Analysis of Timber Exports from the Russian Far East in 2015 WWF-Russia
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Elena Feditchkina Tracy, Alexey Lankin ANALYSIS OF TIMBER EXPORTS FROM THE RUSSIAN FAR EAST in 2015 WWF-Russia Elena Feditchkina Tracy, Alexey Lankin ANALYSIS OF TIMBER EXPORTS FROM THE RUSSIAN FaR EAST in 2015 Vladivostok 2016 Feditchkina Tracy, Elena Analysis of Timber Exports from the Russian Far East in 2015. / E. Feditchkina Tracy, A. Lankin. — Vladivostok: WWF-Russia, 2016. — 44 p., color illustrations This work offers an analysis of timber and wood product exports from the Russian Far East for the year 2015. It examines the basic parameters of timber exports, export destinations, major export patterns, and target markets. The analysis also includes ranking the leading wood product importers in the Far East, investigates the export structure and quality of timber processing and considers the possibility of expanding product variety. Particular attention is given to the Chinese market, the largest market for timber from the Russian Far East. © WWF Russia, 2016 The publication is supported by WWF-IKEA Forest Partnership This publication is not for sale and is distributed free of charge Table of Contents 1. Background .................................................................................4 2. Methodology ................................................................................6 3. Results ........................................................................................8 Timber origin ....................................................................................................9 Export routes ....................................................................................................9 Leading importers of wood products from the Russian Far East .................10 Wood product exports .................................................................................... 17 4. Target markets .......................................................................... 22 China’s timber market ....................................................................................22 Japan’s timber market ...................................................................................27 South Korea’s timber market .........................................................................28 5. Export of high value timber ....................................................... 29 High value lumber producers ........................................................................33 Export of linden ..............................................................................................36 6. Exports of FSC-certified timber ................................................. 39 7. Conclusion ................................................................................43 Table of Contents 3 1. INTRODUCTION his work builds on earlier research, published in 2015, on timber exports Tfrom the Russian Far East between 2004 and 20141. Current conditions in the Russian Far East forestry sector are largely determined by its strong export orientation: insignificant domestic demand encourages the export of virtually all forestry industry output to neighboring countries in East Asia. This paper covers the basic timber export parameters as of 2015 as follows: export destinations, major export patterns, and target markets. Particular attention is given to the Chinese market, the largest market for timber products from the Russian Far East. It includes ranking of leading wood product importers in the Far East and lists their market shares and pricing policies. In addition, it investigates the Russian Far East timber export structure and issues related to the quality of timber processing while suggesting the possibility of expanding timber product variety. The latter could ultimately promote more responsible forest management and reduce logging pressures in Russian Far East forests. Similar to previous research, exports of valuable woods, such as Manchurian ash (Fraxinus mandshurica), Mongolian oak (Quercus mongolica) and Amur, Manchurian and Take linden (Tilia amurensis, T. mandshurica and T. taquetii), are analyzed separately, due to their high environmental and social value. In 2015, Mongolian oak supply chains from the Russian Far East attracted the attention of experts because of the penalty imposed by the U.S. legislature on Lumber Liquidators, the largest U.S. flooring provider, for importing illegal timber from the Russian Far East via China. The penalty totaled US $13 million in fines — the largest penalty ever charged for violating US timber export regulations. Lack of transparency in the supply chains and persistent problems with illegal logging of valuable tree species elevated the risks for European and U.S. importers who work under increasingly stringent legislation demanding evidence of legal timber origin (the Lacey Act in the U.S., the European Union Timber Regulation (EUTR), etc.). Today, the lion’s share of products made of high value timber of Russian Far East origin (99%) are supplied to China, where they are processed and occasionally forwarded to target markets. The research shows that less than 1% of Mongolian oak logged in the Russian Far East is harvested by companies certified by the Forest Stewardship Council (FSC), which creates additional barriers for diligent western importers. Due to the lack of certification and insufficient transparency in the supply chains, products made of high value timber harvested in the Russian Far East will remain too risky and hence be less competitive beyond China. The demand for legality and environmental compliance in China is not very high, although the growing purchasing power of Chinese consumers may eventually increase their willingness to pay for products produced under higher environmental standards. In addition, logging rates of linden trees continue to increase each year in the south of the Russian Far East, causing serious concerns. Calculation of the roundwood equivalent of linden timber export volumes clearly shows a steep 1 Timber exports from the Russian Far East in 2004-2014 / B.D. Milakovsky, E.A. Fedichkina. — Vladivostok: World Wildlife Fund (WWF), 2015. — 36 p. 4 Analysis of Timber Exports from the Russian Far East in 2015 increase in linden harvest volumes to levels well above those officially permitted. The overwhelming majority of linden exports — 99% — go to China. The share of FSC-certified timber is shown separately in the analysis. In 2015, approximately 28—31% of timber exported from the Russian Far East was harvested in forest concessions certified by a forest management certificate of the Forest Stewardship Council (FSC FM). FSC-certified forests cover 17% of the total forest area in the Far Eastern region, a volume largely accounted for by the two largest logging companies, RFP Group Holding and the Terneyles Group. The latter is the region’s leading company in value-added wood product exports and perhaps the most competitive company of the Russian Far East in international timber markets. However, the overall the quality of timber products exported from the Russian Far East generally remains relatively low and requires further processing to the end-use stage. In fact, the current export pattern represents an attempt by regional timber businesses to comply with unprocessed timber export restrictions. Further development of the value-added wood processing industry in the Russian Far East can be encouraged not only through government policies and public investment but also through the promotion of Russian timber products in overseas markets by making these products more competitive. Building a positive image in international trade and capital markets while ensuring the transparency of supply chains is a prerequisite for the sustainable development of the export-oriented forestry economy of the Russian Far East. Introduction 5 2. METHODOLOGY he analysis of wood product exports from the Russian Far East is based on Tthe product codes used in 2015 customs statistics (Table 1). Table 1: Timber product codes used in customs statistics FEACN Description (Customs Commodity Code) 4401 Fuel wood, wood chip 44032 Coniferous roundwood 44039 Deciduous roundwood 44071 Coniferous sawnwood 44079 Deciduous sawnwood 4408 Veneer 4412 Plywood Customs data from the Russian Far Eastern Customs Service were used in the analysis. Because the primary task of the analysis was to explore the impact of exports on the logging volumes of various tree species in the Russian Far Eastern forests rather than an evaluation of export revenues, physical (cubic meters) rather than monetary indicators were used. To make the results comparable with those of the earlier analysis (Milakovsky and Fedichkina, 2015), a similar methodology of data classification by groups (types) of tree species (1) and by degree of wood processing (2) was used as follows: (1) Coniferous (larch, fir, spruce, pine) (2) Valuable hardwoods and valuable deciduous softwood (ash, oak, linden, and elm) (3) Ordinary deciduous softwood and other unidentified species (birch, poplar and aspen) (4) Fuel wood and wood chips. The new analysis contains a new category of products, “4.1, fuel wood and wood chip,” which represents promising timber export products based on a more comprehensive use of all forest benefits and addressing the challenge of utilizing full harvest volumes, the residual of processing and low-value small- diameter wood. The second classification is based on the degree of processing on a scale of 1 to 3, where: (1) unprocessed wood (FEACN code 4403) (2) sawn wood (FEACN