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EU trade restrictions have led to a drop in exports against the backdrop of rising transport tariffs and a stronger ruble, making timber production in northwestern Russia unprofitable. According to data from Lesprom Analytics, in April 2022, China's timber imports fell by 20.1% year-on-year to 2.2 million cubic meters, including an 11% decrease in supplies from Russia to 1.04 million cubic meters. The decline in lumber imports was due to the closure of Chinese ports due to quarantines, as well as a slump in the domestic construction sector - physical home sales fell 25.6% in the first quarter and new construction fell 17.5%.

Russian timber exports to Japan also fell in April. Supply from Russia fell by 22.1% to 58,400 cubic meters against the backdrop of a 5.6% increase in the country's timber imports to 395,900 cubic meters. If Russia ranked second in terms of timber exports to Japan a year ago, it lost both positions last April. Japanese homebuilding firms have started looking for new timber suppliers after top shipping companies Maersk and MSC stopped shipping Russian timber on March 1.

The Russian domestic market will not be able to absorb exports. "The domestic market will be saturated with timber deliveries in June," said Valery Pisarev, managing director of LHK Cherepovetsles (Vologda region, Russia). Timber prices have already started to fall. The domestic market will not eat into exports. Russia produces about 40 million cubic meters of wood every year. (According to Russian national statistics, in 2021, the output of the Russian timber industry will reach 30.6 million cubic meters). The Russian market needs about 10 million cubic meters and what to do with the previous remaining volume. Of course, we will go to Asia, Egypt, Israel, Turkey, the United Arab Emirates. But there are other home building traditions where wood is not used much. "

At present, Russia's timber production is the same as last year, at 9.83 million cubic meters in January-April (up 0.7% year-on-year). Inventories of Russian sawmills are increasing. “There is nowhere to ship wood,” Valery Pisarev said. “Back in February, our company shipped about 25,000 cubic meters of wood per month to foreign markets. In May, we were only able to ship 15,000 cubic meters. The remaining 10,000 cubic meters. Rice went to the warehouse."

Timber exports to Europe, the main market for sawmills in northwestern Russia, will end on July 9, when the grace period for deliveries of contracts signed before the EU imposed trade restrictions ends. According to Valery Pisarev, the declining sales will have nowhere to go after Europe's complete closure to Russian suppliers on July 9. "Today, big companies are still working by inertia," he said. There is another option until July 9 to ship sawn timber to Europe. After that, the wood will have nowhere to go. Therefore, from July 10, sawmills will start to stop. "

"Exporting timber to China has become unprofitable for the company," explains Valery Pisarev. “Many companies are scrambling to ship timber to China, and now there are some big problems with container shipping. Also, ports where we used to transship timber in Rotterdam, Hamburg, etc. are now closed to us. Previously, our containers were there on ocean liners Reloaded, but now these ports are closed and our ships are not allowed to go there. For the boatmen to China, only the railway is left, which used to be a bottleneck in logistics.”

In addition, the price of Russian lumber is being reduced, and the cost of shipping containers has increased several times, with Russian sawmills shipping lumber below cost.

"The situation is difficult," said Alexander Konyukhov, deputy director of production at Sevrespil (Russia's Komi Republic). "The main problem is not selling goods, but shipping them. There is literally no logistics. So businesses are forced to close. Our production continues, and so are the sawmills around us. After trade restrictions on Russia , capacity utilization started to drop immediately. In our region, many businesses don’t have two or three shifts, only one.”

Timber exporters were also negatively affected by the appreciation of the ruble, which was caused by a drop in the country's imports. Export earnings in rubles declined. Alexander Konyukhov concluded: “No one works at a loss. What can be done at the moment is to stop production and wait for the market to thin out easier.”