Reduced Tariffs Unlikely to Boost Russian Log Exports Back to Historic Levels
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Log exports from Russia have plummeted the past five years mainly because of the country's implementation of a log export tariff of 25% in 2008, according to the Wood Resource Quarterly (WRQ), Seattle, Wash., USA. Despite having suffered a sharp decline in global market share, Russia is still the largest exporter of softwood logs in the world, WRQ adds.
When Russia was accepted into the World Trade Organization (WTO) in December 2011, one of the entry requirements was that the country had to reduce export and import tariffs on forest products, WRQ explains. According to persons close to the negotiation process, it adds, the not-yet official proposal for the amendment of the Russian log export tariff system will lower the tariffs on softwood logs from 25% to 15% for pine logs, and to 13% for spruce logs. The new proposed tariff for birch will actually be higher than the current tariffs for small diameter logs.
In addition to the lowering of the tariffs, the proposal also includes a volume quota for softwood logs, according to WRQ. Below the quota limit, the new tariffs will apply, and for volumes above the quota, current tariffs will continue to be in effect. The proposed quotas will almost certainly have no impact on trade with the EU, since they are set substantially higher than the volumes shipped in 2011, and are close to the record high levels of 2006, WRQ notes.
The quota level for countries outside of the EU is proposed to be 13 million cubic meters, of which pine species account for 95%. China is the major destination for Russian pine logs, and in 2011, shipments were well below the proposed quota volume. WRQ reports.
During the past 10 years, there have been three occasions when the annual shipments of pine logs have been higher than the quota volume. Even with a reduction in export taxes of 12%, it is not likely that foreign log buyers will rush back to Russia to purchase higher log volumes in the coming years since the business climate in the country continues to be challenging in terms of political uncertainty, continued corruption, increasing domestic log costs, and infrastructure problems, WRQ points out.
This uncertainty makes many forest companies wary about investing or trading with Russia, so they will likely try to diversify their timber sourcing further to include other regions, WRQ adds, noting that China, which is the largest importer of Russian softwood logs, is increasingly choosing to import lumber rather than logs from its northern neighbor.
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