Russian timber companies ask the government to assist in lifting the ban on the supply of pellets to China

Russian timber companies have asked the government at the intergovernmental level, within the framework of consultations and negotiations, to assist in lifting the ban on the supply of pellets to China. After the closure of Europe, Russian producers of timber products were largely saved by the redirection of volumes to China, but this was not possible with respect to pellets. As a result, their output fell by half in January-April. If the initiative is supported, negotiations may begin in June-July.

In a letter sent on June 7 by the Arkhangelsk Legislative Assembly to Deputy Prime Minister Victoria Abramchenko (see Kommersant of June 8), among other initiatives, there is a request to help lift the ban on the supply of pellets (fuel pellets) to China. It came into being in September 2020 with the adoption of the Solid Waste Pollution Prevention and Control Act. “Somehow, pellets are classified as waste, which can rather be said about wood chips, which are allowed to be imported into China,” says one of the market participants.

Back then, Russian suppliers tried to challenge the new rules by filing a petition, but were unsuccessful. Now, the opening of a large-scale Chinese market has become critical for suppliers against the backdrop of sanctions. Before the outbreak of hostilities in Ukraine, the bulk of Russian pellets were exported to Europe. Due to the absence of the main sales market in January-April, the production of pellets in the Russian Federation almost halved, to 431 thousand tons (a decrease by 19.6% in 2022, to 2 million tons).

“Mountains of sawdust and wood chips continue to grow. There are no stable markets for biofuels. Pellet production has been reduced to 5–10% of annual capacity. We sell them only on the domestic market, ”Dmitry Gvozdev, director general of Region-Forest, told Kommersant. Due to the fact that wood chips are not accepted for processing, their quantity in the forests is also growing, which creates “certain risks in a fire hazard situation,” market participants add.

The letter says that the 18th meeting of the permanent Russian-Chinese working group on the development and use of forest resources is scheduled to be held in June, within which issues of further development of bilateral cooperation in the field of deep wood processing and attracting Chinese investors to the Russian Federation will be raised. Timber merchants ask during the meeting to hold talks on lifting the ban. The companies are “ready to provide the necessary certificates or carry out all the necessary procedures for obtaining them and conducting various tests in China.”

Segezha Group Vice President Nikolai Ivanov calls pellets “a promising niche for bilateral cooperation, within which Russian factories will receive a stable market, and Chinese partners will significantly improve the ecology of their cities.” “If the initiative is approved, a substantive discussion could take place as early as July at the negotiation platform in China,” says the top manager.

Timber merchants recognize the need for development and the internal market. In particular, in February, the President of the Russian Federation instructed to allocate an additional at least 15 billion rubles in 2023–2024. infrastructure, budget and special treasury loans for the development of domestic consumption of pellets. We are talking about the transfer of boiler houses operating on coal and fuel oil to biofuel, as well as the construction of new boiler houses on fuel pellets with priority given to them in the Far East and the North-West region. But, according to the calculations of the deputies of the Arkhangelsk region, the annual consumption of pellets in the transfer of boiler houses to them will be only about 4% of the total production in the region per year. They consider it necessary to develop a special state program to develop domestic demand for pellets.

In the office of Victoria Abramchenko, Kommersant was told that the proposals would be “considered and sent to the relevant departments.” At the same time, the WhatWood agency notes that China is a “dark horse in terms of the consumption of wood pellets”, since there are no solid and reliable data on the volume of their production (mainly in the PRC, pellets are made from rice husks and other agricultural waste) and consumption. According to various estimates, demand in the country can reach from several hundred thousand to several million tons of pellets per year, experts explain. Russian manufacturers, the agency emphasizes, have almost no experience in deliveries to China, but if this market opens, it could become a good substitute for Europe.

Olga Mordyushenko