Why is the Northern Sea Route critical for the timber industry?

Photo: Press service of the Russian Ministry for the Development of the Far East and Arctic

A year and a half has passed since the timber industry has been operating under the fifth package of EU sanctions, which banned the supply of Russian wood, plywood, wood boards and pellets. Some segments of the timber industry, under the pressure of sanctions, were able to get back on their feet, but some timber producers still experience difficulties in selling their products.

Throughout 2023, the forestry industry was actively restructured to serve Asian markets. In this regard, the importance of the Northern Sea Route (NSR) has grown - the main shipping route running along the northern coast of the Russian Federation, connecting European and Far Eastern ports.

In August 2023, Russia conducted a test delivery of timber along the Northern Sea Route from Arkhangelsk to Shanghai. In the 2024 navigation season, it is planned to load two vessels per month, and in the future to provide six vessel calls per month.

Over the last three months of 2023, delivery of products to China has become approximately 30% more expensive. It is difficult to make forecasts for logistics costs - the situation is changing rapidly. Experts note that timber producers can achieve profitability only if transportation costs are compensated in accordance with Russian Government Resolutions No. 1215 and No. 1347, but so far not all enterprises have been able to receive it in full.

The main tasks for the development of the NSR that remain to be solved include:

• shortage of containers and ships, as well as the lack of an established infrastructure that would allow cargo to be processed in the required quantities;
• the need to create a single operator of the container base, which would allow for reverse loading;
• transport subsidy for cargo transportation along the NSR - this will stimulate investment in the development of the Northern Sea Route and business.

Plans for the development of the Arctic transport artery adopted in 2022 and 2023 suggest that 1.8 trillion rubles will be allocated to expand the NSR infrastructure until 2035.