Shortage creates exorbitant prices for wood in Tatarstan

“We waited for autumn but waited until the trouble came”

In Kazan, at the “wooden” market on the Zhurnalistov Street — a lull. . . Rare buyers wander between the rows and try to bargain in the hope of gaining at least a little. It turns out bad.

The correspondent of Realnoe Vremya had an opportunity to get a failed buyer to talk. . Ramil Sagdeev is an individual entrepreneur, for two decades he has been building houses, baths, cottages to order. Until the middle of 2020, the business at least brought income, and in the spring — “it crashed”. Self-isolation hit the first blow. It was possible to work at first. But as soon as the material ended, there was nothing to cut — the markets were closed. They waited until they were opened — and there was still nothing to saw:

“There was not enough wood, they had not delivered it. But what was there — timber, clapboard — everything had risen in price so that if you build for the price that we contracted for, you would have to pay for the material from your own pocket. But the customer does not agree to add — he, like us, was sitting without money. We expected that things would improve in the autumn, we expected that it would become cheaper — but no! We waited until trouble came," the businessman complains.

“What are you going to do?"

“Perhaps, we will have to close the status of individual entrepreneur. Well, maybe I'll go to the self-employed. I don't know yet.”

Outlook depends on tax

“Prices for a floor board and a bar have risen on average by a hundred rubles — in the summer we sold a six-metre one for 420 rubles, now for 520, if the batch is large — for 500 or a little cheaper," says the seller Sania Nikishins. “Timber has also risen in price. What else to expect, if we bought wood from suppliers in the summer for 8,300 rubles per cubic metre, and from September — for 9,300? We also still have to pay for movers, rent a warehouse and a work place! Winter prices have always been lower, and now these high prices — they can be considered to be low. Because by the beginning of the construction season, they will still rise.

How much they will rise — Sania does not even risk guessing: “We will have other taxes from this year, before sole proprietors were under the unified tax on imputed income, but we do not know how much they will count now. And a lot depends on it. Maybe we will close — what is the point of standing here, if we only to work on taxes and rent.”

According to Nikishina's neighbour Elena Mikheeva, the rent on the market has not been raised either in the autumn or since 2021, but it is already exorbitant in terms of her income:

“We pay 17,000 rubles a month for one selling spot — this is a trading place and a warehouse.”

Reasons for the high cost are the poverty of producers, quarantine and rising prices

“The market in Tatarstan is now mainly represented by the Kirov forest, the Mari forest is almost gone," says entrepreneur from Kazan Niyaz Garayev, who has been engaged in the production of wooden designer houses for customers from all over Russia for many years. “The shortage of wood on the market was increasing gradually, every year. First, it is more profitable for manufacturers to sell to China. Second, the equipment on which all this is done comes from the Soviet era. People do not have much confidence that it is necessary to invest — it is long money. The wood industry is a complex thing: to make a board, you need to have a plot, then take a round log from this plot, this log is divided into boards, the boards are dried and rebuilt, then packed. And only after that, the product go to the customer. At each of these stages, large investments are needed: in machinery, people, equipment, production facilities, and so on. Everything that was is slowly fading, and people do not have the opportunity to invest in new production because the forest is where small cities, poor regions — Volzhsk in Mari El, Kirov Oblast...

Garayev noted that not only board, timber, and clapboard are becoming more expensive — but all materials made of wood are becoming more expensive. In his opinion, the reasons for this lie in the impact of the coronavirus pandemic on the entire world economy:

And in conditions of shortage, the most natural thing for a merchant is to raise prices. Plus, if you managed to buy, for example, glue or other necessary materials abroad — the price of products will also be affected by the exchange rate difference.

“Yes, I've recently needed boards — the difference in price compared to last winter is noticeable. But over the past year, not only forest has become significantly more expensive — everything has become more expensive: fuel and transport costs for delivery," Lev Bugatsov, the director of Novy Bereg PLC, reminded. “After all, to cut down the forest, you also need fuel — they cut it with chainsaws. Petrol is required both for felling and for transporting wood by cars. Besides, food has become very expensive, and loggers also want to eat. It is state employees — they suffer no matter their salary has been increased or not, and the person who works for himself, on a fee-for-service basis, has a different policy. If he does not have enough for bread, he will raise the price of his services.

Reasons for the shortage — supplies to China and the growth of high-tech production?

“When active construction was not carried out, the existing volumes of wood were more or less enough," says Niyaz Garayev. “But now, first of all, Europe and China are taking everything, and second, industry: factories are being built, and they need raw materials. The production of plywood, OSB and other materials is increasing, the purchase of raw materials is growing, and those who produce boards and beams simply cannot compete with a large plywood factory that cuts everything around. So this is a complex problem: the country lacks a clear policy of regulation and development of the timber industry, and we are reaping these benefits.”

Indeed, at the end of 2020, even the State Duma took care of the volume of wood exports from Russia and adopted in the first reading a bill on the unified state information system for accounting for wood and transactions with it (LesEGAIS). President Vladimir Putin ordered a ban on the export of unprocessed timber — and it has already begun to be implemented.

Vera Khmyrova, the director of the Department of Light Industry and Timber Industry of the Ministry of Industry and Trade, made a statement to the Federation Council a month ago that since September 2020 furniture companies in Russia had been experiencing a shortage of chipboard, and explained this by a sharp demand for the growth of consumer demand for furniture.

However, it is unlikely that everything is so simple.

Buy or wait?

At the same time, as official statistics show, the volume of timber harvesting in Russia has been falling for 2 years — this is against the background of growing demand!

According to Rosstat, the maximum value of 239 million cubic metres of harvested wood reached in 2018. A year later, 219 million cubic metres of timber were harvested, of which 15,9 million were exported. Analysts attributed the fall in logging to an oversupply of finished products in 2018, too warm weather that disrupted seasonal logging, and the export of wood from plots. The results of the year 2020 have not yet been made public, but taking into account the pandemic, we can assume a further decrease in the volume of logging.

However, a number of market participants express a different opinion:

“In 2020, in Kirov Oblast, which serves as the main supplier for Tatarstan, woodworking enterprises did not work for a long time," says the manager of Vse Iz Lesa company. “Accordingly, logging was not carried out. When the quarantine was lifted, it became impossible to harvest and export wood: when autumn comes, you can't go there until frosty weather. Now the deficit has not yet been compensated, but in a month or two, there will be a lot of forest. And prices will fall — suppliers will not go anywhere. So if there is an opportunity, you just need to wait out and not rush to buy wood at today's prices.”

Meanwhile, the situation last season was such that a wooden house of comparable area was more expensive than a brick one in construction — just because of the prices of key materials.