Timber enterprises in the Arkhangelsk and Vologda regions are at risk of facing financial problems in connection with the restructuring of the Russian economy to the East. Businesses have faced too high prices for exporting their products to China, forcing them to operate at a loss. Companies complain that they have to cut or even stop production. Kommersant writes about this with reference to market participants.
In connection with the "reorientation to the East", the logistics costs of timber companies have tripled (up to $117 per cubic meter). An additional problem is the growth of competition and the decrease in selling prices for products, which also affects the income of timber merchants. Selling prices for lumber have already fallen by 30% (to $260 per cubic meter) and continue to fall, the work of enterprises is on the verge of profitability. Due to the difficult situation, business representatives of the two regions requested an increase in subsidies to compensate for logistics costs, moreover, they asked Russian Railways to allocate quotas for container trains with forest products to travel to the east.
Representatives of the forest business are calling on the authorities to increase the already established quotas so that they can cover at least 50% of the increased logistics costs. According to the current data, the subsidy will start working from January 1, 2023, and it is limited to the amount of 300 million rubles, regardless of the size of the business, which puts market participants in an unequal position. For example, legal entities with exports of 72 thousand cubic meters of sawn timber will be able to compensate up to 65% of the costs incurred, and those with exports of more than 250 thousand – only 19%. The subsidy compensates for the costs of deliveries from July 1, 2022.
Timber merchants insist that these measures are not enough, and the limits do not make sense. They propose to increase the size of the subsidy to 50% of logistics costs and pay it not once every six months, but quarterly. Limits, in their opinion, should not be, as they put market participants in an unequal position.
Problems with logistics due to the unpreparedness of the Russian transport infrastructure for the “turn to the East” are experienced not only by the timber industry, but by the entire Russian economy. The capacity of the Eastern Polygon (which includes the BAM and Trans-Siberian transport systems) turned out to be insufficient to cope with the flow of goods towards China. The coal industry, where companies are already forced to sell their products at a loss, suffers the most from the unwillingness of the Russian authorities to develop trade flows to China.