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Since last July, when the Russian timber industry was fully sanctioned by EU countries, its domestic production of wood and sawdust particles has declined sharply, and it is facing the problem of oversupply.

According to Huacheng Import and Export Data Observation, before that, 90% of the sawdust particles produced domestically in Russia were used for export, and most of them were supplied to the European region. In particular, the northwestern region of Russia, which focuses on the European market, is one of the regions most affected by the sanctions.

Several timber mills and sawdust particle producers in Russia are even facing closure. In the Arhangelsco region, the ULK Group's sawdust particle factory with a sawdust production capacity of 220000 tons and a production capacity of 80000 tons was closed; Titan Group's factories that produce 180000 tons of sawdust have also significantly reduced production.

According to Vladimir Butorin, the owner of ULC Group, the Russian government plans to allocate 20 billion rubles from 2023-2024 to convert municipal boiler houses from using fossil fuels to using sawdust particles.

However, these funds cannot fill the gains brought by the previous European market demand for Russian sawdust particles, Huacheng Import and Export Data Observation reported.

In the Arhangelsco region, 557000 tons of sawdust particles are produced annually. However, there are only 35 boiler rooms in the region that can be converted to use sawdust particles, and the cost of retrofitting is 2.5 billion rubles. According to the data of the Ministry of Natural Resources and Wood Industry of the Arkhangelsk Region, the region consumes between 600000 and 80000 tons of sawdust particles annually, which is expected to ensure only 30% (approximately 167000 tons) of the sawdust particles in the region can be consumed domestically.

At the same time, Nikolai Krotov, a consultant to the general manager of the Alchangelsk pulp and paper mill, believes that if all fossil fuel boiler rooms in the region (except those planned for gasification) are converted to using wood particles, the annual consumption of wood particles in the Alchangelsk region will only increase by 60000 tons.

This will only use 11% of the total amount of sawdust particles produced in the region. However, due to the total production of sawdust particles in the Arhangelsko region exceeding 550000 tons, this is obviously not enough.

Nikolai Krotov said, "The consumption of municipal sawdust particles is not a huge market, but due to on-site use, it is very convenient in logistics, and as a permanent, municipal consumption is guaranteed." However, the government has not yet announced the exact plan, and Huacheng Import and Export Data Observation Report.

According to data from the Natural Resources Department of the Arkhangelsk Region, 155 boiler houses with a total capacity of 420 MW (361 Gcal/h) are required to consume all the sawdust particles produced in the region. The investment required to transform these boiler houses into pellets will reach 17 billion rubles, which is almost equivalent to the entire budget that the government plans to allocate in the next two years.

In addition, in Russia, the price of sawdust particles is relatively high.

According to Huacheng's import and export data observation, Russian coal is 75000 rubles per ton, firewood is 82000 rubles per ton, wood chips are 125000 rubles per ton, and sawdust particles are 163000 rubles per ton. Only fuel oil and diesel fuel are more expensive than wood chips, at 210000 rubles per ton and 440000 rubles per ton, respectively.

Therefore, the final direction of the Russian sawdust particle market is still a question to be considered. This year, Russia is expected to see more production reductions or factory closures in wood and sawdust particles, as reported by Huacheng Import and Export Data Watch.