMA “We prevented forest fires from spreading over Over the last five years, 415 thousand hectares to the vast spaces,” noted Perchatkin. of forests were cut and damaged in Komi. Reforestation was carried out only in 185 thousand ha (45%) and because of insufficient FOREST RESOURCE MANAGEMENT financing this area is gradually being reduced. According to the data of the territorial agency OF THE KOMI REPUBLIC of the Federal Service of State Statistics for the The annual allowable cut in Komi is 26,4 million m2, Komi Republic, the scope of reforestation in 2004 however, exploitation of forest resources by all came down to 9% as compared to that of the types of logging did not exceed 7 million m2 year prior, and covered an area of 34 thousand over the last years. Almost all factories of ha. The most extensively used measures were deep wood processing in Komi work at full those stimulating natural forest regeneration capacity or beyond their calculated power. (increment sustenance) – 31 thousand ha. At the “Currently, we are observing the succession of same time, 2.7 thousand hectares were planted coniferous species by deciduous, which causes and sown with new trees. Tending of plantations serious alarm,” says Perchatkin. For example, was conducted in the territory of 5 thousand the allowable cut of coniferous forest stands ha, and soil preparation for new plantations in the Koygorodsky forest management unit was carried out in 2 thousand ha. In order to has been reduced by 121 thousand m2 per year. 188 increase soil productivity, the forest nurseries Earlier it was 526 thousand m2 per year, while 189 were supplied with 218 tons of organic fertilizer, the current inventory showed results of 475 however, this was way less than in the previous thousand m2, with the simultaneous increase years. For the spring operations, 14 million of the allowable cut of deciduous volume by coniferous seedlings were prepared and ready for 21 thousand m per year. The Komi Republic is situated in the extreme GENERAL DESCRIPTION northeast of the European part of the Russian Federation, within the borders of the Pechora OF THE TIMBER COMPLEX and Mezen-Vychegda Lowlands, Middle and OF THE KOMI REPUBLIC Southern Timan, western slopes of the Ural Cut-to-length harvesting Mountains (Northern, pre-Polar and Polar Urals). The timber complex, including logging, wood- The Republic stretches from Northern Uvaly processing, paper and pulp, is considered the in the south to Pay-Khoya in the northeast, second most important industry after fuel and from the Pinega and Mezen rivers in the and energy (timber production accounted for west to the watershed of the Pechora and Ob 25% of the total production volume in 2004). river basins extending along the Ural ridge in Production growth was supported by wood- the east. processing, and pulp and paper industries.
In the west and northwest, Komi borders the The timber complex of the Republic is generally at Arkhangelsk region and the Nenets Autonomous a growing stage (in 6 months of 2005 production Okrug; Yamalo-Nenets and Khanty-Mansiysk volume distribution remained at the level of Autonomous Okrugs of the Tyumen region in the the previous year). According to the Ministry east; Sverdlovsk region in the southeast; the of Industry and Energy of the Komi Republic, Perm region in the south and the Kirov region in volume indices of large and medium enterprises the southwest. The total length of the borders at all logging operation phases were lower in the of the Republic are 4415 km. The area of the first six months of 2005 than in 2004. Forest, Komi territory is 416.8 thousand km2. Forests wood-processing, and pulp-and-paper companies occupy 72.7% of the Komi land area. in Komi increased their production volume from 4.1% – up to 3 million 330 thousand m2 in the
№ 1 2006 № 1 2006 ARKHANGELSKKOMI REPUBLIC REGION
A shop of JSC Mondi Business Paper Syktyvkarsky LPK
regular and balanced work. Volume growth in JSC Mondi Business Paper Syktyvkarsky logging is influenced by restrictive factors. They Timber rafts, drifted down the include a high degree of depreciation of basic stream of the Vychegda river, production assets, deficiency of deep wood- reached their destination LOGGING IN KOMI processing capacities and insufficient volume In the first six months of 2005, logging of the fixed capital investment. The expected 191 companies reduced their production volume volume of logging, hauling and production of by 3.9% – to 2 million 108 thousand m3 as commercial timber is determined by wood- compared to the same period in 2004. But, processing facilities put into operation in the taking into consideration that up to 30% of Komi region, full exploitation of the existing the total volume of logging in the Republic is production capacities, and absorption of the contributed by private entrepreneurs, small and market of timber resources. Dynamics of the other companies, the general annual volume transportation tariffs and customs restrictions of logging remains within 6,0–6,3 million m3. do not allow an increase in the sale of timber About 34% of timber is logged by machinery raw material by broadening the home market – 1.2 million m3, of which 818.3 thousand m3, or (of the Republic and nearby regions), neither 24.6%, is logged by harvesters and forwarders. by augmenting the export volume. The growth of assortment logging by harvesters and forwarders for the current six months stood WOODPROCESSING IN KOMI for 65.2%. P. Perchatkin remarked that the logging volume in 2005 was relatively lower For the first six months of 2005, wood-processing than in 2004. “This situation in the Republic companies of Komi increased the volume of is explained first of all by the fact that the produced sawn timber by 0.8% – up to 368.6 Kotlas Pulp and Paper Complex has rejected thousand m3. During January–June, 2005, in their three areas in Komi (three enterprises comparison with the same period of 2004, a of the IlymSeverLes Ltd.). Currently the Open growth of cardboard and paper production Joint-Stock Company “Mondi Business Paper indices by 1.6% – up to 393.8 thousand tons, – Syktyvkar” uses less pulpwood.” Hauling of plywood by 11.9% – up to 57 thousand m3, of timber for the same period of time was and MDF chipboards (MittelDichteFazerplatte) reduced by 6.6% – down to 2 million 299 by 16.4% – up to 2154.5 thousand m², can be thousand m3. In the current year the key observed. The volume of fiberboard production wood-processing enterprises have maintained stood for 13.3 million m², which is 4.7% less technological stock of the timber needed for than the year before. The growth of the given
№ 1 2006 № 1 2006 ARKHANGELSKKOMI REPUBLIC REGION
2005 was put on quality improvement and Particularly, in 2005, OJSC “Mondi Business Paper new production mastering. – Syktyvkar” had plans to implement several projects on production modernization. One of TIMBER EXPORT OF KOMI the main “ecological” projects of the company is “Transition to the non-chlorine (ECF) bleach The average currency proceeds from the export of coniferous cellulose.” The project goal is to of all sorts of timber production in 2005 amount meet increased environmental demands and to $60.8 per 1 m3 of logged wood. This figure to reduce the contents of hazardous chlorine- is higher than the average in Russia, which organic substances in finished products. The is approximately $50 per 1 m3, but is several aggregate project value comes to 23.5 million times less than in the leading forest countries, EUR. According to the time schedule the project e.g. in Finland – $200 per 1 m3, Canada – $150 is to be completed by the end of quarter II of per 1 m3. 2006. Environmental and conservation activities of the company are expected to improve as a In accordance with the information of the result. “At present, we are striving to lower the Ministry of Industry and Energy of the Komi company’s load on the environment,” pointed out Shops of a plywood plant Republic, in the first half of 2005, export shares Rinat Starkov, MBPSY CEO. “The major principle of timber and paper production volume increased of the company from an environmental point by 1.4% and amounted to 53.4% (in RUR) in sorts of production is due to a stable condition of view is zero tolerance and the absence of comparison with the same period in 2004; in both in the home and foreign markets of timber ecocatastrophe.” Implementation of the project the timber complex this index is 50.6%. and paper products. In the first half of 2005, “Modernization of recovery unit #4 "Ó"” also as compared to 2004, there was a lag in the contributes to the solution of ecological issues. Export-oriented sub-industries of the timber production of wood-particle boards by 24.3% The aggregated value of the project is 8 million Rinat Starkov, Director General complex include: wood processing (73.2% – 118.9 thousand m3. This situation was EUR, of which 14% is already expended. The of JSC Mondi Business Paper of production for export), board and plate explained by the break in the complete overhaul project is to be implemented in quarter I, Syktyvkarsky LPK manufacturing (74.8% of plywood and 23.4% of manufacturing equipment and an increase in 2006. of fiberboard for export), pulp and paper (more the production of composite particle-boards at than 54.2% of production for export). Export be built at the first stage. About 100 workers the Syktyvkar Plywood Plant, as well as by the It is expected that realization of the project 192 growth of sawn timber, fiberboard and wood- will be employed. Construction works started 193 lesser demand for non-refined wood-particle “Installation of a large-format film-slitting particle board according to the data of the in 2005, and it is scheduled for operation in boards in the home market. The tendency for machine” will ensure deeper treatment of the Ministry is due to the three-fold expansion of the autumn of 2006. After that it is planned to positive development dynamics of the wood production and supply of finished paper. The the timber and paper markets during the last increase the productivity of sawing in 2008 up processing industry in the Komi Republic is aggregate value of the project makes up 1.5 3 3 ten years ($100 billion). As it was noted in the to 780 thousand m , and to achieve 1 million m formed by the extension and exploitation million EUR, and since the beginning of the Ministry, to ensure high competitiveness and a by 2010. The number of employers will grow as of sawing capacities and the replacement of project a little over 1% was expended. The transition to more profitable timber production, well – up to 400 people. Steam, hot water and physically and morally depreciated equipment. production line was planned for launch in the key issue is to continue modernization of electricity are to be supplied by MBP–Syktyvkar, The factor restricting development of the quarter IV, 2005. The project “Installation of the timber companies, technical re-equipment where waste will be delivered to: wood chips industry is the rise in the share of costs for the second line of the oxygen plant” is aimed on the basis of highly efficient technologies for paper production, sawdust and bark for fuel and energy in production. at the steady raising of productiveness of the and attraction of investments to the timber incineration at the heat power plant of the technological process of non-chlorine bleach of industry of the Komi Republic. Timber products company. For this purpose one more boiler will According to the Ministry of Economic coniferous cellulose by assembling a second line are exported by the following companies: be reconstructed. “The production will need a Development of the Komi Republic, the main of oxygen production, with the power of 525 Open Joint-Stock Company “Syktyvkarsky LDK” ground area of 30 ha for starters and 50 ha priorities in the wood-processing industry in m3/hour of pure gaseous oxygen. The aggregate (manufactured forest products), “SevLesPil” for the planned construction. Ground areas 2005 were: value of the project amounts to 8 million EUR, (sawn wood), Private Joint-Stock Company should be in the nearest distance to Mondi 69% of which has been spent. At the present “Leskom” (forest products), Private Joint-Stock Business Paper – Syktyvkar in connection with moment, assembling and adjustment works are Company “Dvina” (sawn wood), Limited Liability its close relations with the company,” said • Adjustment of chipboard manufacturing under way. Another project contributing to the Company “Zavod DVP” (fiberboard manufacture), Hans Tilly, director of the Austrian company. and sawing to the planned production new wood-processing capacities is “Construction Limited Liability Company “Syktyvkarsky Fanerny An area of 70 ha has been allocated for the capacity; of a new sawmill of 600 thousand m3 per year in Zavod” (plywood). The monopolist in the export plant’s construction, and land measuring is the Ezhva district of Syktyvkar,” with a primary of pulp and paper is the Open Joint-Stock currently taking place. “Substantiation of value of 33 million EUR. According to Edgar • Quality improvement of output in order to Company “Mondi Business Paper – Syktyvkar.” investments toward the construction of the pulp improve competitiveness in the home and Grunberger, Deputy CEO, the powerful wood- and cardboard plant in the Troitsko-Pechorsky world markets; processing plant will be erected in several steps. region of the Komi Republic” is considered BIG INVESTMENT PROJECTS The share of the Syktyvkar Timber Complex in to be one of the projects with the highest the new plant will stand for 15%, the owner of potential. Its value is 5.9 million RUR. A Familiarization with new sorts of production. There are a number of projects concerning • 85% is the Tilly GmbH from Austria. A sawmill separate subdivision of the project will concern In board manufacturing the main focus in the construction of forest plants in Komi. of 370 thousand m3 of sawn wood per year will environmental impact assessment, which is to
№ 1 2006 № 1 2006 ARKHANGELSKKOMI REPUBLIC REGION
be carried out by ecologists and experts of the makes a contribution to the development of Directorate of the Federal Supervision Service the timber industry of the Komi Republic.” The in Nature Management (Rosprirodnadzor) in investment program of the Syktyvkar Plywood cooperation with specialists of the close joint- Plant for 2005 includes the priority investment stock company “Giprobum-Engineering.” Public projects. First is the construction of an annex to hearings on the project were held in September the storehouse of finished products and veneer 2005. According to Valentin Brovkin, Head of the drying line (deadline – October, 2005). Second, Timber Department of the Ministry of Industry reconstruction of the wood-particle board shop, and Energy of the Komi Republic, financing of planned for September, and construction of the project on investment substantiation will a boiler-house for the utilization of wood be allocated from the Republican budget. “The waste, with a productive capacity of 15 MW in introduction of such projects in Komi gives a November 2005. The total investment amount is powerful incentive to the development of timber over 460 million RUR. The company with limited and all the other industries of the Republic,” liability “Syktyvkar Tissue Group” will implement V. Brovkin said. the project “Modernization and expansion of the production of high-quality hygiene and Construction of the pulp mill in the Udora sanitary paper.” Generally it is expected to region will enable the involvement of 3.2 million increase the total production volume up to 46 m3 of unused raw wood material. To raise the thousand tons of base paper for hygiene and chemical treatment of surplus small-scale timber, sanitary goods per year. The value of the project the project is considering the construction is 544.6 million RUR. “The Komi government of a plant for market sulfate bleached pulp will support such projects, since along with production (capacity – 500 thousand tons per the construction of new plants and opening year). The aggregate value of the project stands new working positions they increase returns to for $876.5 million. The construction deadline is the Republican and local budgets,” states Ivan 3.5–4.5 years. This project was elaborated by Pozdeev, Deputy Head of the Komi Republic. In the close joint-stock company “Gazprombum” the Noshul village of the Priluzsky Region of 194 with participation of Jaakko Poyry Consulting the Komi Republic the company “Algir Pelltes” (Finland). General costs of the project’s (Moscow) started a project “Construction of a development reached 5.8 million RUR and were plant producing fuel pellets from logging waste,” allocated by the Republican budget. V. Brovkin which is directed toward the liquidation of thinks that the Udora pulp mill project will get logging waste, reduction of costs on heat energy investors shortly. “Project realization will enable by using biological fuel and the utilization an increase in capacities of the processing of of low-quality timber. The aggregate value of small-scale and low-grade timber from 7 up this project amounts to 77 million RUR. Now to 12–13 million m3 per year, which, in turn, that the design estimates have been approved, foundation building, and the mounting of production units and equipment are being Sawmilling facilities carried out. “Investments in board production could increase the volume of timber resources involved,” considers the Ministry of Industry and Energy of the Komi Republic. Experts think that because of deficient financing the projects are being slowly implemented. At present, an active search for potential investors in the construction projects is being held.
