Region/Countries: Europe, Russia Industry: Agriculture / Timber Date: November 2018

Why this is important to Wisconsin businesses: More than 90 percent of woodworking equipment in Russia is imported, and Wisconsin manufacturers of this equipment can help meet the need.

Russia’s timber industry has very significant development potential due to the country’s practically inexhaustible reserves of forest resources. Russia's forests occupy about 3 million square miles—that is, more than 45 percent of the country's land area. That places Russia first in the world in terms of forest area, with about 20 percent of the world’s timber reserves, or 107 billion cubic yards. The main trees making up these forest reserves are conifers such as pine, spruce, larch and cedar, and hardwood species such as birch and oak. The harvesting level in 2017 was 175 million cubic yards.

Russia’s woodworking industry employs 196,500 people. The industry demonstrates stable production of its main products, and growth continues on many measures. In 2017, the woodworking industry grew by 2.2 percent. Sales in October 2018 were 15.3 percent higher than in October 2017, and were 9.3 percent higher in the first 10 months of 2018 than for the same period in 2017.

Favorable conditions in export markets helped to achieve these growth rates. High prices for forest products on world markets compensated for the weakening of the Russian ruble against the U.S. dollar. Export prices for Russian wood products have displayed a positive trend since the beginning of 2017, and moderate growth continued in the first half of 2018.

By types of woodworking products in 2017, Russia produced 707 million conventional square yards of fiberboard, 34 million cubic yards of sawn timber, 11 million conventional cubic yards of particleboard and 4.9 million cubic yards of plywood.

In this sector, Russia mainly exports raw materials and primary wood products. In some regions of Russia, less than 20 percent of harvested round timber is processed, while in developed countries this figure reaches 85 percent. As a result, the average profitability of the sector is rather low (8.4 percent). The main problem is the outdated science and technology used in production. The wear of fixed assets in this area is more than 40 percent. Modernization of existing production and addition of new capacity that can produce competitive products demanded by the markets requires modern high-tech equipment. This process of modernization is gradually gaining momentum. The coefficient of renewal of fixed assets increased from 8.7 percent in 2010 to 15.5 percent in 2015. Investment in fixed capital of woodworking enterprises (reconstruction, modernization, purchase of machinery and equipment) in 2017 amounted to about $1 billion.

One of the factors hindering modernization is the lack of equipment, and low quality of equipment, manufactured by Russian enterprises. The share of imported woodworking equipment in the Russian market is more than 90 percent, with purchases of such imports increasing since 2016. The main sources of Russia’s imported woodworking equipment are China, Germany, Italy and Finland.

It is clear that modernization of wood processing technologies in Russia would make it possible to increase the efficiency of forest use, change priorities in the structure of production and forest exports, and allow the sector to shift into high value-added products. This will only be possible with the import of high-quality equipment. Thus, there are significant opportunities for Wisconsin companies that produce this equipment.