November 18 Vologda Timber Industry Group celebrated its 31st birthday. The Company Day, as well as summing up the results of the journalistic works contest, was the basis of a large press conference held by the Chairman of the Board of Directors of “VLP” Alexander Churkin.
The main news of this year is that Vologda Timber Industry has kept all its production and staff.
The year 2021 was one of the most successful for the Group of companies. At the end of February 2022 there was a new reality for the timber industry. Timber export restrictions played their part in the dynamics of the company’s activity. Due to the sanctions imposed, many markets were inaccessible for Russian timber. The demand for raw materials in the domestic market also dropped. Since July export to EEC countries, where lumber, pellets and many other types of products went, stopped.
The influence on the production volumes of timber industry this year had both geopolitical and economic factors – a significant increase in transportation costs – by 3-5 times, decrease in the cost of goods in China, strengthening of the ruble. On top of all this are problems with the supply of equipment and spare parts, an increase in the cost of fuel, etc.
The volume of timber harvested in the Vologda region in the second and third quarters of this year decreased exactly by one third compared to the same periods last year. In the future the situation may aggravate even more: the reduction of logging may reach 50%, and as a consequence – the reduction of wood processing products, bankruptcy of enterprises and dismissal of workers.
It should be noted that it is not correct to compare semi-annual indices taking into account January and February. The crisis and decline in production began in March-April 2022.
Starting from this period, the timber industry has been demonstrating a steady decline in production of all types of products. Thus, in the second quarter of this year, the volume of timber harvested in the Vologda Oblast fell by exactly one third compared to the same period in 2021. The production of sawn timber decreased by almost 10% (taking into account the postponed sawing of sawn timber harvested in winter), plywood – by 20%. Statistical indicators of July 2022 also confirm further reduction of production of main wood products: compared to July 2021 the output of sawn timber decreased by 33%, sawn timber – by 25%, plywood – by almost 40%. This characterizes the current situation in the timber industry as critical.
After the embargo was announced on July 10, the sawnwood market in Europe was shut down.
Alexander Churkin, Chairman of the Board of Directors of Joint-Stock Company “Group of companies “Vologda timber industry”:
“At the same time, VLP products still have markets in China, Korea, Egypt, Israel, the CIS, and the domestic market is not going anywhere. It is to these markets that we re-oriented our lumber supplies. As for the success, then logistics came to the fore, both in terms of cost and the physical capacity of Russian Railways and ports in the south and the Far East of the country. It is logistics that is the main factor restraining lumber shipments”.
Undoubtedly, the situation has made significant adjustments in the implementation of the largest investment project, the Plitwood plant.
“The most important thing is that the project continues. We have delivered the equipment, we are forming an effective team, the employees are undergoing the necessary training. Construction of all large-scale facilities has already been completed. Now the unique high-tech equipment is being installed,” said Alexander Churkin.
As the head of the Group of Companies said, the management is always in search of non-trivial solutions for the advancement of the “Group of Companies”. However, without clear state support and real help, the industry, and therefore the Group of Companies “Vologda timber industry” will face difficult times.