Irina MANOVA *** The article contains information of the Komiinform Agency, Territorial Agency of the Federal Service of State Statistics for the Komi Republic, Ministry of Economic Development of the Komi Republic, Ministry of Industry and Energy of the Komi Republic, Open Joint-Stock Company “Mondi Business Paper–Syktyvkar”.
№ 1 2006 ARKHANGELSKLENINGRADIRKUTSK REGION REGION REGION
The major reserves of mature timber are The “Siblespol’zovanie” (Siberian timber THE TIMBER concentrated in the Ust’-Ilimsky, Chunsky, exploitation) exhibition (organized by Kirenskom, Bratsky, Ust’-Kutsky, Nizhneilimsky “Sibexpocenter” International exhibition complex) i Kazachinsko-Lensky districts. is annually held in Irkutsk. The main themes of the exhibition are investment projects, technologies, INDUSTRY COMPLEX Significant experience can be gained in the machinery and equipment for timber harvesting Irkutsk region by using timber resources for and processing, thorough timber processing, and economic development. The timber industry of timber industry products. Presentations, round- OF THE IRKUTSK REGION the region includes timber production, wood table discussions, and consultations are organized. processing, cellulose / paper production, and a The participants are Russian and foreign timber wood-chemical industry. The development of companies and equipment producers. the timber industry in the Angara basin was The Irkutsk region is one of ten Russian regions them are of the highest value pine forests, stimulated by the fast industrial development with a developed timber industry. The timber which are highly desirable for the timber of Siberia that started in the mid-1950s. Timber STATISTICS industry complex is very important for the industry. production in the region drastically increased and In 2005, 21 million cubic meters of timber were regional economy. The region possesses unique the large integrated timber plants (Baikal and produced in the Irkutsk region. In the beginning timber resources. The territories covered with The estimated timber production in the region Ust’-Ilim integrated pulp-and-paper mills) started of 2006, 296 forest lots with a total area 14 forests occupy 61.7 million hectares (82 % of (the value that does not violate the recovery operating. These plants produce about 70 % of million hectares were on lease. The possible the region’s territory). The region is one of of the timber reserves) is 52.7 million cubic the total Angara basin timber industry output. production volume is 27 million cubic meters. most timber-rich among the Russian Federation meters of lumber per year. In 1998, the decrease of production slowed Timber processing includes 35 % for cellulose members and second after the Krasnoyarsk region. down and a tendency towards the increase of production, 17 % of sawn timber and 9 % of 12 % of the country’s mature timber resources are The main objective of the timber industry in the the production volume became visible. other products; 25 % of timber production is concentrated here and the amount of high-value Irkutsk region is pine. The high technical properties raw timber, and 14 % is used as firewood. coniferous timber like pine and Siberian pine of the pinewood make it especially valuable for all In 2007, the Irkutsk regional administration (cedar) is significant on the world scale. The total kinds of wood products. The large pine forestlands will accept wide powers in the distributing, In 2005, the industrial production index of the timber reserves of the Irkutsk region exceed that are located in the Angara river basin in the south protection and recovering of the timber resources Irkutsk region was 103.7 %. In 2005, 2461.4 of Sweden, Finland and Germany together. of the Central Siberian plateau. The second in of the region. Currently, the timber industry is thousand cubic meters of sawn timber, 1295.0 196 economic value is larch wood. The advantage of responsible for less than a 7 % contribution to the thousand tons of marketable cellulose, 155 197 The total timber reserves in the region’s forests larch wood is its high resistance to rotting. Larch budgets of all levels. According to the regional thousand tons of plywood, 2.38 thousand tons of (according to the information of the Russian wood buildings can last for a few centuries. administration, high priority in receiving forest paper, 214.4 thousand tons of cardboard, 28,003 Ministry of Natural Resources and Environment lots for lease will be granted to the companies thousand square meters of building insulation administration for the Irkutsk region) is 8.79 billion Larch forests are dominant in the northern accomplishing the thorough processing of timber. (DVP), and 169.5 thousand cubic meters of cubic meters including 5.17 billion cubic meters districts of the region. Because of the poor This will reduce the volume of raw timber chipboard (DSP) were produced. in mature and overmature forests in which the development of transportation routes in larch- exportation. The Federal agency for the timber fraction of coniferous forests is 4.51 billion cubic growing areas and the specific mechanical industry of the Irkutsk region, jointly with the In January 2006, the industrial production meters. The mature forests ready for exploitation properties of this wood hampering its processing, regional administration, developed new criteria index compared to January 2005 was 110.1 %. occupy 11.72 million hectares or 20 % of the forest larch forests are almost unexploited. The for determining winners in competitions for forest The timber processing industry index in January area. Predominantly coniferous wood occupies mechanical properties of larch wood nevertheless lots. Not only the forest lot lease price and the 2006 compared to January 2005 was 117.9 %, 78 % of the exploitative reserve, thus they may be enable its use instead of oak and beech. production capability are taken into consideration, and that of timber harvesting – 89.3 %. considered highly valuable for the timber industry. but the leaseholder’s preparedness for social The forests of highly salable pine in our country The valuable technical properties (strength, partnership, the creation of new workplaces, and About two thousand companies are operating and on the International market occupy 15.2 softness, weight, rotting resistance) are investments into the development of the facility in the timber industry of the region employing million hectares, or 25 % of the wooded area, characteristic of Siberian pine (cedar) wood. and the whole industry. Strict compliance with 62 thousand. and are second only to larch forests. The pine The production of cedar wood is limited because the lease agreement will be ensured. forests of the region constitute 13.1 % of the parts of cedar forests (3.8 million hectares) are total pine forest area of Russia (115.2 millions of reserved for cedar nut harvesting and hunting, In 2005, the Baikal timber exchange was opened in PRINCIPAL PERSONS IN THE hectares). The Siberian pine (cedar) occupies 7,138 whereas the regulated felling age is much higher Irkutsk. Among its founders were 11 organizations REGIONAL TIMBER INDUSTRY hectares of taiga or 12 % of the forested area. The than that of other coniferous trees. and 6 individuals. The timber exchange was Irkutsk region cedar forests constitute 18 % of the founded in order to regulate trade relationships • Dolgov Viktor Nikolaevich – Irkutsk country’s total cedar forest area (39.7 millions of Coniferous timber is used inside the region inside the region and with International partners administration deputy head for the timber hectares). Only in the Krasnoyarsk region the does as well as outside. The problem exists with and to establish general timber trade rules for all and wood processing industry the predominantly cedar forest area exceed that the processing of deciduous timber: aspen participants of the industry’s division, which were of the Irkutsk region. and birch. The region produces more than six formulated by the founders jointly with buyers Committee for the timber and wood processing million of these kinds of lumber and more than and sellers. The founders expect that about 300 industry of the Governor’s administration: The exploitable timber reserves in the Irkutsk three million remain unused. The rest is used timber companies of the Irkutsk region will use • Ignatov Valerij Viktorovich, committee region are 2730 million cubic meters; 41 % of in cellulose production. the exchange services. chairman
№ 1 2006 № 1 2006 ARKHANGELSKLENINGRADIRKUTSK REGION REGION REGION
• Tangarov Semen Sidorovich, head of the The reason for the transportation problem is Departmental roads are another point of electronic systems. Each log is marked with department of the timber and wood the shortage of freight cars experienced by concern. The large timber companies that a tag. The exporter’s employees input the processing industry of the Governor’s transportation companies and timber companies. have to build their own roads for lumber log parameters into the database. The timber administration This problem is being solved: new lumber transportation have to pay the road taxes too, exported this way requires less time for customs transportation companies have been founded, though these funds could be invested in the clearance. The Irkutsk region is the first Russian • Tribunskij Pavel Vladimirovich, department and currently there is competition between building of a new lumber truck road network. region where by-the-piece electronic recording of timber resources and leases them. The timber companies themselves are Currently, the estimated timber reserves in of raw timber has been tested. • Zhurkov Sergej Prokop’evich, head of the investing into transportation vehicles. Creation the region are estimated to be 52.7 million timber agency of the Irkutsk region of additional transportation companies and hectares, but only 14.6 million hectares are According to the Eastern Siberian and Far East their competition is the best way to ensure the leased. According to Valerij Ignatov, the customs data, exportation of Irkutsk region • Logachjov Jurij Fjodorovich – president of sufficient supply of the timber industrial complex chairman of the committee for the timber timber industry products in 2005 included: the Irkutsk region timber producers and with transportation vehicles. The regional and wood processing industry, the reason is raw timber – 6033 thousand cubic meters, exporters association administration supports the founding and the absence of a transportation infrastructure sawn timber – 1815 thousand cubic meters, • Plakhotnik Anatolij Konstantinovich – development of transportation companies. including all-season lumber transportation cellulose – 1035 thousand tons, cardboard president of OAO «Pik-89» roads and, as a result – the inaccessibility of – 155.2 thousand tons, building insulation (DVP) The low productivity per hectare of forest is reserves for timber companies. The average – 0.4 million conditional square meters. • Il’inskij Vladimir Serafimovich – general considered the main problem of the regional timber transportation distance in the region director of OAO «Chunskij LPK» timber industrial complex. In Russia, this index is more than 150 km. The area for the timber TRENDS IN THE DEVELOPMENT • Krivokhizhin Ivan Prokop’evich – general is a few times lower than in European countries. resources accessible for exploitation should be director of OAO «Lesogorskles» The productivity means not only the volume gradually increased by road construction. For OF IRKUTSK FORESTRELATED of timber harvested from the forest lot, but the efficient exploitation of timber reserves, • Stupin Andrej Ivanovich – general director all of the profit obtained from the unit area. 2.3 thousand kilometers of roads should be INDUSTRIES of ZAO «Jantal’les» How can the value of the timber products be built in the Irkutsk region. A strategy of development in the forest industry • Babich Sergej Jakovlevich – general director increased? It is necessary to ensure the increase prioritized enhancement of advanced chemical of OAO «Kunerminskij LTKH» of the volume of timber processing within Among the existing problems is also the wood technology with the aim to process the region. Obviously this cannot be achieved excessive value of duties paid for standing small-size, low-grade wood and soft-wooded • Rossoj Andrej Georgievich – general director instantly because significant investments are timber, which is expected to increase. broadleaved species to obtain high-profit of OOO «Ilimsibles» necessary. goods. The products obtained by advanced 199 • Podashov Iosif Fomich – OOO «SP There are artificial problems too, for example, timber processing are competitive on the Sibehksportles-Tajriku» A very serious problem in the timber industrial according to information of the Irkutsk region's domestic and international markets, highly complex of the region is the 80 % aging capital timber producers and exporters association, profitable and ensure stable revenues of the • Bratischev Vladimir Nikolaevich - General equipment. This is the result of the state’s among them is the depletion of timber reserves. budgets at all levels. Investment projects Director of JSC Ust-Ilimsk Pulp Mill insufficiently considered policy in customs Actually, the forest lot lessees do not even have been developed for the development • Sokolovskiy Vladimir Alexandrovich – duties and payments. According to experts it reach the estimated production volume (52.7 and expansion of existing advanced chemical General Director of JSC Bratsk Pulp and is necessary to stimulate businesses toward million cubic meters per year). Every year 11 processing facilities and commissioning new Containerboard Mill thorough timber processing and the compliance million hectares are leased. The production on sawmills and woodworking enterprises oriented of products with world standards. This requires these lots is 20 million cubic meters. with the advanced processing of wood; their • Lazarev Alexandr Vasilyevich – General the correction of the customs policy and the implementation is being planned considering Director of JSC Logging and timber rafting revision of customs exportation duties for economic, social, technical and environmental Department timber industry products. EXPORTATION conditions. One of the major pre-conditions • Rudenko Viktor Ivanovich – General Director China is the major importer of timber from the of enhanced timber harvest and extraction is of JSC Ust-Ilimsk Saw and Wood Processing Another important problem is the high Irkutsk region. This country’s share is 75 % of full compliance with sustainable forest use and Mill transportation cost. The Irkutsk region is the total exportation; the remaining 25 % is environmental protection requirements. located in the center of Russia, thus, currently received by Japan and other Eastern countries. THE PROBLEMS OF THE TIMBER the cost of one cubic meter of lumber delivered In 2004, the region’s companies produced 20 According to Denis Petushinsky, vice-governor to sea ports is increased by a factor of two. A million cubic meters of timber, including six that of the Irkutsk region, the priority of the timber INDUSTRIAL COMPLEX OF THE REGION well-considered system of preferential tariffs for were exported (in comparison, during the Soviet industry in 2006 is the commissioning of new The main problems of the timber industrial these kinds of freights is necessary. period, 40 million cubic meters of timber were facilities for advanced timber processing. The complex of the region are: worn-out equipment, produced and only one million exported). growth in this sector is ensured by the large absence of investments into the all-season The next problem is lumber theft. The efficient pulp producing plants: JSC TsKK, PO Ust- lumber truck roads, and the shortage of a coordination of law-enforcement, customs and Currently, the electronic recording of timber Ilimsky LPK, and Baykalsky Pulp and Paper qualified workforce. There is also a shortage revenue agencies, transportation companies exportation is being applied. The goal of the new Mill. Moreover, in 2007, Bratsky LDZ is expected of timber transporting vehicles. Investments and regional authorities is necessary. In order system is more strict control of the exportation to double its output to reach 150thsd cubic into thorough timber processing and equipment to prevent crime in the timber business, the of timber abroad and the reduction of freight meters per year. Ilim Bratsk DOK Ltd. drew up a purchasing are necessary. timber police was founded. document processing times. The information on business plan of plywood production providing lumber volume and quality is transferred via for the increase of output nearly two times by
№ 1 2006 № 1 2006 ARKHANGELSKLENINGRADIRKUTSK REGION REGION REGION
2007 (from 137.7thsd cu m to 240thsd cu m). FSC requirements. This is the first FSC certificate Each project requires a two-party discussion with around USD 80 mln in the mechanical wood- Ust-Ilimsky LDZ is to approve a business plan by obtained by Ilim Pulp Corporation. The the potential investor to identify the participation working. Such a scale investment program is the end of 2006 referring to the advancement of registration number of the forest management of parties in the project’s implementation. “Ilim connected with company’s wish to keep the timber processing and increasing the output of certificate is GFA-FM / COC-1192, valid from Pulp” corporation, which regards Irkutsk as a leading positions on the Chinese market where lumber by 300thsd cubic meters. The enterprise 22.08.05 till 12.08.10, certified area: 1,589,944 supporting region, reported its plans to invest one exports the product of the Eastern Siberian is planning to produce more than 600thsd cubic ha. At the beginning of 2006 “ULiL” (JSC Logging in 2011 more than USD 750 mln in its pulp-and- enterprises of “Ilim Pulp.” meters of high-quality lumber in 2008. and timber rafting Department) as a part of “Ilim paper productions, more than USD 130 mln in Pulp” received the license for timber management the timber industry business development and Maria SOLOVIEVA According to the experts’ forecasts, by 2010, and for the line of deliveries. the Irkutsk region will be able to harvest 25.9mln cu m of timber. It will be processed to INVESTMENT PROPOSALS Information about districts of the Irkutsk region, which produce 1.65mln tons of pulp, 265.8thsd tons of are planned to host the production facilities cardboard, and 216.3 tons of chip boards. 3.1mln FOR THE TIMBER INDUSTRY tons of lumber are also included planned. Popul- Annual Area, UNDER CONSIDERATION ation, Water Major energy allowable District thous- Transport 2 thousand resources source cut, thsd At present the administration of the Irkutsk and m 3 CERTIFICATION people m region is receiving various investment proposals Bratskaya HPP, Ust-Kut district 34.6 67.8 western part of BAM Lena River 4,153.1 For the period from December 2004 to January regarding its timber industry. The proposals Ust-Ilimskaya HPP 2005, Russian Europartner and German GFA are considered by a Coordination Council western part of BAM, automobile Tayshet district 27.7 33.2 Birusa River Bratskaya HPP 4,460 Terra Systems Company performed preliminary established by the governor. Among the offers road Moscow-Chita western part of BAM, automobile audits of the FSC system of forest management already discussed are: an investment plan Chuna district 25.8 46.9 Chuna River Bratskaya HPP 5,755.3 at IlimSibLes Ltd. within the framework of for Transsibirskaya Timber Company providing road Bratsk-Chuna-Tayshet railway, the joint certification program. The two- USD140mln for the construction of a sawmill Zima district 7 15 Irkutskenergo 325 stage preliminary audit was made on 14–20 with the rated capacity of 600ths cu m and automobile road “Moscow tract” Ust-Ilimsk railway, 36 22.2 Angara River Ust-Ilimskaya HPP 6,150.3 December 2004 and 11–17 January 2005 an OSB plant with the annual capacity of district automobile road Bratsk-Ust-Ilimsk and covered the territory of seven logging 25thsd cu m located in the town of Ust-Kut; railway, western part of BAM, Angara River, enterprises. These companies also performed an investment plan of Region Ltd. offering Irkutsk district 11.3 59.9 automobile road Irkutskaya HPP 196.5 Irkut River 200 an FSC-based preliminary audit of forest USD60mln. Still another investment plan of plant Moscow-Vladivostok 201 railway, management at CJCS Agency for Harvesting construction in the Kazachinsk-Lensk district is Sludyansk district 6.3 43.9 Baykal Lake Irkutskaya HPP 11.4 and Rafting in January 2005. In April 2005, under consideration. automobile road Irkutsk-Ulan-Ude Cheremkhovo railway, the audit company GFA Terra Systems in 36.5 81.2 Irkutskenergo 342.1 district automobile road Moscow-Chita conjunction with WWF conducted a preliminary BUSINESS OFFERS TO FOREIGN railway, Angarsk district 1.2 262.8 Angara River Irkutskenergo 35.4 forest management audit at CJSC Kachugsky automobile road Moscow-Chita Production System. The auditors prepared a INVESTORS Kazachinsk-Lensk Bratskaya HPP, corresponding report confirming the readiness 33 21.1 western part of BAM Kirenga River 3,077.5 The Irkutsk region has all the necessary district Ust-Ilimskaya HPP of enterprises for subsequent baseline appraisal railway, conditions for the development of advanced Usolye district 6.4 56.2 Angara River Irkutskenergo 373.9 of compliance with FSC principles and criteria. automobile road “Moscow tract” processing enterprises: transport infrastructure The certification process is generic to the western part of BAM, (a railway system, including an underused BAM Bratsk district 33.2 64.1 Angara River Bratskaya HPP 4,222 standards of GFA Terra Systems, adapted to automobile road Bratsk-Tulun road), excessive energy capacities, and labor railway, western part of BAM, the Irkutsk region. Irkutskenergo, resources. Regional authorities in association Kirensk district 43.8 26.9 automobile road Lena River 5,307.3 Bratskaya HPP with FGUP Sibgiprobum are developing a number Irkutsk-Kachug-Zhigalovo 16 September 2005, the Ilim Pulp Corporation of business offers for investments with varying received an FSC certificate. The certificate volumes of costs, which are being presented to The goal posed by Irkutsk regional authorities – the manufacture of is a verification of compliance with forest Russian and foreign investors for consideration. modern products: chemico-thermomechanical pulp, MDF and OSB panels, etc. management and the chain-of-custody system of Some projects are quite unique. The proposed Consequently, investors offering to locate facilities in the Irkutsk region will IlimSibLes (Ust-Ilim group of logging enterprises investment scheme is: credit + equity capital. have priority in allocation of the forest fund. of Ilim Pulp, Irkutsk region) and international
№ 1 2006 № 1 2006 ARKHANGELSKLENINGRADIRKUTSK REGION REGION REGION
Chemico-thermomechanical pulp is widely used in compositions for newsprint, writing and printing paper, various cardboard types and sanitary paper. OFFERS TO FOREIGN INVESTORS Financial proposal to the investor USD200–250mln are to be raised (depending on the supposed production capacity), the period of payback is IN THE IRKUTSK REGION 4–5 years; the interest rate and payback terms are to be agreed upon between the parties.
PROJECTS ON THE CHEMICAL TECHNOLOGY ORGANIZATION OF CHEMICO THERMOMECHANICAL OF WOOD, PULP AND PAPER PRODUCTION 3 PULP PRODUCTION (CTMP) WITH A RATED CAPACITY OF 200–300THSD TONS. PREFERRED SPECIES ARE SPRUCE, FIR AND ASPEN.
