Russia softwood timber market developments

Page №
RUSSIA SAWMILLING INDUSTRY ON A GLOBAL SCALE
4%
3%
2%
2%
3%
N.America
Europe
Asia
S.America
Russia
Africa
Oceania
CIS
Source: FAO UNECE
11%
3%
5%
1%
1%

Page №
RUSSIA SAWMILLING INDUSTRY ON A GLOBAL SCALE
3%
1%
1%
Source: FAO UNECE
Canada
Russia
Germany
Finland
Sweden
Belarus
Austria
Chile

Page №
RUSSIA AND FSC CERTIFICATION GLOBALLY
Russia
Canada
USA
Others
204 MLN GA
Source: FSC

27% SAWN TIMBER
PRODUCTION
9% SAWN TIMBER
PRODUCTION
33% SAWN TIMBER
PRODUCTION
Page №
RUSSIA FOREST RESOURCES
MAJOR SOFTWOOD HARVESTING REGIONS
SIBERIA
FAR EAST
NORTH WEST
North West
20
2019
Far East
Siberia
219 mln m3
Other regions
2017
2018
2019
+9%
-7%
North West
33%
Siberia
Far East
31%
Other regions
2019
Source: Rosleshoz

Page №
RUSSIA SOFTWOOD SAW LOG
PRODUCTION AND EXPORTS
80
0
78
79
77
76
2016
79,0
2019
2018
80,0
78,0
2017
2020
79,0
+5%
-1%
RUSSIA SOFTWOOD SAW LOG PRODUCTION MLN. M3
Source: Russian Customs, China Customs, Rosleshoz
RUSSIA SOFTWOOD SAW LOG EXPORTS MLN. M3
11
12
0
9
6
10
5
7
8
2017
4
2016
10
6
2019
12
2020
7
5
11
11
2018
10
9
-55%
CHINA
ROW

Page №
SOFTWOOD TIMBER EXPORTS TO CHINA
Source: China Customs
SOFTWOOD SAW LOG EXPORTS TO CHINA
BY COUNTRY MLN. M3
EUROPE
OTHERS
NZ OCEANIA
20,4
RUSSIA
N.AMERICA
20,6
15,2
+117%
-21%
-25%
2019
2020
RUSSIA
N.AMERICA
EUROPE
0,9
S.AMERICA
OTHERS
0,9
-13%
-4%
SOFTWOOD SAWN TIMBER EXPORTS TO CHINA
BY COUNTRY MLN. M3

Page №
RUSSIA SOFTWOOD SAWN TIMBER EXPORTS
VOLUME, SPECIES AND ORIGING MLN M3
24
31
30
27
25
28
29
0
22
26
23
27,6
2019
2017
29,4
21,4
2014
22,4
2015
24,3
2018
2016
26,8
30,8
2020
-5%
+44%
Larch
Spruce
Pine
Source: Russian Customs
SIBERIA
NORTH WEST
FAR EAST
OTHERS
2020

Page №
RUSSIAN EXPORTS
SOFTWOOD SAWN TIMBER BY REGION, ‘000 m3
CHINA
19 370
17 444
EUROPE
CIS
MENA
OTHERS
-10%
+19%
+14%
-29%
2020
2019
2020
2019
-5%
MENA
CHINA
EUROPE
CIS
OTHERS
2020
TH. M3
Source: Russian Customs

Page №
Dostyk
Krasnoyarsk
Zamyn-Uud
Naushki
Chongqing
Irkutsk
Suzhou Shanghai
Changsha
Shílóng Wuhan
Yiwu
Nanking
Beijing
Manchukuo
Changchun
Shenyang
Incheon
Chendu
Dalian
Quingdao
Zabaikalsk
Moscow
Nizhny Novgorod
Ekaterinburg
Novosibirsk
St. Petersburg
Novorossiysk
Grodekovo
SAWN TIMBER CONTAINER SHIPMENT TO CHINA.
RAILWAY AND SEA TRANSPORT
EXPORT BY LAND
Russia—China 2019-2020 H1*
Zabaikalsk – 327 036 TEU
Naushki – 307 528 TEU
Dostyk – 73 556 TEU
Grodekovo – 50 792 TEU
EXPORT BY SEA
Russia—China 2019-2020 H1*
St. Petersburg – 240 268 TEU
Vladivostok – 233 480 TEU
Novorossiysk – 1 396 TEU
*Source: MCC of the Russian Railways
Representative office of RZHD Logistika, OAO
Border crossings/Ports
Freight consolidation points
Vladivostok

