Russian industry plunges into turmoil, European markets out of reach, companies shuttering operations

The Russian plywood industry, once a significant player in global exports, is currently grappling with the impact of geopolitical changes. Former Soviet Republics, including Belarus, Armenia, Georgia, Azerbaijan, Uzbekistan, Kazakhstan, Tajikistan, Kyrgyzstan, and Turkmenistan, collectively account for over 450,000 m³ of Russian plywood sales.

However, sanctions have taken a toll on the industry. Russia lost 22 billion rubles in timber exports, with the USA and Turkey being the main beneficiaries. This shift has left Russian plywood producers struggling to fully utilize their existing capacities, as reported by Yulia Ermakova, marketing director of "Plywoodwood" company.

Israel presents a promising market for Russian plywood, but due to its geographical limitations, it is unlikely to exceed 100,000 m³. In contrast, the European market, once a significant sales channel, now accounts for only 25% of Russian plywood exports, with the rest catering to the domestic market.

Before 2022, Russian plywood producers sent up to 70% of their products for export. However, if European markets were open, Russia could send 400-500 thousand m³ of plywood there, according to Yulia Ermakova. The closure of this sales channel has forced the industry to seek new customers through third countries such as China, Turkey, Kazakhstan, and Kyrgyzstan to circumvent EU sanctions.

Unfortunately, intensified customs controls in Estonia have reduced plywood imports from China by more than tenfold and from Kazakhstan by about 20%. The Persian Gulf countries and Turkey have established plywood markets dominated by Chinese and local producers, respectively.

The wood processing industry is one of the most affected sectors of the Russian economy following the events of February 23, 2022. Housing construction has decreased by 15%, and related industries, such as furniture production and transportation, are also expected to decline by 6% and 50% respectively.

Despite these challenges, some Russian producers, such as Segezha Group and "Sveza," are actively selling premium plywood in South Korea. Exports of Russian birch plywood to China increased by 38% in 2024, making it the top export market for Russia with a volume of 330 thousand m³.

However, the closure of the sales channel to Europe has had a significant impact on new enterprises like "Plywoodwood," which initially planned to sell its plywood in Europe but is now forced to find alternative sales channels. Yulia Yermakova, marketing director of "Plywoodwood," summarized that these volumes are insufficient to increase the average load of Russian plywood enterprises from the current 65-68% to 80%.

In an effort to adapt, the "Sveza" Group has been investing in its Tyumen plant, spending 82 million rubles on ventilating system modernization in 2023 and purchasing robotic manipulators worth 400 million rubles at the beginning of 2024. Despite these efforts, production at a plywood plant belonging to the "Sveza" Group in Tyumen has been mothballed, leading to the dismissal of 323 employees.

South America remains a micro-market for Russian plywood exports, while the USA, Canada, and Mexico have high import tariffs and intense competition for Russian plywood producers. Russia supplies 320-350,000 m³ of plywood to Egypt in Africa, but further growth in other regions is limited.

As the Russian plywood industry navigates these challenges, it continues to seek new opportunities and invest in modernization to maintain its position in the global market.

Russian industry plunges into turmoil, European markets out of reach, companies shuttering operations