CONSTRUCTION OF A PULP AND PAPER MILL Location: town of Chuna (Chuna district) Total project cost: USD200–250mln 1 INCLUDING FACILITIES FOR: Payback period: 48 months Internal rate of return: 50 % • cardboard and bag paper, output - 280thsd tons; Brief description of business proposal: • bleached pulp, output - 250thsd tons. Chemico-thermomechanical pulp (CTMP) refers to fiber semi-finished high-output products obtained by the mechanical treatment of wood. It is widely used in compositions for newsprint, writing and printing paper, Location: Ust-Kut (Ust-Kut district) Total project cost: USD900mln. various cardboard types and sanitary paper. Payback period: 108 months. Internal rate of return: 40%. Financial proposal to the investor Brief description of the business proposal: USD200–250mln are to be raised (depending on the supposed production capacity), the period of payback is The construction of the mill is to be accomplished in two-phases: 4–5 years; the interest rate and payback terms are to be agreed upon between the parties. 1st phase –cardboard and bag paper facilities with a rated capacity of 280thsd tons. 202 2nd phase – sulphate bleached pulp production facilities with a rated capacity of 250thsd tons. 203 Total raw material consumption– 2.9–3mln cu m of softwood and hardwood timber. MDF PANEL PRODUCTION WITH A RATED Financial proposal to the investor: 4 CAPACITY OF 35THSD CU M USD900mln are supposed to be raised, the period of payback is 6–7 years; the interest rate and payback terms are to be agreed between the parties. Location: Yantal settl. (Ust-Kut district) Total project cost: USD18–20mln Payback period: 30 months Internal rate of return: 60 % ORGANIZATION OF CHEMICO THERMOMECHANICAL Brief description of business proposal: MDF panels are modern, high-quality and strong materials in comparison with fiber and chipboards, offering a 2 PULP PRODUCTION (CTMP) WITH THE RATED wider range of uses. The panel format is 2100*2750 mm, thickness – 4–28 mm. The panels are used to produce CAPACITY OF 200–300THSD TONS. PREFERRED furniture, as well as in building construction, car production and shipbuilding. Thanks to their strength and good workability, MDF panels can be used as a material having the strength equal to the strength of massive SPECIES ARE SPRUCE, FIR AND ASPEN. wood, with such advantages as absence of defects, homogeneous dense structures and large surface areas. Wood consumption is 1.9–2 cu m per 1 cu m of panel. MDF panel production in Russia is limited. Location: Tayshet (Tayshet district) Total project cost: USD200–250mln Financial proposal to the investor: Payback period: 48 months Internal rate of return: 50 % USD18–20mln are to be raised (depending on the production capacity), the period of payback is 3–4 years; Brief description of business proposal the interest rate and payback terms are to be agreed upon between the parties. Chemico-thermomechanical pulp (CTMP) refers to fiber semi-finished high-output products obtained by the mechanical treatment of wood. CTMP production is boosting in countries with a developed pulp and paper industry. The growth of demand for bleached pulp is especially notable, which can be explained by the improved properties MDF PANEL PRODUCTION WITH A RATED of the pulp and wider ranges of paper and cardboard products, using this semi-product. The popularity of CTMP 5 CAPACITY OF 35THSD CU M in comparison with other fiber materials (bleached pulp is accounted for by a number of advantages): • less capital expenditures; Location: town of Zima (Zima district) Total project cost: USD18–20mln • high output of pulp (85–9 %), which is two times higher than bleached pulp (42–52 %); • high degree of lightness (85 % ISO for hardwoods); Payback period: 30 months Internal rate of return: 60 % • high degree of bulkiness, hardness and opacity; Brief description of business proposal: • significant decrease of harmful discharge into the atmosphere in comparison with pulp production; MDF panels are a modern, high-quality and strong material in comparison with fiber and chipboards, offering • fully automated technological processes. a wider range of uses.
№ 1 2006 № 1 2006 ARKHANGELSKLENINGRADIRKUTSK REGION REGION REGION
Financial proposal to the investor: Financial proposal to the investor: USD18–20mln are to be raised (depending on the supposed production capacity), the period of payback is 3–4 A USD18mln credit is to be raised; the period of payback is 3–4 years; the interest rate and payback terms are years; the interest rate and payback terms are to be upon agreed between the parties. to be agreed upon between the parties.
ORGANIZATION OF OSB PANEL PRODUCTION ORGANIZATION OF CORRUGATED BOARD 6 WITH A RATED CAPACITY OF 35THSD CU M 9 PRODUCTION AND PACKING. RATED CAPACITY IS 20 MLN M2 PER YEAR; KNOBBY LINING FROM Location: town of Ust-Ilimsk (Ust-Ilimsk district) Total project cost: USD18mln WASTE – 7 MLN ITEMS PER YEAR. Payback period: 24 months Internal rate of return: 80 % Brief description of business proposal: Location: Irkutsk (Irkutsk district) Total project cost: USD 12 mln OSB panels are composed of three layers of chips oriented longitudinally in outer layers and across in the Payback period: 60 months Internal rate of return: 40 % inner layers, glued with phenol or melamine-carbamide-phenol layers. OSB panels with thicknesses from 5 to 50 mm are used for the internal and external cladding of houses, floor structures and roofs, interior walls, A brief description of the business proposal: furniture, etc. Corrugated cardboard is produced from a semi-finished product – a cardboard for the thin layers of corrugated OSB panels have superior quality and lower costs in comparison with plywood and traditional boards. board (manufacturer OOO “CKK,” Bratsk town) and paper for crimping (manufacturer – OAO “Eniseykiy Paper mill,” OSB advantages over plywood are as follows: Krasnoyarsk city). The starch glue is used for gluing together the layers of corrugated board. The corrugated • less materials / output ratio (1.9 cu m of wood / 1 cu m of panel instead of 2.5–2.7 cu m of wood / 1 cu m board is processed into packing of many sizes and types. of panel); Nowadays, the packing made from corrugated board is brought to the Irkutsk region from the Nobosibirsk region • less strict quality requirements for raw wood; and from Buriatiya. The requirement of the Irkutsk region in the corrugated board packing is around 30 mln m2 • a wide range of thicknesses (up to 100 mm) and a wide range of panel dimensions. per year, including the need of Irkutsk city – 50 %, of Angarsk – 23 % and Usolye-Sibirskoye – 14 %. The project advantages are as follows: OSB panel production may use various species, though aspen and pine are preferable, both long and short (1–2 the presence of raw materials in the region and nearby districts; m) stems can be used. • • the presence of a stable and growing demand (around 20 % per year) for the product; Financial proposal to the investor: • the environmental safety of the production. 204 A USD18mln credit is to be raised; the period of payback is 3–4 years; the interest rate and payback terms are We propose a corrugator with a capacity of 20 mln m2 per year and a processing line. All of the waste from 205 to be agreed upon between the parties. the production of corrugated boards and the packing from it are processed into knobby linings. Financial proposal to the investor: ORGANIZATION OF OSB PANEL PRODUCTION A USD12 mln credit is to be raised; the period of payback is 3–4 years; the interest rate and payback terms are to be agreed upon between the parties. 7 WITH A RATED CAPACITY OF 35THSD CU M Location: town of Ust-Kut (Ust-Kut district) Total project cost: USD18mln ORGANIZATION OF BAG PAPER PRODUCTION Payback period: 24 months Internal rate of return: 80 % 10 AND BAGS WITH A RATED CAPACITY OF 25–30 Brief description of business proposal: MLN UNITS. OSB panels are composed of three layers of chips oriented longitudinally in outer layers and across in the inner layers, glued with phenol or melamine-carbamide-phenol layers. Location: Baykalsk town (Slyudyansk district) Total project cost: USD 3mln Financial proposal to the investor: Payback period: 42 months Internal rate of return: 60 % A USD18mln credit is to be raised, the period of payback is 3–4 years; the interest rate and payback terms are to be agreed upon between the parties. A brief description of the business proposal: It is supposed to organize a bag paper manufacture on the existing paper-making machine after the modernization of the cellulose production and the paper-making machine at “Baykalskiy Paper Mill” joint-stock company. We also propose ORGANIZATION OF OSB PANEL PRODUCTION to organize the manufacture of bags at the existing production facilities of “Baykalskiy Paper Mill” or Baykal city. Advantages: 8 WITH A RATED CAPACITY OF 35THSD CU M • the presence of production facilities; • environmental safety of the production; Location: town of Chuna (Chuna district) Total project cost: USD18mln • meeting the needs of the Irkutsk region in paper bags; creating new work stations (bag production) in Baykalsk towns. Payback period: 24 months Internal rate of return: 80 % • Financial proposal to the investor: Brief description of business proposal: A USD 3mln credit is to be raised; the period of payback is 3–4 years; the interest rate and payback terms are OSB panels are composed of three layers of chips oriented longitudinally in outer layers and across in the inner to be agreed upon between the parties. layers, glued with phenol or melamine-carbamide-phenol layers.
