Forestry companies increased investments in processing in 2023

Timber companies, against the background of problems with the export of lumber, are increasing investments in deep processing, primarily in pulp and paper production and furniture production. At the end of 2023, investments in these segments increased by 30%. However, if furniture production fuels active domestic demand, then the pulp and paper mills under construction were mainly approved even before the sanctions and are aimed at export, the profitability of which has seriously decreased.

Investments of forestry enterprises at the end of 2023 fell by 4.8%, to 188.8 billion rubles, slightly decreasing compared to the record figures of 2022, Roslesinforge told Kommersant. However, investments remained approximately at the level of 2021, when large timber companies launched large-scale investment projects amid windfall profits due to the imbalance in demand and supply caused by Covid. Most of the investments (63.2%) in 2023 were aimed at purchasing specialized equipment, another 27.9% of the company invested in infrastructure facilities, and 7.9% went to renewing the vehicle fleet. One of Kommersant’s interlocutors notes that investment in deepening processing is hampered by the unavailability of high-tech equipment amid sanctions.

The interest of companies is shifting from traditional building materials towards complex products, Roslesinforg notes. Thus, investments in the production of pulp and paper products last year reached a historical maximum – 125.4 billion rubles. (an increase of 29.4%), furniture – increased by 30%, to 9.4 billion rubles.

Among the regions, the leader in investment was the Irkutsk region (60.6 billion rubles), mainly thanks to the Ilima project to create a pulp and paper mill with a capacity of 600 thousand tons per year. In second place in terms of investment is the Kaluga region (16.3 billion rubles), where several lines for the production of decorative and impregnated paper “Ultra Decor Rus” were launched, the second stage of the plant for the production of sanitary and hygienic products of Arkhbum Tissue Group LLC is being completed. (a subsidiary of Arkhangelsk Pulp and Paper Mill JSC). The Moscow region closes the top three with investments of 14.1 billion rubles, most of which went to the reconstruction of paper packaging production facilities.

General Director of the First Furniture Factory Alexander Shestakov confirms active growth in this sector. He recalls that the volume of furniture production in monetary terms in 2023 increased by 25%, to 445 billion rubles, and in physical terms by 34%, to 67.5 million pieces. Alexander Shestakov notes that prices for furniture throughout 2023 grew more slowly than for other goods, which ensured an increase in demand in this category and orders for materials and components, primarily wood boards. “That is, furniture acts in a previously unusual role as a locomotive, although previously in our industry it was believed that we were more like a carriage, and the construction site was the locomotive,” says the head of the association. This year, Mr. Shestakov predicts growth in the furniture sector by 20.5% in value terms and 14% in physical terms.

The President of the Association of Organizations and Enterprises of the Pulp and Paper Industry, Alexander Spiridonov, notes that the growth of production in the pulp and paper industry largely depends on exports, which are currently limited by export duties. In the medium term, this could lead to lower output, he says. Mr. Spiridonov points out that the most difficult situation is in the newsprint segment. “Everyone today understands that demand for it is falling by 8–12% per year. Only a small part of the paper produced in Russia goes to the domestic market; the main production is aimed at export,” he recalls. At the end of last year, the Ministry of Industry and Trade advocated the abolition of the duty on paper exports, but the matter did not come to fruition.

Olga Mordyushenko, Vladimir Komarov