Russian Timber Industry

A Co fli ti g Message

Paul D. Owen, President

Vanport International, Inc.

WHAT TERMS OR THOUGHTS COME

TO YOUR MIND?

The Russian Timber Industry

In The Past Russia Was Considered

• Closed

• Obscure

• High level of illegal activity

• Dangerous

• A quick way to lose money

• Illegal logging was prevalent (just 10

years ago it was estimated at $1 Billion)

HOW MUCH FORESTLAND AND TIMBER IS

FOUND IN RUSSIA?

Russia has 25% of the global

timber resources but less than

3% of the global timber

production.

65% of the Russian Territory is

covered by forests.

0%

5%

10%

15%

20%

25%

Russia Brazil Canada USA China

% OF GLOBAL TIMBERLANDS 25% 14% 6% 6% 4%

Largest Timber Owning Countries in the World (Source: FAO, 2004)

90% of the major timber species that

ake up the forests i Russia are…. • Larch (Larix Siberica)

• Pine (Pinus Sylvestris)

• Spruce (Picea Abies)

• Siberian stone pine (Pinus Siberica)

• Oak

• Beech

• Birch

• Aspen

Coniferous

77%

Hardwood

23%

Russia’s Major Timber Species Clusters

Only 44% of the total forested area in Russia is considered to be accessible for forest exploitation.

Larch

57%

Pine

26%

Spruce

17%

Russia’s Major Coniferous Group

Species

Russia Canada United States

100% 94%

39%

0% 6%

61%

Where are the forests located?

Public Lands Private Lands

78%

22%

Where within Russia is their timber resource located?

Asian Russia European Russia

Lack of Infrastructure for

increased logging In deep Siberia and the Far East where more than 50% of the

standing timber exists there is no infrastructure at all.

In these areas, you will find around 224 million hectares (553

million acres) of completely unbroken and undeveloped forests.

Only around 250 million hectares (618 million acres) of

economically efficient and accessible forests are available for

harvest and processing.

Note that there are 3 billion acres of timberlands in Russia.

Russian sawmilling technologies are nearly 25~50

years ehi d the rest of the world’s saw ill industry.

Only a few dozen of the more than 2500 sawmills

and wood processing facilities in Russia currently

use modern sawmilling technology.

But today, a few new sawmills are being built with

European and US technology.

Russian Red Pine Lam Stock for Japan

Russian Birch Plywood

The Russian Economy is Booming • The unemployment rate in Russia dropped from 5.3% in July to

5.2% in August

• Although the average Russian citizen earns a salary of around

$800/month, in the sawmill industry in Siberia

• Sawmill workers $1000~$2000/month

• Sawmill supervisors $3000~$5000

• Log truck drivers $4000~$5000

• Sawmill Managers $5000~$25000 depending on the size of

the company

• Russia has surpassed Germany to become the 5th in terms of

purchasing power in the world with a $3.4 Trillion dollar GDP.

• This increased purchasing power in Russia has caused imports of

finished products to increase dramatically. From flooring to

furniture containerized imports are up dramatically.

• Containers are now readily available due to increased imports of

finished goods. Providing access to more export markets for

Russian wood products.

Interesting Information to Note • Ministry of Forestry announces rapid growth in timber harvesting

of 45% by 2016 and a doubling or processing by 2016. Reality,

harvests are flat to declining.

• Access is getting harder and profits are non-existent.

• China log imports from Russia down 12.8% from 2012.

• China lumber imports from Russia up 10.3% from 2012.

• New Zealand is now the largest log supplier into China ahead of

Russia. USA and Canada are a close #3 and #4 in log exports to

China.

• Concern over Russian Fiber competition is well place, but what is

reality?