How the timber industry is affected by the decrease and increase in logistics costs

In the summer of 2023, China, where anti-COVID restrictions were in effect for almost three years, became the main sales market for Russian lumber. How does the change in logistics costs affect the timber industry market? For example, the cost of delivering lumber from northwest Russia to China fell from $120 to $20 per 1 m³, while from Siberia, on the contrary, it increased from $20 to $55 and more.

Olga Kalyuzhnaya, President of the Russian Forest Association: “The volatility of the logistics market, even when it comes to lower prices, has a negative impact on the industry as a whole, because it deprives it of predictability and predictability. Such a difference between logistics from the North-West and Siberia is determined by the imbalance of imports and exports. Rates for container transportation from the northwest of Russia to the east have decreased due to serious competition among operators for export cargo in the direction of China. In Siberia, on the contrary, the cost of logistics has increased, and since the beginning of the year there has been a huge shortage of containers..

A multimodal service for the transportation of goods between St. Petersburg and the Chinese ports of Rizhao and Taicang was opened in November 2022. Now, at the Moscow transport hub, an excess of empty containers has formed with a significant need for them in the export-producing regions of Siberia, as well as at sea and land terminals of the Far East to load imports. To ensure their return to the supply chain, operators need to provide for the loading of containers at a reduced rate to Siberia and the Far East.

There are several solutions to this problem:

• Continuing the dialogue with Russian Railways on increasing the number of trains in domestic Russian traffic. Now Russian Railways, together with container operators, are developing solutions aimed at ensuring the supply of containers to the regions by forming a passing load or replenishing existing container routes with empty containers, but not more than 50% of the composition.
• It is necessary to analyze medium-term and long-term trends in the logic of the development of the capacities of the Eastern test site, the railway in general, the need to load the port of St. Petersburg, the balance of export and import operations of Russia. Expansion of shipping methods (direct sea container shipments, multimodal and direct rail shipments) is the main solution for stable export deliveries.

Under these conditions, state subsidies for the timber industry to compensate for logistics costs have become a key decision to support the industry. This tool has already shown its effectiveness. At the end of July 2023, the government adopted a resolution according to which timber industry enterprises in 2023–2024 will be able to count on compensation for up to 80% of the costs of transporting products through seaports in the Northwestern Federal District.

In addition to maintaining transport subsidies, Russian timber merchants can be helped by attracting large cargo carriers to work on routes passing through the ports of the North-West and the Far East. Companies also need support in concluding intergovernmental agreements, they also need new financial routes and infrastructure financial solutions for international settlements.