№ 1 2006 № 1 2006 ARKHANGELSKLENINGRADIRKUTSK REGION REGION REGION
ORGANIZATION OF PAPER PRODUCTION FOR a drug in medicine, as a preservative and the second helping in the food industry, also for preparations of different treatment – and-prophylactic food compositions that are relevant under conditions of higher risk 11 SANITARY DOMESTIC USE AND PRODUCTS MADE of aggravation of the processes of peroxide lipids oxidation (when poisoned, during ionizing radiation, etc.) FROM IT WITH A RATED CAPACITY OF 10 TONS Dihydroquercitinum is a valuable product of larch extraction from the bottom part of the wood. PER 24 HOURS (3.390 TONS PER YEAR). Financial proposal to the investor: A USD 1mln credit is to be raised; the period of payback is 2 years; the interest rate and payback terms are Location: Irkutsk city (Irkutsk district) Total project cost: USD 1,2mln to be agreed upon between the parties. Payback period: 20 months Internal rate of return: 70 % A brief description of the business proposal: PRODUCTION OF DIHYDROQUERCITINUM It is supposed to organize a high quality paper-base manufacture for the production of goods from cellulose for sanitary domestic use. The paper-base is made in Baykalsk, and the production facilities are on the existing 14 WITH A RATED CAPACITY OF 3 TONS PER YEAR paper mill. The paper-base is delivered to Irkutsk city or other nearby towns and is processed into goods (rolls, towels, tissue paper, napkins). Location: Zima town (Ziminsk district) Total project cost: USD 1 mln Advantages: Internal rate of return: 100 % • the high request of the region; • free area. Financial proposal to the investor: A brief description of the business proposal: The project is to be fulfilled at one of the enterprises processing larch in Zima. A USD 1,2mln credit is to be raised; the period of payback is 2–3 years; the interest rate and payback terms Dihydroquercitinum (takcifolin) i.e. natural flavonoid, is related to vitamin P. are to be agreed upon between the parties. Financial proposal to the investor: A USD 1mln credit is to be raised; the period of payback is 2 years; the interest rate and payback terms are ORGANIZATION OF CARDBOARD MANUFACTURE to be agreed upon between the parties. 12 FOR THE FOLLOWING PRODUCTION OF GYPSUM CARDBOARD WITH A RATED CAPACITY OF 20.000 PRODUCTION OF DIHYDROQUERCITINUM TONS PER YEAR AT “CHEREMKHOVKROVLYA” WITH A RATED CAPACITY OF 3 TONS PER YEAR 206 STOCK JOINT COMPANY 15 207 Location: Kazachinsk town (Kazachinsk-Lensk district) Total project cost: USD 1 mln Location: Cheremkhovo town (Cheremkhovo district) Total project cost: USD 2,9mln Payback period: 12 months Internal rate of return: 100 % Payback period: 36 months Internal rate of return: 55 % A brief description of the business proposal: A brief description of the business proposal: It is supposed to reconstruct cardboard-making machine K-3M, to fulfill its modernization for the cardboard-base The project is to be fulfilled at one of the enterprises processing larch in Kazachinsk. production of the following manufactures of corrugated board. The coating machine is installed. Dihydroquercitinum (takcifolin) i.e. natural flavonoid, is related to vitamin P. Advantages: Financial proposal to the investor: • production facilities including warehouses and engineering communications (network system and roads); A USD 1mln credit is to be raised; the period of payback is 2 years; the interest rate and payback terms are • manufacturing of cheap and competitive constructional material – the base for corrugated board to be agreed upon between the parties. production. Raw materials: mackle-paper. Financial proposal to the investor: PRODUCTION OF DRYING OIL A USD 2,9mln credit is supposed to be raised; the period of payback is 3–4 years; the interest rate and payback AND PAINT AND LACQUER MATERIALS terms are to be agreed upon between the parties. 16 WITH A RATED CAPACITY OF 4.500 TONS
DIHYDROQUERCITINUM PRODUCTION WITH Location: Ust-Ilimsk town (Ust-Ilimsk district) Total project cost: USD 4,5mln 13 A RATED CAPACITY OF 3 TONS PER YEAR Payback period: 50 months Internal rate of return: 28 % A brief description of the business proposal: Location: Angarsk city (Angarsk district) Total project cost: USD 1mln One proposes to organize production of drying oil and paint-and-lacquer materials on the basis of the processing Payback period: 12 months Internal rate of return: 100 % of by-products left over from paper manufacturing (i.e. tall oil). A brief description of the business proposal: Financial proposal to the investor: A USD 4,5mln credit is to be raised; the period of The project is supposed to be fulfilled at one of Angarsk’s enterprises processing larch. payback is 3 years; the interest rate and payback terms are to be agreed upon between the parties. Dihydroquercitinum (takcifolin) i.e. natural flavonoid, is related to vitamin P. Nowadays it is widely used as
№ 1 2006 № 1 2006 ARKHANGELSKLENINGRADIRKUTSK REGION REGION REGION
PRODUCTION OF GLUED CONSTRUCTIONS FROM 19 LARCH TIMBER WITH A RATED CAPACITY OF 14.000 M3 PER YEAR
Location: Bratsk (Bratsk district) Total project cost: USD 0,9 mln Payback period: 12 months Internal rate of return: 100 % PROJECTS FOR FURNITURE A brief description of the business proposal: Production of glued constructions made from larch timber with a rated capacity of 14.000 m3 per year. AND WOOD WORKING PRODUCTION Financial proposal to the investor: A USD 0,9 mln credit is to be raised; the period of payback is 2 years; the interest rate and payback terms are to be agreed upon between the parties. PRODUCTION OF GLUED CONSTRUCTIONS 17 FROM LARCH WOOD WITH A RATED CAPACITY JOINT MILL FOR THE PRODUCTION OF FURNITURE OF 14.000 M2 PER YEAR 20 PANELS WITH A RATED CAPACITY OF 30.000 M3 Location: Usolye-Sibirskoye town (Usolsk district) Total project cost: USD 0,9 mln Location: Irkutsk (Irkutsk district) Total project cost: USD 1,8 mln Payback period: 24 months Internal rate of return: 60 % Payback period: 12 months Internal rate of return: 100 % A brief description of the business proposal: A brief description of the business proposal: Rate for the ready-to-use product on the international market is USD 350-450 per m3. The project fulfillment provides for: 1. Procurement of equipment for the glued construction production of 14.000 m3 per year of glued timber Financial proposal to the investor: A USD 1,8 mln credit is to be raised; the period of payback is 3 years; the interest rate and payback terms are – 7.000 m3, glued sawn timber – 3.000 m3, glued molded strips – 4.000 m3. to be agreed upon between the parties. 208 2. Putting into operation the manufacture of glued constructions at the existing production facilities using 209 the existing engineering systems, transport, unloader-and-loader machines and equipment with an annual volume of processed raw materials equal to 20.000 m3. SAWN TIMBER PRODUCTION WITH A RATED 3. Putting into operation a larch timber-sawing workshop. CAPACITY OF 60.000 M3 3 21 4. Putting into operation 3 drying kilns with the single unloading of 100 m . 5. Application of the international specifications for product quality (ISO 9000). Location: Ust-Ilimsk town (Ust-Ilimsk district) Total project cost: USD 8–10 mln The rates of the products in other markets are as follows: glued timber with a length of 12–15 m costs USD Payback period: 36 months Internal rate of return: 15 % 800 per m., glued sawn timber – USD 350, glued molded strips – USD 450. A brief description of the business proposal: Financial proposal to the investor: Additional wood-sawing facilities are to be put into operation at “PIK-89” Ltd, with a rated capacity of A USD 0,9 mln credit is to be raised; the period of payback is 2 years; the interest rate and payback terms are 60.000 m3. to be agreed upon between the parties. Financial proposal to the investor: A USD 8–10 mln credit is to be raised; the period of payback is 4–5 years; the interest rate and payback terms PRODUCTION OF GLUED CONSTRUCTIONS are to be agreed upon between the parties. FROM LARCH TIMBER WITH A RATED CAPACITY 18 SAWN TIMBER PRODUCTION WITH A RATED OF 14.000 M3 PER YEAR 22 CAPACITY OF 70.000 M3 Location: Irkutsk city (Irkutsk district) Total project cost: USD 0,9 mln Location: Alekseevka village (Kirenskiy district) Total project cost: USD 5–7 mln Payback period: 12 months Internal rate of return: 100 % Payback period: 36 months Internal rate of return: 15 % A brief description of the business proposal: A brief description of the business proposal: 3 Production of glued constructions made from larch timber with a rated capacity of 14000 m per year. Additional wood-sawing facilities are to be put into operation at Alekseevskaya REB with a rated capacity of 70.000 m3. Financial proposal to the investor: Financial proposal to the investor: A USD 0,9 mln credit is to be raised; the period of payback is 2 years; the interest rate and payback terms are A USD 5–7 mln credit is to be raised; the period of payback is 4–5 years; the interest rate and payback terms to be agreed upon between the parties. are to be agreed upon between the parties.
№ 1 2006 № 1 2006 ARKHANGELSKLENINGRADIRKUTSK REGION REGION REGION
SAWN TIMBER PRODUCTION WITH A RATED SOME OF THE ENTERPRISES PRESENTED 23 CAPACITY OF 25.000 M3 Location: Tolstiy Mis village (Ust-Kutskiy district) Total project cost: USD 1–1,5 mln IN RUSSIAN FORESTRY REVIEW Payback period: 20 months Internal rate of return: 15 % LENINGRADSKAYA JSC Firo-O E mail: [email protected] A brief description of the business proposal: Address: 55, Savushkina St., 3 OBLAST Additional wood-sawing facilities are to be put into operation at “Volga” Ltd. with a rated capacity of 25.000 m . St.Petersburg, 197183, Russia JSC Fanplast Phone: +7 (812) 430-8935 Address: 8, Dnepropetrovskaya St., Financial proposal to the investor: St. Petersburg Cartonboard and Fax: +7 (812) 430-8930 St.Petersburg, 191119, Russia A USD 1–1,5 mln credit is to be raised; the period of payback is 4–5 years; the interest rate and payback Printing Mill E mail: [email protected] Phone: +7 (812) 164-10-94 terms are to be agreed upon between the parties. (a part of Ilim Pulp) Fax: +7 (812) 164-24-86 Address: P.O. Box 51, Pavlovsk, St. JSC Priozersky DOZ E mail: [email protected] Petersburg, 196620, Russia Address: 49-A, Kalinina St., Priozersk, Web: www.fanplast.sp.ru SAWN TIMBER PRODUCTION WITH A RATED Phone: +7 (812) 460-2278, 460-1696 Leningradskaya oblast, Fax: +7 (812) 460-2287, 460-1963 Swedwood Tikhvin (a part of 3 188760, Russia 24 CAPACITY OF 80.000 M E mail: [email protected] Phone: +7 (81379) 3-73-84 IKEA) Web: www.ilimpulp.ru Fax: +7 (81379) 3-62-46 Address: 15, Shvedsky proezd, Location: Ust-Ilimsk (Ust-Ilimsk district) Total project cost: USD 5–7 mln E mail: [email protected] Leningradskay oblast, 187500, Kommunar Paper Mill Russia 36 months 15 % JSC Vyborgskaya Cellulose Phone: +7 (812) 331-1020, Payback period: Internal rate of return: (a part of Ilim Pulp) Address: 2, Zavodskaya St., settl. +7 (81367) 5-22-42 A brief description of the business proposal: Address: 1, Fabrichnaya St., town of Sovetsky, Vyborg district, Fax: +7 (812) 331-1021, Additional wood-sawing facilities are to be put into operation at “Kata” joint-stock company with a rated Kommunar, Gatchino District, Leningradskaya oblast, 188 +7 (81367) 5-27-44 capacity of 80.000 m3. Leningradskay oblast, 188320, 918, Russia E mail: [email protected] Russia Phone/Fax: +7 (813 78) 72-794 Financial proposal to the investor: A USD 5–7 mln credit is to be raised; the period of Phone: +7 (812) 460-0667 Fax: +7 (813 78) 7-46-46, 72-794 JSC Syassky Pulp and Paper Mill payback is 4–5 years; the interest rate and payback terms are to be agreed upon between the parties. Fax: +7 (812) 460-1095 E mail: [email protected], Address: 1, Zavodskaya St., 210 E mail: [email protected] [email protected] Syasstroy, Volkhov district, 