Page №
ONE BELT, ONE ROAD
Irkutsk
Naushki
Zabaykalsk
Kirov
EXPORT BY LAND
Russia—China 2019-2020H1*
Krasnoyarsk
(Bazaiha st./Krasnoyarsk st.)
2 968 TEU
Irkutsk (Batareynaya st.)
2 156 TEU
Novosibirsk
(Inya-Vostochnaya st. /Klechiha st.)
840 TEU
Kirov (Luza st.)
176 TEU
Novosibirsk
Krasnoyarsk
Manzhouli
Zamyn-Uud
Beijing
Chendu
Chongqing
Tianjin
Suzhou Shanghai
Border crossings
Shipping points
*Source: MCC of the Russian Railways
THE GROWTH OF CARGO TURNOVER AT THE BORDER CROSSING IN ZABAIKALSK WILL BE 71% BY 2025. INVESTMENT IN MODERNIZATION OF THE RAILWAY HUB AMOUNTS TO 21.9 BILLION RUBLES
Delivery points
16 days for container train

Page №
GOVERNMENT INCENTIVES AND LEGISLATION
INDUSTRIAL DEVELOPMENT
Russian Government have approved in February 2021 updated Strategy for the wood processing industry development up to 2030 (cluster approach, further processing, pulp and paper production development, intensive reforestation) targeting:
Double the share of forest based industries in GDP
Annual harvesting 286 mln m3
Sawn timber domestic consumption 24 million m3 and 43 million m3 exports
Resolution #1509 from 21.09.2020 legalized logging at abandoned agricultural lands (about 100 million hectares across Russia, primarily in NW regions)
Resolution #496 from 18.09.2019 offers federal subsidies for the forestry based industries to cover partly logistic costs for exports
RECENT INITIATIVES
Development of the new regulations to set additional export duties for green lumber (more then 22% moisture content) including changes in HS codes and Customs duties. Planned to be enforced starting 2022
Package of new initiatives (customs regulations, border crossing points, railway tariffs) to enable further limitations on round wood exports targeting softwood and hardwood saw log exports from Siberia and Far East regions. Planned to be enforced starting 2022
CONTROLLING FUNCTIONS
Federal Law No. 3-FZ of February 4, 2021 «On Amendments to the Forest Code of the Russian Federation and Certain Legislative Acts of the Russian Federation in Terms of Improving the Legal Regulation of Forest Relations» (full enforcement from July 01, 2021)
Total tracking of round wood and sawn goods for timber supply chain including stocks in the logging area
Digitalization of all documents for timber turnover in Unified State Information System
Registration of all transactions with timber including commercial contracts with pricing
Assignment of harvesters to dedicated cutting areas and satellite tracking of all transportation vehicles in logging areas

China remains the key market for Russian sawmills in all major lumber production regions. «One Belt One Road» strategic initiative will give more opportunities for Russian exporters
Russian saw milling industry achieved maximal historic export volumes in 2019. The availability of saw log became a major limiting factor for further growth in production capacity utilization
Russian State in past 10 years has successfully promoted investments in saw milling and is taking next steps to stop saw log exports completely in order to increase share of further processing
Recent Government incentives will drive modernization projects at existing sawmills. The share of kiln dried sawn goods in Russian exports will increase as well as further processed timber in the domestic market
Page №
CONCLUSIONS

Page №
ILIM TIMBER CORPORATE PROFILE
OPERATIONS
Business Units: Russia and Germany
Sales organizations:
EU, USA, China, Russia and NIS, MENA
Annual production capacity: 2,65 million m3 of sawn timber and 230 000 m3 of plywood
Company headcount: 3000 people
Species: Pine, Siberian larch, Spruce, Douglas fir, Sitka spruce
Long-term contracts with strategic log suppliers

Page №
ILIM TIMBER CORPORATE PROFILE
SALES AND PRODUCTION VOLUMES
Total production: 2.300.000 m3
Total sales: 650 million USD
CIS
MENA
Europe
BU Germany
BU Russia
Russia
China
USA