The era of green wood has come to an end, and the RFP Group is opening a complex for the deep processing of wood
Near Komsomolsk-on-Amur, just 45 km away, there is a satellite city of Amursk, where its plants used to be focused on manufacturing military and defense products. But economic realities changes, and the plants of Amursk had to switch to other types of production, primarily related to woodworking. And today, Amursk can proudly boast that it graduated from small projects in this industry to serious, capital-intensive ventures.
One such project belongs to RFP Group. Subsidiaries of the holding company – Amursk Timber Company LLC and Amursk Industrial Center JSC are working at the Amursk site to launch production of peeled veneer with a total annual capacity of 300 thousand cubic meters, and lumber with the capacity of 250 thousand cubic meters per year. Investments in this project, which is expected to create 650 jobs, amount to more than 12 billion rubles.
Vladimir Grigoriev, managing director for wood processing of Amursk Timber Company LLC, pointed out:
"We are currently in the active construction phase of the second lumber plant. We plan to kick-start production in early 2017. The complex will produce export-oriented goods sold to Korea, China, and Japan. The first plant is already operational and is constantly running at a minimum of 60 % of its capacity load. The main product is veneer, and the main export destination is Japan.
The third project involves the production of pellets and is currently under development. Its main goal is to balance the use of raw materials and residual products of the first two projects, and its products will also be export-oriented. The project is expected to be implemented within two years.
It should be noted that RFP is the largest forest industry group in the Far East and one of the largest in all of Russia. RFP owns 4.5 million hectares of forest land with a cutting area of 4.1 million cubic meters (the second largest in Russia after the Ilim Group), and the annual volume of its timber harvest is 2 million cubic meters, which accounts for 15 % of all timber harvested in the Far East. The RFP Group includes more than 30 companies that form a single technological chain — from forest plantation and harvesting, to the processing, transportation, and sale of timber products to final consumers. The total number of employees of RFP Group exceeds 6 thousand. The entirety of the forest land and manufacturing facilities are certified according to FSC standards (Canada), which confirms that the company complies with the international standards of forest use and reforestation.
RFP is the largest supplier of Russian timber to the northeast Asian markets. It accounts for 15 % of the Russian timber export to China, and more than 5 % of Russian exports to Japan. This is the largest Far Eastern manufacturer and exporter of lumber with an annual production capacity of 300 thousand cubic meters (excluding the capacity of facilities currently under construction). Given the volume of Far Eastern timber exports to the Asia-Pacific region, the creation of an enterprise for the deep processing of wood is a step in the right direction. After all, the export structure of the entire Far East is still dominated by round timber: it makes up over 70 % of exports. At the same time, the processing plants of the Far Eastern companies manufacture products with a low degree of processing, mainly lumber. However, the managers of RFP Group believe that selling only green timber means not only sacrificing profits, but suffering financial losses.
"Historically, the entire forest industry, including wood processing projects, has been very volatile in terms of prices," Vladimir Grigoriev stated. "Therefore, losses are unfortunately a regular, repetitive condition for the industry. Timber products primarily mean an increase in the liquidity of timber. On the one hand, the state strategy has always been to restrict the export of raw materials and switch to deep processing products. But on the other hand, export countries in their advanced state are increasingly distancing themselves from a full cycle of processing, choosing instead to work with high-quality semi-finished products."
Konstantin Lashkevich, president of RFP Holding, explained:
"World forest prices follow the same trends as oil. They're falling. That's why companies suffer financial losses despite increased foreign exchange rates."
The statistics confirm this: the total investment of RFP Group in the development of timber industry of the Far East in 2010-2015 amounted to 13 billion rubles. During the same period, the Group paid 8.2 billion rubles in customs duties. As a result, the gross loss attributed to the Group in 2010-2015 amounted to 7.1 billion rubles.
The Far Eastern Center of Deep Wood Processing, which is being created as part of the Khabarovsk PSEDA, aims to change the current market environment and increase the volume of wood exports with a high degree of processing.
Vladimir Grigoriev noted that the final consumers of their products are wood processing companies in Japan, China, and Korea. "Our semi-products are primarily used to produce the elements of traditional wooden architecture."
It is worth mentioning that the investment project for the construction of the Far Eastern Center of Deep Wood Processing is one of the largest in the Far East. The project involves establishing an integrated wood processing cluster in the city of Amursk in the Khabarovsk Krai. The cluster includes the production of veneer sheets, lumber, pulp chips, pellets, as well as the generation of heat and electricity.
Total investments in the project exceed 12 billion rubles, and 8.7 billion rubles were already spent in 2015. Additional investments in the project in 2016-2017 will amount to 2.9 billion rubles. It is noteworthy that until December of last year the project was implemented as a priority in the forest development sector (Government Decree No. 419 dated June 30, 2007). On December 23, 2015, Amursk Timber Company LLC and Amursk Industrial Center JSC, which are the companies responsible for the project, received resident status in the Khabarovsk PSEDA.