211 Web: www.ilimpulp.ru Web: www.vybcell.ru Leningradskaya oblast, SAWN TIMBER PRODUCTION WITH A RATED 187420, Russia Ilim Gofropak Ltd. SevZapLesprom Phone: +7 (813 63) 5-64-44, 5-62-19 3 25 CAPACITY OF 90.000 M (a part of Ilim Pulp) Address: quarters 4-N, letter A, Fax: +7 (813 63)5-23-88, 5-30-80 E mail: [email protected] Address: 9 Pavlovskaya St., town of 19, Zaporozhskaya St., St. Web: www.syas.ru Location: Melnichniy village (Kirenskiy district) Total project cost: USD 7–9 mln Kommunar, Leningradskaya Petersburg, 192012, Russia oblast, 188323, Russia Phone/Fax: +7 (812) 919-3828, 933- Payback period: 36 months Internal rate of return: 15 % 5668 Phone: +7 (812) 460-1691 VOLOGDA REGION Fax: +7 (812) 460-1693 E mail: [email protected] A brief description of the business proposal: E mail: [email protected] Additional wood-sawing facilities are to be put into operation at Kirenskaya REB with a rated capacity of Web: www.ilimpulp.ru JSC Sodruzhestvo Holding company “Vologodskiye 90.000 m3. Address: 99A, 3rd Konnaya Lakhta St., lesopromishlenniki” Olgino, St.Petersburg, 197229, Address: Vologda, Blagoveschenskaya Financial proposal to the investor: Kamennogorsk Offset Paper Mill Russia St., 47, 160000, Russia A USD 7–9 mln credit is to be raised; the period of payback is 4–5 years; the interest rate and payback terms (KOPM, a part of Northwest Phone: +7 (812) 320-0575 Phone: +7 (8172) 72-88-17 Timber Company) Fax: +7 (812) 320-0576 are to be agreed upon between the parties. Fax: +7 (8172) 72-88-18 E mail: [email protected] Address: 54, Leningradskoye shosse, E mail: [email protected] Kamennogorsk, Leningradskaya Web: www.sodruzhestvo.spb.ru oblast, 188950, Russia JSC Avstrofor Phone/fax: +7 (812) 331-8340 Ltd. Petrospect CONTACT INFORMATION OF THE PROJECTS: Address: Vologda, Pushkinskaya St., 10, E mail: [email protected] Address: 2, Professor Popov’s St., 160035, Russia Web: www.szlk.ru St.Petersburg, 197022, Russia contact person in the Irkutsk regional administration: Tangarov Semyon Sidorovich, head Phone: +7 (8172) 72-95-24 • Phone: +7 (812) 347-6691, 347-6977 Fax: +7 (8172) 72-04-42 of the Department of Logging and Timber Processing of the Governor’s Administration of Fax: +7 (812) 347-5271 JSC Svetogorsk E mail: avstro@ vologda.ru E mail: [email protected] the Irkutsk region; 1A. Lenin St., Irkutsk, 664027, Russia. (a part of International Paper) Web: www.domiki.ru, www. JSC Tkhomesto-Vologda Tel.: (3952) 25-65-08, 25-62-42, 25-60-45; e-mail: [email protected]. Address: 17, Zavodskaya St., Svetogorsk, petrospekt.ru Leningradskaya oblast, Address: Vologda, Sovetskiy pr., 13, • contact person in FGUP Sibgiprobum: Goncharov Alexey Ivanovich; 6, Stepana Razina St., 188991, Russia JSC ORIMI 160035, Russia Phone: +7 (8172) 76-75-53 Irkutsk, 664025; tel.: (3952) 33-23-78, 24-22-81; e-mail: [email protected]. Phone: +358 5 688 400 Address: 3, Tobolskaya St., Fax: +7 (8172) 72-01-79 Fax: +358 5 688 4900 St.Petersburg, 194044, Russia
№ 1 2006 № 1 2006 RUSSIAN REGIONS
Ltd. Kharovsklesprom Ltd. Vashkinskiy Ltd. Monzenskiy DOK OJSC LADENSO Ltd. Lyaskelya SLBK Address: Vologda Region, Kharovsk, (a part of LHK Cherepovetsles) Address: Vologda Region, Gryazovetskiy Address: Pitkyaranta, Gorkogo St., 15, Address: The Republic of Karelia, Krasnoye Znamya St., Russia Address: Vologda Region, Lipin Bor district, Vokhtoga village, 186810, Russia Pyitkyarantskiy district, Phone: +7 (81732) 2-11-61 village, Pionerskaya St., 11, 162740, Russia Phone: +7 (814-33) 3-14-60, 3-24-89 Lyaskelya village, Sovyetskaya Fax: +7 (81732) 2-20-71, 2-13-94 161250, Russia Phone: +7 (81755) 3-15-19 St., 4, 186804, Russia Phone: +7 (81758) 2-13-35 Fax: +7 (81755) 3-28-26 OJSC Lahdenpokhskiy TIE Phone: +7 (814-33) 2-41-33, 2-41-44, Fax: +7 (81758) 2-18-38 2-41-55 OJSC Corporation Ltd. Sheksninskiy KDP Address: The Republic of Karelia, “Vologdalesprom” Lahdenpokhya, Arkadiy (subsidiary of OJSC Tolyattiazot) OJSC CZ PYITKYARANTA Address: Vologda, Kozlenskaya St., 42, Ltd. Belozerskles Markov’s St., 4a, 186730, Address: Vologda Region, Sheksna 160035, Russia (a part of LHK Cherepovetsles) Russia Address: The Republic of Karelia, village, Pervomayskaya Str., Phone: +7 (814-50) 2-23-63, 2-25-37 Piyitkyaranta, Nurmi-saari, Phone: +7 (8172) 72-89-01 Address: Vologda Region, Belozersk, 22, 162560, Russia 186810, Russia Fax: +7 (8172) 72-51-07 50 let VLKSM St., 43, 161200, Phone: +7 (81751) 2-33-60, 2-39-41 Phone: (814-33) 3-50-57, 3-41 -57, 3- Russia OJSC OLONETSLES Fax: +7 (81751) 2-35-06 34-46 Ltd. Vologoda Resin Manufacture Phone: +7 (81756) 2-22-50 Address: The Republic of Karelia, Fax: +7 (81756) 2-25-87 Olonets, Lenina St., 21, Address: Vologda, Kanifolnaya St., 1, KARELIA 186000, Russia OJSC SUOYARVSKAYA KARTONTARA 160024, Russia Phone: +7 (814-36) 2-10-74 Address: The Republic of Karelia, Phone/Fax: +7 (8172) 241-952, 243-260 JSC Beliy Ruchey Suoyarvi, I.Idrisov’s St., 24, Address: Vologda Region, Vitegorskiy OJSC ZAPKARELLES OJSC PUDOZHSKIY TIE 186870, Russia district, Depo village, 162940, Address: The Republic of Karelia, Phone: +7 (814-57 )2-11-58, 2-18-03 OJSC Timber Concern “Kipelovo” Address: The Republic of Karelia, Russia Suoyarvi, Gagarina St., 28, (a part of JSC National Timber Pudozh, Lenina St., 70, Phone: +7 (81746) 4-55-78 186870, Russia Company) 186150, Russia OJSC LAHDENPOHKSKIY VENEER Fax: +7 (81746) 2-22-25 Phone: +7 (814-57) 2-18-43, 2-23-04 Address: Vologda, Kozlenskaya St., 42, Phone: +7 (814-52) 2-12-45, 2-12-41 PLANT BUMEKS 160035, Russia OJSC KARELLESPROM, TIMBER Address: The Republic of Karelia, Phone: +7 (8172) 72-48-20 JSC Cherepovetsk Veneer-and- OJSC Pyalmskiy TIE Lahdenpohkya village, Furniture Industrial Plant INDUSTRY ENTERPRICE (TIE) Fax: +7 (8172) 72-37-35 Address: The Republic of Karelia, Zavodskaya St., 24, 186730, Address: The Republic of Karelia, Address: Vologda Region, Cherepovets, Pudozhskiy district, Pyalma Russia Petrozavodsk, Andropova St., Proiezhaya St., 4, 162604, village, Shkolnaya St., Russia Petrozavodsk, P.B. 368 (Titov’s Ltd. Sokolskiy DOK 2/24, 185035, Russia Russia Phone: +7 (814-52) 2-95-31, 2-95-46 St., 11, 3rd floor), 185035, 212 (a part of JSC National Timber Phone: +7 (8202) 29-11-95 Phone: +7 (8142) 76-80-40 Russia 213 Company) Fax: +7 (8202) 29-25-40 Web: http://bumex.ru, OJSC PYAOZERSKY TIE Address: Vologda Region, Sokol, JSC KARYALAN PUUTUOTE E mail: [email protected] Address: The Republic of Karelia, Address: The Republic of Karelia, Phone: + 7 (814-50) 2-24-24, 2-21-09 Lugovaya St., 1, 162132, Ltd. Novatrskiy Timber Mill Russia Prionezhskiy district, 1, Loukhskiy district, Pyaozerskiy Fax: +7 (814-2) 76-80-22 Phone: +7 (81733) 3-31-52 Address: Velikiy Ustyug, Vinogradova 185505, Russia village, Mira St., 10a, 186667, Fax: +7 (81733) 3-36-46 St., 4, 162340, Russia Phone: +7 (8142) 78-91-02 Russia OJSC ILYINSKIY TIMBER Phone: +7 (81738) 2-29-14 E mail: [email protected] Phone: +7 (814-39) 3-86-89, 3-82-48 ENTERPRISE Fax: +7 (81738) 2-13-50 LTD. KOSTOMUKSHSKIY TIE Address: JSC SHUYALES The Republic of Karelia, LHK Cherepovetsles Address: The Republic of Karelia, Olohetskiy district, Ilyinskiy OJSC Severlesprom Kostomuksha, Stroiteley St., Address: The Republic of Karelia, Address: Vologda Region, Cherepovets, village, Zavodskaya St., 16, 7a, 186930, Russia, Pryazhinskiy district, Chalna Lenina St., 80, 162600, Russia Address: Vologda Region, Vitegra, 186004, Russia The Republic of Karelia, village, Pervomayskaya St., Phone: +7 (8202) 22-12-30 Ploskonivskaya St., 9, 162900, Phone: +7 (814-36) 2-36-99, 2-16-00, Petrozavodsk, Dzerzhinskogo, 186130, Russia Phone/Fax: +7 (8202) 51-84-53 Russia 2-14-54 Phone: +7 (81746) 2-39-43 39, 185000, Russia E mail: [email protected] E mail: [email protected] Phone: +7 (814-59) 9-35-94, 9-32-45 Fax: +7 (81746) 2-39-35 Phone: +7 (814-56) 4-53-59, 4-54-99 LTD. INTERLESPROM XXI, Fax: +7 (8142) 774649, 774580 Fax: +7 (814-56) 4-53-68 OJSC Babaevskiy LPH E mail: [email protected] SUDSIDIARY OF BELOMORSK Ltd. Premium-Les (a part of LHK Cherepovetsles) OJSC KONDOPOGA Address: The Republic of Karelia, Address: Vologda region, Krasavino, OJSC KRIVCILES Belomorsk, Leninskaya St., 39, Address: Vologda Region, Babaevo, Mira Address: The Republic of Karelia, district of the railway station, 186500, Russia St., 3, 162480, Russia Address: The Republic of Karelia, Kondopoga, Promishlennaya 162341, Russia Phone: +7 (814-37) 2-17-05 Phone: +7 (81743) 2-11-52 Pudozhskiy district, Krivci St., 2, 186220, Russia Phone: +7 (81738) 4-19-06 Fax: +7 (81743) 2-22-74 village, Gagarina St., 4, Phone: +7 (814-51) 3-65-00 Fax: +7 (81738) 4-23-16 186170, Russia Fax: +7 (814-51) 4-35-86 LTD KEMKSKIY LDZ OJSC Belozerskiy LPH Phone: +7 (814-52) 2-53-60, 2-53-91 Address: The Republic of Karelia, JSC ÇÀÎ Match Mill of Cherepovets (a part of LHK Cherepovetsles) Kemskiy district, FESCO JSC LADVINSKIY TIE OJSC SEGEZHSKIY PAPER MILL Address: Vologda Region, Belozersk, Rabocheostrovask village, Address: Vologda Region, Cherepovets, Address: The Republic of Karelia, Address: The Republic of Karelia, Internacional III St. 2, Komsomolskaya St., 1, 186601, Mochenkov St., 17, 162604, Prionezhskiy district, Ladva- Petrozavodsk, Rigachina, 37a, 161200, Russia Russia vetka village, Lesnaya St., 1, 185005, Russia Phone: +7 (81756) 2-11-45 Russia Web: http://kemldz.narod.ru, Phone: +7 (8202) 29-52-26 185519, Russia Phone: +7 (814-2) 71-90-68 Fax: +7 (81756) 2-14-08 E mail: [email protected] Fax: +7 (8202) 29-23-12 Phone: +7 (814-2) 73-61-22 Web: http://www.scbk.ru
№ 1 2006 № 1 2006 RUSSIAN REGIONS
OJSC KARELIA OJSC Ustyales OJSC Arkhangelskiy LDK ¹ 3 IRKUTSK REGION Phone: +7 (39535) 922-66 Fax: +7 (39535) 715-05, 770-48 Address: Republic of Karelia, (a part of National Timber Phone/Fax: +7 (8182) 67-77-17, 67-77-24 E mail: [email protected] Medvezhjegorskiy district, Company) E mail: [email protected] ULIL (a part of Ilim Pulp) Web: www.ilimpulp.ru Pindushi village, Kanifolnaya Phone/Fax: +7 (818-55) 514-13, 511-71 OJSK Lesozavod -2 Address: P.O.Box 461, 1 Mira St., Bratsk, St., 5, 186323, Russia E mail: [email protected] Irkutsk Region, 665718, Russia OJSC Pik-89 Phone: +7 (81434) 4-49-62 Phone/Fax: +7 (8182) 62-80-60, 62-79-57 Phone: +7 (3953) 49-66-87 Phone: +7 (39535) 94882, (39535) Ltd. Ustyanskiy Timber Industry E mail: [email protected] Fax: +7 (3953) 49-68-89 Ltd. Kondopozhskiy LEZ 93406 company E mail: [email protected] OJSC Shalakushskiy Timber Mill E mail: [email protected] Address: The Republic of Karelia, Phone/Fax: +7 (818-55) 6-12-24, Web: www.ilimpulp.ru Kondopoga, Medvezhyegorskiy 6-11-91, 5-26-90 Phone/Fax: +7 (818-38) 3-12-06, 3-11-82 OJSC Irkutsklesprom highway, 16, 186200, Russia IlimSibLes (a part of Ilim Pulp) E mail: [email protected] Phone: +7 (3952) 277222, 277261 Phone: +7 (814-51) 4-36-11 Ltd. Lesozavod 23 Address: P.O.Box 318 , Us t-Ilimsk-14 , Ltd. PKP Titan Phone/Fax: +7 (8182) 63-58-58, 63-58-57 Irkutsk Region, 666684, Russia JSC TIMBER-SAWING MILL OJSC Lesogorskles E mail: [email protected] Phone: +7 (39535) 93-130 Address: Arkhangelsk, PomorskayaSt., 7 Phone: +7 (39567) 91133 LADOZHSKIY Phone: +7 (8182) 21-43-90 Fax: +7 (39535) 77-926 Address: The Republic of Karelia, Ltd. Kotlasskiy LDK Fax: +7 (8182) 20-58-31 E mail: [email protected] JSC Yantalles Pitkyarantskiy district, Phone/Fax: +7 (818-37) 3-97-98, 3-98-53 Web: www.ilimpulp.ru Khiydenselga village, OJSC Lukovetskiy TIE (a part of E mail: [email protected] Phone: +7 (3952) 211711, (39565) Sadovaya St., 1, 186803, the industrial group “Northwest” Ilim Bratsk Saw and Wood 66433 E mail: [email protected] Russia TIE, “Continental Management” JSC Pleseckiy Timber-Sawing Mill Processing Mill Phone: +7 (814-33) 2-47-44, 2-47-11 TIE) Phone/Fax: +7(818-32) 7-14-06, 7-17-74 (a part of Ilim Pulp) Ltd. SP Sibexportles-Tayriku E mail: [email protected] Address: P.O.Box 472, 1 Mir a St ., Br at sk , JSC Medvyezhyegorskiy LDK Phone/Fax: +7 (818-30) 