Implications: Finland, traditionally, obtained half its wood fiber needs by importing Russian Spruce, Pine and Larch logs. China also counted on low cost logs when it significantly expanded its newsprint industry to 12.5 million mt/year. Then, in 2007 Mr. Putin announced an increased tariff (duty) on all logs that would increase the duty from the then present 5 euros/cubic meter to 15 euros in 2009 and then to 35 euros in 2010. The intention was to expand Russia's domestic pulp and paper industry by forcing outside companies to build mills in Russia. Stora Enso and UPM Kymmene quickly began to develop plans to build world class complexes near St. Petersburg and in the southwestern part of the country. However, with the economic crisis these new duties on logs were put off indefinitely. Now, Mr. Medvedev, Russia's President has announced his support to build new pulp and paper mills nears the border to producer and export value added paper grades.
Analysis: Russia, with the world's largest forests, now must import fully one-third of all its requirements for timber-related products. The Government would very much like to see the domestic expansion of the pulp and paper, dimension lumber, OSB, plywood etc. industries in the country. However, with a severe lack of cash for large capital intensive projects (ie. US$1.5 billion each), it was imcumbent to encourage outside (deep pockets) firms to come into the country to build these facilities. The first thought was to impose high tariffs on all logs leaving the country and thereby force companies to build mills within Russia's borders. This plan has since been delayed because of the global meltdown. Now Mr. Medvedev announced at a conference held in Chita, Russia, a new strategy that his Government will support the building of pulp and paper mills near the border so their value added products can be exported. This could prove to be an important revenue source. But, again, these mills will most likely have to be funded from outside the country by comglomerates already active in the pulp and paper industry. Now the big question will become "where willl all this money come from?". Only time will tell.
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