With sanctions cutting Russia off from European markets, wood product companies are seeking new export markets, as domestic consumption cannot absorb all production. Segezha Group, a major player in Russia’s timber industry, has identified India as a key market for future growth.
During the Eastern Economic Forum, Segezha Group’s Vice President for External Relations, Nikolai Ivanov, emphasized India’s potential. According to Segezha Group's official Telegram channel (in Russian), Ivanov pointed out that currently only 3% of Russian timber products are exported to India, with Segezha’s share being just 1%. However, the company plans to increase its shipments to India by 50% this year compared to 2022. Ivanov described this increase as the start of a long-term strategy, though he acknowledged that these are still small volumes compared to the market's full potential.
Segezha Group mainly exports lumber and plywood to India, but aims to expand its offerings with wooden house kits, biofuel, and wood pellets, which can replace coal.
Import tariffs on Russian plywood to India currently stand at 30%, and paper imports face a 10% duty compared to 0-7% for other exporters, noted Ivanov. High logistics costs are another hurdle. For Segezha Group, keeping transportation costs below 15-20% is crucial for profitability, with $1,800 per 40-foot container being an acceptable rate.
Ivanov also projected that, with reduced tariffs and logistics costs, Russia could potentially export the equivalent of 50 million m3 of processed wood to India annually. This represents a quarter of Russia’s entire timber harvest, despite India’s own annual wood production of around 300 million m3.
According to Lesprom Analytics, in the first half of 2024, Russia's lumber exports to India surged fourfold compared to the previous year, reaching 22 thousand m3. However, this represents only 2.2% of India’s total lumber imports, which reached 1 million m3 in the same period. Brazil, Germany, and the U.S. dominate as India’s primary lumber suppliers.
Meanwhile, plywood exports from Russia to India increased by 17%, totaling 8 thousand m3 in the first six month of this year. This accounts for less than 1% of India's total plywood imports.
Recently, Segezha Group reported a 24% year-over-year increase in losses for the first half of 2024, reaching RUB 9.5 billion ($103 million). According to the company's Q2 report, Segezha continues to face significant financial pressure, with total debt increasing by 5% quarter-over-quarter to RUB 144.2 billion ($1.56 billion) as of June 30, 2024. These financial difficulties are largely driven by ongoing sanctions, particularly the European Union's embargo on Russian wood products, including plywood, lumber, and pellets, which took effect in July 2022 and cut off access to the company’s key European market.