3-52-31, Phone: +7 (3952) 511888, (39566) 3-51-34, 3-51-96 Irkutsk Region, 665718, Russia Address: The Republic of Karelia, IlimSeverLes (a part of Ilim Pulp) 22682 E mail: [email protected] Phone: +7 (3953) 49-65-33 Medvyezhyegorsk, Address: Koryazhma, Arkhangelsk Fax: +7 (3953) 49-65-33 Onezhskaya St., 1, 186300, Ltd. Ruslesprom-Trading OGUP Arhangelsklesprom Region, 165651, Russia E mail: [email protected] Russia Web: www.ilimpulp.ru Phone: +7 (39535) 98100, (39535) Phone/Fax: +7 (8182) 205-593, 652-205 Phone: +7 (81850) 456-40, 563-60 Phone: +7 (814-34) 2-10-76, 2-27-03 Fax: +7 (81850) 565-07 98139 E mail: [email protected] Ilim Bratsk Wood Processing Mill E mail: [email protected] JSC Olonetskiy LDK OJSC Dvinskiy TIE 214 Web: www.ilimpulp.ru (a part of Ilim Pulp) Address: The Republic of Karelia, Phone/Fax: +7 (818-30) 240-18, 240-56 Ltd. SP TM Baykal 215 Address: 1 Mira St., Bratsk, Irkutsk Olonets, Komsomolskaya St., Phone: +7 (39573) 21810 Arkhangelsk Pulp and Paper Mill Region, 665718, Russia 32, 186000, Russia Ltd. ARM-Nord Address: 1, Melnikov st., Novodvinsk, Phone: +7 (3953) 49-69-54 Phone: +7 (814-36) 2-15-91, 2-16-03 Phone/Fax: +7 (8182) 62-58-75, 62- Ltd. Eastern Siberian Plant of Arkhangelsk region, 164900, Fax: +7 (3953) 49-69-54 58-15 Russia Ferroconcrete Constructions Ltd. Petrozavodskiy Timber Mill E mail: [email protected] Phone/Fax: +7 (818-52) 6-32-31, Web: www.ilimpulp.ru Phone: +7 (39510) 93678 Address: The Republic of Karelia, OJSC Zelennikovskoye 6-32-02, 6-30-43 E mail: [email protected] Petrozavodsk, Povenetskaya Phone/Fax: +7 (818-54) 734-73, E mail: [email protected] Ust-Ilimsk Saw and Wood St., 16, 185030, Russia 733-24, 7-33-44 Web: www.appm.ru Processing Mill Ltd. Siberian Plywood Phone: +7 (814-2) 56-72-53 (a part of Ilim Pulp) Phone: +7 (39543) 44250 OJSC Solombalskiy LDK Kotlas Pulp and Paper Mill (a part Address: P.O.Box 315, Us t-Ilimsk-14 , E mail: [email protected] LTD. SWEDWOOD-KARELIA, Phone/Fax: +7 (8182) 22-82-87, 67-84-55 of Ilim Pulp) Irkutsk Region, 666684, Russia SUBSIDIARY E mail: [email protected] Address: Koryazhma, Arkhangelsk Phone: +7 (39535) 925-40 Ltd. Ust-Ilimskiy Plant of Joiner’s Web: www.sldk.ru Address: The Republic of Karelia, Region, 165651, Russia Fax: +7 (39535) 704-31 Items Petrozavodsk, Pervomayskiy Phone: +7 (81850) 451-03 OJSC Northern Timber Company E mail: [email protected] Phone: +7 (39535) 99654, pr., 8, 185001, Russia Fax: +7 (81850) 333-27 Web: www.ilimpulp.ru +7 (39535) 99510 Phone: +7 (8142) 70-23-28 Lesozavod ¹3 E mail: [email protected] Phone/Fax: +7 (8182) 27-22-72, 61-86-99 Web: www.ilimpulp.ru Bratsk Pulp and Containerboard E mail: [email protected] Mill (a part of Ilim Pulp) ARKHANGELSK Web: www.sawmill3.ru OJSC Solombalskiy Pulp and Paper Address: If you find in the list a REGION Mill P.O.Box 467, 1 Mira St., Bratsk, JSC Lesozavod ¹ 25 Irkutsk Region, 665718, Russia company thet interests Phone/Fax: +7 (8182) 67-97-00, Phone: +7 (3953) 41-18-35 OJSC Dvinskiye Phone/Fax: +7 (8182) 63-81-00, 63-81-11 67-96-79, 23-41-98 Fax: +7 (3953) 49-68-48 you or wish to receive the E mail: [email protected] Lesopromishlenniki E mail: [email protected] E mail: [email protected] full information about the Web: www.sawmill25.ru Web: www.sppm.ru Web: www.ilimpulp.ru (a part of the industrial group markets players described “Northwest” TIE, “Continental OJSC Onezhskiy LDK Promishlenniki Pomorya. Ust-Ilimsk Pulp Mill in the Russian Forestry Management” TIE) Phone/Fax: +7 (818-39) 7-71-48, 7-71-37 Arkhangelsk inter-branch (a part of Ilim Pulp) Phone/Fax: (818-54) 7-55-85, 7-55-38, E mail: [email protected] association of employers Address: P.O.Box 353, Us t-Ilimsk-14 , Review, please contact us at 7-54-62 Web: www.sawmills.ru Phone: +7 (818-52) 6-32-02, Irkutsk Region, 666684, Russia [email protected] E mail: [email protected] (8182) 20-65-04
№ 1 2006 № 1 2006 MODEL FORESTS OF RUSSIA
We do our best to present new technologies LESPROM BRIEFLY ABOUT US and ideas for high management, specialists and researchers of the Russian TIC! Our FORUM readers have a chance to get the exclusive information necessary for their business. We The LesPromFORUM newspaper is a relatively new are ready to help you promote your brands project, which will be one year old in the autumn in Russia! of 2006. This is a unique publication especially for Russia’s largest exhibition events and is officially supported by their organizers. LesPromInform, an industrial magazine for HOW WILL WE DO IT? Dear readers of the RUSSIAN FORESTRY those associated with the TIC, is our core An exhibition is a complex product, which usually REVIEW digest! If you were so patient as First, by preparing attractive advertisements product, and we have been publishing it for comprises, apart from the exposition itself, a to have read our bulky magazine from cover for your company, translating and publishing four years. Over the years, LPI has become one business program including seminars, conferences, to cover, you seem to be really interested in the technical articles to catch the attention of of the most influential journals in the country, etc. The larger an exhibition is, the more it is the Russian forestry market. your potential clients (Russian readers prefer having won the recognition of specialists laden with events of every kind, and practice to receive detailed information about new and experts of different levels: production shows that its market standing, in today’s severely For four years, our editorial staff has been technologies and their opportunities). supervisors, managers, researchers, lawyers, competitive environment, can be improved by successfully attaining informational support financiers, officials, legislators, etc. making your exhibition-related program more on the forest industry in the RF and the CIS Then, we will organize the distribution of our sophisticated. Under such circumstances, the countries. The prospects for the development journal to find as wide an audience of readers as informational support of an exhibition event of the national timber industry complex WHAT ARE WE DOING TO PROGRESS? possible! 15,000 samples of LesPromInform will becomes especially important for maximum Svetlana (TIC), and the industry’s image abroad, are be waiting for your clients in their own offices Nothing special! Only high-qualified information coverage of its guests as an audience. This is the YAROVAYA of tremendous importance to us. We will and in the offices of their partners and clients, and well-planned distribution! We have main idea of the LesPromFORUM newspaper. General Director surely do our best for our companies to profile associations, regional administration covered all of the sub-branches of the Russian [email protected] develop, update their facilities, and find new offices, institutes and other educational It is published to suit a particular exhibition timber industry complex, starting with forest approaches to in-depth wood processing. The centers, as well as sea ports; they will meet only, and in the number of copies to suit the management, reforestation, wood harvesting, most valuable aspect of business is information your clients during more than 60 timber fairs in expected number of guests (6,000 to 10,000). On pellet producing, mechanical and chemical that is necessary and timely. This is just the Russia, CIS, the Baltic countries and Europe and its pages you will find the organizers’ greetings, wood processing, the pulp and paper sector product we offer our readers – specialists during different events: seminars, conferences, the official program of events, presentation and wooden house-building. Additionally, we and managers of pulp & paper, TIC, and openings of the new enterprises, competitions, announcements, special offers by exhibitors and discuss “hot topics” of the country’s forestry. furniture companies, and anyone wishing to etc. Your customers will be found! The life their profiles, and all kinds of useful analytical For example – the new Forest Code, problems and reference information. open their own business in this sector. Our expectancy of our samples is not less than of certification, the transportation of wooden editorial office is an information center, a one year, because our readers keep our journal materials, ecological topics, branch education, The high printing quality of the publication (a full- connecting link between Russian equipment and always return to its pages in search of questions of leasing and credits for enterprises color pages A3 (12- to 20-pages) newspaper printed buyers and foreign suppliers, and between necessary information! of the Russian TIC, and scientific research on good coated paper), and skillful distribution Russian exporters and international users of articles in the field of new technologies. Each pattern (handed to EACH guest personally) have our raw materials and products. We should add that LesPromInform is not issue is devoted to one of the Russian forest yielded maximum success. Our project has covered just useful for your business to deal with our Oleg regions and contains all of the information all of the major exhibition events in Russia, and In accordance with the old Russian tradition, magazine. It is also a pleasure, since we take on PRUDNIKOV about forests, mills and factories, profile the overall circulation of LesPromFORUM issues where the presenter is the last to be introduced, many related matters. For example, the price of in 2006 will be 32,000 copies. Project Manager associations, researching institutes, new projects we decided to dedicate the last pages of this an ordered advertisement (see the price list on [email protected] and investments in this region. Such information digest to the description of our projects. the next page) already includes artwork / layout This is a really unique chance to get maximum can be useful if you are searching for dealers in design, translation into Russian, proofreading, access to market players in a particular region Russia or conducting market research for your (this year, we are publishing the newspaper in We are a team of competent, energetic, creative, bonus articles, and journalist work. product’s promotion. We also publish articles Novosibirsk, Perm, St. Petersburg, Moscow, and and driven young professional publishers, whose about the leading timber enterprises as examples Vologda). Our newspaper is attractive in its principal goal is the informative support of the The magazine’s editors, with their extensive of well-organized businesses. Enterprises like this appearance, and useful for exhibition guests, as Timber Industry Complex. Our editorial office is contacts among Russian companies in might already be working successfully thanks to it contains the full program of events, a list of located in St. Petersburg, and our reports and the industry, can provide you with agent the equipment made by your company. If so, participants, interesting articles – and hopefully, reviews cover all of Russia, from Kaliningrad to assistance, for instance in the sale of used inform the Russian market about it! your advertisement, which they simply won’t be Vladivostok, and countries abroad. equipment to particular mills, or, if desired, able to miss! arrange a seminar on your technologies for potential customers in Russia. We know the Therefore, to get high-quality massive PR at an market, and the market knows and respects exhibition that you find interesting, and to invite Elena our magazine, therefore, apart from being its guests to your stand or seminar, LesPromFORUM CHUGUNOVA WWW.LESPROM.SPB.RU an advertising / information resource, we can is your best and smartest opportunity! You will serve as event promoters, consultants, and find a full schedule of issues and prices for the PR-Manager ENGLISH RUSSIAN DEUTCH [email protected] intermediaries. newspaper in our price list below.
