The consumption of wood-based panels in Russia is steadily growing, thanks to the on-going recovery of the Russian economy from the financial crisis and the growth in demand for panels from some major consuming industries in the country, according to recent statements by leading domestic producers and industry analysts.
In 2018, the consumption of wood-based panels in Russia amounted to 12.9 million m3, which became a record figure in the modern history of the country. Compared with 2017 the volume of production grew by 12%, while the biggest growth was observed in the segment of particleboard and OSB.
The official results for 2019 have not yet been announced, however, most local analysts predict the consumption volume exceeded 13 million m3 last year.
According to the Russian Ministry of Industry and Trade, such growth could be mainly explained by the increase of the demand from the domestic furniture industry, which in recent years has become one of the major consumers of boards in Russia.
A recent report published by the Russian Federal State Statistic Service (Rosstat), shows the volume of furniture production in Russia in 2019 grew by about 15% on yearon- year basis to about RUB200bn (US$3bn).
At present OSB remains probably the most promising segment of the Russian woodbased panels market in terms of its potential for further growth.
The increase of OSB production in Russia, which has been observed in recent years, resulted in the withdrawal of most low-grade plywood from the market which dominated in the past, being primarily used for the needs of the local construction industry.
According to preliminary data, published by Rosstat and the Russian Ministry of Industry and Trade – a state agency responsible for the development of the timber and forestry industry in Russia – the production of OSB in the country in 2019 amounted to about 1.35 million m3. That was slightly lower than the volume of consumption of 1.4 million m3 for the same year. According to a spokesman for the Russian Minister of Industry and Trade, Denis Manturov, that means the segment has potential for further growth.
At present total installed capacity of OSB in Russia is estimated at 2 million m3, however, planned implementation of some major investment projects in the industry (which is scheduled for the next several years), according to analysts’ predictions, will result in an increase of these figures by at least an additional 1 million m3.
Perhaps, the biggest of such projects is currently being implemented by Swiss Krono – one of the leading players in the Russian boards’ market, which is ready to start building the largest facility in the country for the production of OSB.
The new plant will be located in the city of Nizhny Novgorod (Volga region) and will have the capacity to produce about 600,000m3 of boards per year. Total cost of the project is estimated at €340m.
It will be located in close proximity to the already existing Krono Sharya plant and will use low-grade wood, sourced in Kostroma and other north-eastern districts of Russia as raw material in its production.
According to an official spokesman of Krono Group Russia, Marcin Luty, so far the company has been primarily operating in the segments of particleboard and MDF in Russia (where its combined capacities have already amounted to 1 million m3). However, at this time particular attention will be paid to OSB operations.
In general, in addition to OSB, the demand for MDF in Russia is also growing, despite the fact that the margins, generated by this segment are significantly lower than those by other types of boards.
Finally, according to analysts, the segment of particleboard is probably the only sector of the Russian market which has faced serious stagnation in the last several months.
Growth of exports
In the meantime, in addition to a further growth of the domestic output, the Russian state wants to create conditions for the increase of exports of Russian boards.
In recent years, the volume of the exports has already increased, while the government, together with leading local producers hopes this growth will continue this year.
According to latest data published by the Russian Ministry of Industry and Trade, at present up to 42% of boards produced in Russia are exported. This figure is expected to increase up to 50% by the end of the current year.
Due to the weakness of the Russian rouble, exports are still considered as more of a priority for domestic producers, than supplies to their home market.
Analysts also predict low rates of development of the Russian economy will continue to contribute to a further increase of exports of Russian-made boards to foreign markets.
The situation is complicated by the failure of the plans of some leading domestic producers to begin regular exports of their products to China and other countries of the Asia Pacific region, as the on-going spread of the Chinese coronavirus forced them to revise their plans.
Local analysts also predict the recently announced plans of the Russian state and producers for a significant increase in Russian wood-based panel output may face serious raw material sourcing problems.
Evgeny Lopatin, leading researcher at the Finnish Forestry Institute and a well-known expert in the field of Russian forestry, expects a shortage of raw materials for the needs of the Russian boards’ industry within the next several years.
According to him, that will be mainly due to the decline of forests’ acreage in Russia, the reduction of the quality of harvested wood, as well as poor state forestry policy.
In addition, the Russian board industry may face a significant decline of local prices for its products.
According to Rosstat predictions, due to the expected commissioning of new capacities for the production of boards in the Russian market, which is scheduled for the period of 2020-2021, prices for most types of board available in Russia may significantly decline by the end of 2020.
The ever-growing surplus of production will continue to have a negative effect on the industry in 2021 and will result in temporary cutbacks of some large-scale local production, as well as transformation of Russia into one of the world's largest net exporters of some types of board, particularly OSB.
