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Softwood Sawn Timber Export 2015 PANEL RDISCUSSION U S S I A OpportunitiesTHE forENIGMA and barriers to forest products from the perspective RUSSIAof the private– THE sector ENIGMA PAUL HERBERT Member of the Board Sviatoslav Bychkov, ILIM TIMBER GLOBAL SOFTWOOD LOG & LUMBER 74th sessionCONFERENCEof the Committee , on Forests and the Forest Industry, UNECE/FAO VANCOUVERForestry and,Timber MAY 07TH, Section 2015 October 19th, 2016, Geneva ILIM TIMBER CORPORATE PROFILE OPERATIONS Ilim Nordic Timber USA GERMANY RUSSIA Ust-Ilimsk branch of Ilim Timber Head Office, St. Petersburg Ilim Timber Bavaria Bratsk branch of Ilim Timber . Business Units: Russia and Germany . Company headcount: about 3000 people . Sales organizations: . Species: pine, Siberian larch, spruce, EU, USA, China, Russia and NIS, MENA Douglas fir, Sitka spruce . Annual production capacity: 2,65 million m3 . Long-term contracts with strategic log of sawn timber and 220 000 m3 of plywood suppliers ILIM TIMBER CORPORATE PROFILE MARKETS AND PRODUCTION VOLUMES 2015 Key markets* BU Russia (cbm.) BU Germany Russia 6% 9% Europe 13% USA CIS 54% MENA China 18% Europe 54% China 18% MENA 13% Russia & CIS 6% RoW 9% • Total production: 2.300.000 m3 *incl. sales of plywood • Total sales: 600 mln. USD BUSINESS UNIT RUSSIA Ust-Ilimsk branch of Ilim Timber Bratsk branch of Ilim Timber . Location: Ust-Ilimsk, Irkutsk region, 700 km North . Location: Bratsk, Irkutsk region, 500 km North from Baikal lake from Baikal lake . Foundation: 1983 . Modernization: 2012 . Products: softwood sawn timber («Taiga» brand) . Products: softwood plywood . Raw material: Angara pine, Siberian larch . Raw material: Angara pine, Siberian larch . Project capacity (output) per year: 650 000 m3 . Project capacity (output) per year: 220 000 m3 . Sales: China, MENA, EU, Japan . Sales: Russia, EU, NIS CERTIFICATION FSC certificate BU Russia EC Certificate of Production Control BU Russia PEFC Certificate BU Germany ISO 50001:2011 Certificate BU Germany IPPC Certificate BU Germany ISO 9001:2008 Certificate BU Russia BU Germany SOFTWOOD ROUND WOOD VOLUMES 2015 • Softwood harvesting in 2015 is over 145 million m3 +4,3% North-West 35% Siberia & Far East 45% • Annual available cut in Siberia & Russian Far East is less than 20% utilized while utilization rate in NW Russia exceeds 60% SOFTWOOD SAW LOG PRODUCTION, mln. m3 80 72.9 71,4 70 60 +2,1 % 50 Source: Rosstat 2014 2015 Source: Rosstat SOFTWOOD SAWN TIMBER EXPORT 2015 3 Asia exl. China RoW • Total export volume - 22.4 mln. m 6% 2% • China the main market – 9.8 mln. m3 CIS • CIS – 4.25 mln. m3 19% CHINA 44% • MENA – 3.47 mln. m3 • Europe - 3.2 mln. m3 MENA 15% • Asia exl. China – 1.3 mln. m3 Europe 14% Source: Russian Customs RUSSIAN EXPORT OF SOFTWOOD SAWN TIMBER BY REGIONS 2014 vs 2015 (th. m3) 12,000 10,000 8,000 6,000 2014 2015 4,000 2,000 +4,7 % 0 China Europe MENA CIS Asia exl. RoW Source: Russian Customs China CHINA SOFTWOOD LUMBER IMPORT 2014 VS 2015, th. m3 9,000 8,000 7,000 6,000 5,000 2014 4,000 2015 3,000 2,000 1,000 +16,5 0 Russia Source: China Bulletin SOFTWOOD SAWN TIMBER EXPORT to CHINA 2016 H1, m3 1,400,000 1,200,000 1,000,000 800,000 China Bulletin Russian Customs 600,000 400,000 200,000 1 2 3 4 5 6 Source: Russian Customs, China Bulletin RUSSIA WILL INCREASE WOODWORKING CAPACITY PRIORITY INVESTMENT PROJECTS • Implementation 2006 – 2021, average payback time 6-7 years • 121 state supported investment project (so far 41 are accomplished and 8 will come in 2016) • Reserved 70 mln.m3 from AAC (10% from whole Russian AAC) GOVERNMENT INCENTIVES • Electronic system for monitoring of round wood turnover on federal level started to operate successfully July 01, 2015 (415 Federal Law) • June 10, 2016, the State Duma adopted in the third (final) reading the largest set of amendments to the Forestry code of the Russian Federation since its adoption in 2006: - compulsory application of remote sensing data (including GPS survey data, aerial photography), photo and video recording, reports on the use of forests and reports on reforestation • Intensive forestry model promotion by the Ministry of natural resources of Russia MAJOR CHELLENGES FOR THE FORESTRY BASED BUSINESS 1 Infrastructure • Lack of investment in forest roads and economic • High railway tariffs for the transportation of wood barriers products 2 Domestic market • Wooden frame houses promotion development • Use of wood in public sector construction 3 Low investment • Investments return is highly dependent on access to log attractiveness and infrastructure (not fast enough) • High interest rates Dependence • No locally made equivalents to imported equipment 4 on imported • Lack of quality components (chemicals, glue, parts) equipment necessary for production process 5 Supply chain • Exceeding volumes of timber in Asian part of Russia territorial disruption • Exceeding production capacities and major consumption regions in the European part 6 Personnel and • Common for the ROW R&D deficit 14 SECTION RUSSE DE L’EXPOSITION UNIVERSELLE, PARIS 1878 R U S S I A THE ENIGMA THANK YOU RUSSIA – THE ENIGMA FORPAUL HERBERT YOUR ATTENTION! Member of the Board GLOBAL SOFTWOOD LOG & LUMBER CONFERENCE , VANCOUVER, MAY 07TH, 2015 .
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