№ 1 2006 № 1 2006 2006 LESPROMINFORM RATES (journal)
Advertising place Size (page) Size (mm) Price (EURO)
The first issue of the RUSSIAN FORESTRY REVIEW that you Face cover 1/1 210õ250 2 500 are holding in your hand is our brand-new informational The 2nd cover + A4 2/1 420õ275 2 800 product. Before we launched the project, we had carefully Cover The 2nd cover 1/1 210õ275 1 995 studied the potential demand for such information outside The 3rd cover 1/1 210õ275 1 800 Russia, in the first place, and secondly, the readiness and willingness of Russian forestry companies to interact with The 4th cover 1/1 210õ275 2 190 VIP-place foreign partners. Our idea happened to be in demand, and (page in front of: was eagerly accepted by both parties. – the 2nd cover, 1/1 210õ275 1 630 – content – list of exhibitions) Working on the contents of this issue, we did not aim to Two pages A4 2/1 420õ275 1 890 publish a global analytical review of the Russian TIC all Pages inside Place in VIP-block 1/1 210õ275 1 440 at once. Such an ambitious effort would require several (first 15 pages) 1/2 162õ118 900 volumes, and would therefore focus on research rather Page A4 1/1 210õ275 1 090 than practical interest. Besides, Russia’s forestry sector is 1/2 162õ118 630 one of the most dynamic sectors of the national economy today, and information that seemed up-to-date a year ago 1/4 78õ118; 162õ57 360 may become hopelessly obsolete tomorrow. Table of proposals One line 19x190 110 Quantity discounts: 2 runs – 5%, 4 runs – 10%, 6 runs – 20%, 10 runs and more – individual discounts We find it more advisable to focus on the most crucial aspects of the Russian TIC’s current development, not trying to cover all of its sub-sectors, but giving all of the 2006 LESPROMFORUM RATES attention to a few. Any disadvantages of this approach will be amply compensated for in the following issues, (newspaper) 219 which will follow at a rate of 1 or 2 per year. They will discuss other segments of wood processing, new lines of Price (EURO) activities, and novel improvements. Tekhnodrev. Ural. International Lesdrevmash 2006 Russian forest 2006 Povolzhye Forestry Forum Size For instance, a new Forest Code will at last be adopted (by Size (page) (mm) Perm, Moscow, St.Petersburg, Vologda, the end of this year), and the governmental forest policy 20–23 June 11–15 Semtember 10–13 October 6–8 December will undergo serious changes. We will surely analyze its Circulation: Circulation: Circulation: Circulation: impact on the market in the next issue of RFR, which is 6 000 samples 10 000 samples 8 000 samples 5 000 samples scheduled for early 2007. In this issue, we also intend to 1-st cover – 1/2 À3 262õ187 1 220 1 810 1 450 1 070 cover the infrastructure problem in the regions, including Last cover – À3 262õ379 48 000 2 360 1 890 1 490 forest road construction; to review novelties in forest À3 page 262õ379 1 180 1 995 1 595 1 030 resources accounting; to discuss in more detail all of horizontal 262õ187 1/2 695 1 130 910 560 the segments of wood processing, including sawn timber, vertical 128õ379 glued / lam materials, construction materials, etc.; and give horizontal 262õ91 Inside pages 1/4 450 695 575 370 serious attention to legal aspects of the national forestry vertical 128õ187 business, especially mergers.
We sincerely hope that you will find this first issue interesting and useful. Following the instructions on the SUBSCRIPTION FOR ONE SAMPLE OF RUSSIAN FORESTRY REVIEW next page, you may subscribe for an additional copy for your partners, or for issue #2, which will be published BY POST DELIVERY COSTS 170 EUR in the spring of 2007. We would be delighted for you to DURING PROFILE EXHIBITIONS YOU CAN BUY A SAMPLE FOR 80 EUR become a loyal reader. In addition, we will be happy to (Table of exhibitions 2006 you may find on the last page) prepare information materials especially for you. Tell our To order the subcsription contact: office what aspect of the Russian TIC you would like to +7 (812) 703 3845, [email protected] see seriously reviewed, and such material will be sure to appear in our next issue! During year 2006 subscription for RUSSIAN FORESTRY REVIEW #2 (2007) costs 140 EUR
№ 1 2006 Date City/ Organizator Name of a fair Contacts (+38-032) 297-0628, 297-1369 May, 16–19 Lviv, Ukrania/ ÀÎ “Gal-EXPO” Woodworking 2006 [email protected], www.galexpo.lviv.ua May, 16–20 Moscow/ Krokus Expo HOLZHAUS 2006 (495) 105-3497, www.mvk.ru May, 16–20 Milan, Italy/ Fiera Milano, Eumabois XYLEXPO 2006 (+39-02) 89210200, 8259009, [email protected], www.xylexpo.com May, 17–19 Vladivostok/ ÎÎÎ “Dalexpocentr” Lesdrevprom 2006 (4232) 300-418, 300-518, [email protected], www.dalexpo.vl.ru Izhevsk, Udmurtiya/ May, 23–26 Furniture. Woodworking (+7-3412) 51-1315, 52-6440, [email protected], www.izhexpo.ru Izhevskiy expocentr May, 23–26 Kemerovo/ ZAO VK “Expo-Siberia” LESDREVPROM (+7-3842) 36-2119, [email protected], www.exposib.ru Construction machinery May, 23 – 27 Moscos/ Krokus Expo (495) 961-2262; 203-4100, [email protected] www.ctt-expo.ru and technologies 2006 May, 25–27 Stavropol/ VC “Progress” Stavropol Furniture salon (+7-8652) 353770, 563310, [email protected], www.progrexpo.ru May, 30 – June, 1 Jongkoping, Sweden/ Elmia AB World Bioenergy 2006 (+46-36) 15 20000, 16 4692, www.worldbioenergy.se May, 30 – June, 2 Minsk, Belorussia/ NVC “Belexpo” Lesdrevtech (+375-17) 234-0131, 234-2678, [email protected], ww.belexpo.by Tomsk/ ÎÀÎ International Business (+7-3822) 41-9470, 41-9768 May, 31– June, 2 Forest. Woodworking. Furniture Xenter o Tomsk “TEKHNOPARK” [email protected], www.t-park.ru Volgograd/ Tsaricinskiy furniture salon. (8442) 23-3377, 96-5034 June, 1–3 VC “Tsaricinskaya yarmarka” Woodworking [email protected], www.zarexpo.ru June, 7–9 Tver/ ÎÀÎ “Expo Tver” Expoles (+7-4822) 32-1513, 34-9667, [email protected], www.expotver.ru (8332) 24-19-38, 58-30-60 June, 14–16 Kirov/ ÎÎÎ “Vyatskiy bazar & CO” Forest. Woodworking. Furniture [email protected], www.vystavka.narod.ru June, 13–16 St.Petersburg/ VO “Restec” Interles 2006 (+7-812) 320-9684, 320-9694, [email protected], www.restec.ru Saint Bonnet de Joux (71), Ôðàíöèÿ/ (+33 (0) 38044378 June, 16–18 EUROFOREST 2006 ñ/î Aprovalbois [email protected], www.euroforest2006.com June, 20–22 St. Petersburg/ VO “Sivel” Biotopexpo (+7-812) 324-6416, 596-3781, [email protected], www.sivel.spb.ru Perm/ VC “Permskaya yarmarka” and Woodworking/ Teknodrev. Perm (+7-812) 320-9684, 320-9694, [email protected], www.restec.ru June, 20–23 VO “Restec” 2006 (+7-342) 262-5833, 262-5847, [email protected], www.fair.perm.ru 221 (+49 89) 949-20630, 949-20639 July, 12–16 Muenchen, Germany/ Muenchen Messe INTERFORST 2006 [email protected], www.interforst.de August 31 – FinnMETKO – fair of wood-logging (+358 9) 566 0010, 563 0329 Helsinki, Finland/ FinnMetko Oy September 2 machinery [email protected], www.finnmetko.fi August 31 – Sept- Klagenfurt, Austria/ Klagenfurter (+43 463) 568 000, 568 0029 Holzmesse ember 3 Messe GmbH [email protected], www.holzmesse.info September, 5–8 Irkutsk/ ÎÀÎ “SibExpoCentr” Siblesopolzovaniye. Woodworking (+3952) 352-239, 352-398, [email protected], www.sibexpo.ru Naberezhniye Tchelni/ September, 6–8 Furniture 2006 (8552) 346-753, 359-243, [email protected], www.expokama.ru VP “EXPO-KAMA” September, 11–15 Moscow/ ZAO “Expocentr” Lesdrevmash 2006 (+7 495) 255-3799, 255-3946, [email protected], www.expocentr.ru (+78432) 570-5108, 570-5111 September, 19–22 Kazan/ VC “Kazanskyja yarmarka” Woodworking [email protected], www.expokazan.ru (+375-17) 226-9193, 226-9192 September, 19–22 Minsk, Belorussia/ VC “Minskexpo” Woodworking 2006 [email protected], www.minskexpo.com October, 2–6 Kiev, Ukraine/ BK “Primus” Woodworking industry (+38-044) 537-6999/96, [email protected], www.theprimus.com Krasnoyarsk/ VK “Krasnoyarskaya Wood. Woodworking: (3912) 36-22-00 October, 3–6 yarmarka” equipment and output [email protected], www.krasfair.ru International Forestry Forum (+7-812) 320-9684, 320-9694 October, 10–13 St.Petersburg/ VO “Restec” “Timber Industry Complex of Russia [email protected], www.restec.ru of XXI century” October, 18–21 Belgorod/ “Belexpocentr” Furniture. Woodworking (+7-4722) 58-29-40, 58-29-41, [email protected] Woodworking. (+7-3512) 78-7605, 63-7512 November, 8–11 Tchelyabinsk/ VC “Vostochnie vorota” House and office- furniture saloon [email protected], www.chelsi.ru (+7-812) 321-2819, 321-2851 November, 21–24 St.Petersburg/ VO “Lenexpo” PAP-FOR 2006 [email protected], www.lenexpo.ru Kharkov, Ukraine/ (+38-057) 719-4834 November, 21–24 Ìåáåëü-ýêñïî è äåðåâîîáðàáîòêà “Õàðüêîâ ÈíôîÝêñïî” [email protected] www.infoexpo.kharkov.ua December, 5–8 Moscow/ MVK Lestekhprodukciya/ Woodex 2006 (+7-495) 105-3413, 268-1407, [email protected], www.woodexpo.ru (+7-8172) 72-9297, 75-7709 December, 6–8 Vologda/ VC “Russkiy dom” Russian forest 2006 [email protected], www.rusdom.region35.ru December, 7-10 Moscow/ Krokus Expo HOLZHAUS 2006 (495) 105-3497, www.mvk.ru № 1 2006