Region/Countries: Europe, Russia Industry: Agriculture / Timber, Other Date: November 2019

Why this is important to Wisconsin businesses: The industry is sizable but needs help modernizing and transitioning to value-added paper products.

The pulp and paper industry plays a key role in the development of the forestry sector of Russia’s economy. Russia has the world’s largest forest area (46% of its total land area) and timber reserves (83 billion cubic meters). Meanwhile, it ranks eighth in the world for the production of pulp and 14th for production of paper and cardboard, and the share of the timber industry in Russia’s GDP is only 1.6%. The huge economic potential of Russia’s forest sector remains untapped due to underdeveloped forestry and woodworking infrastructure, a high degree of industrial equipment wear and tear, and slow introduction of new technologies.

In 2018, Russian companies produced 8.6 million tons of pulp, which is 3.1% more than in 2017, and 9 million tons of paper and cardboard, 4.0% more than in the previous year). Market participants called 2018 a successful year for the industry: demand was noticeably higher and product prices increased, they said.

Russia is one of the world’s leading producers of wood pulp. Average annual growth in wood pulp production in Russia from 2013-2017 amounted to 6.7%, whereas world production decreased by 2.3%.

Over the past 10 years, the average annual increase in pulp production in Russia amounted to 1.4%. Bleached sulfate pulp is currently the largest and one of the most promising areas in world pulp production. However, in Russia, the production of unbleached sulfate pulp predominates due to an underdeveloped technical base. In this market, Russia is the world’s second-largest manufacturer, after the U.S. Russia's share of the market for high-tech, expensive pulp varieties is low. For example, there is virtually no production of dissolving pulp, a product with high value added.

Growth in paper and cardboard production in 2018 over 2017 amounted to 4%. The main types of products in this category are newsprint paper, offset paper, unbleached containerboard, paper and cardboard blanks, and paper and cardboard labels and tags.

Russia mainly exports cellulose, packaging board, newsprint and bag paper. It mainly imports high-value-added paper and paperboard products. In 2018, Russia imported wood and pulp and paper products valued at $3.6 billion, which was 8.8% more than the prior year. Its exports of wood pulp in 2018 amounted to 2.1 million tons (0.8% more than in 2017), valued at $1.5 billion. Its exports of newsprint paper reached 1.2 million tons, valued at $653.6 million.

The Russian government is currently considering five potential investment projects—pulp and paper plants with a total capacity of 4.5 million tons. The necessary investments amount to approximately $9.1 billion. These projects were announced by major market players in various regions of the country, taking into account the availability of forest resources.

This industry is known to cause major environmental issues. Companies in this industry are the main source of water pollution among all Russia’s manufacturing industries; therefore, the government is faced with the task of modernization and introduction of the best available technologies.

Thus, Wisconsin companies have a chance to export their products and technologies to Russia. One such opportunity is the export of high-quality pulp and paper products with high value added, of types that are not produced in Russia. Another opportunity is the supply of high-tech machinery equipment that meets modern environmental standards for pulp and paper enterprises.