WHATWOOD.RU #15-16 May 02 13, 2012

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1 WHATWOOD.RU #15-16 May 02 13, 2012 TOP NEWS: $121 MILLION TO CHANGE FOREST MANAGEMENT Federal Forest Agency (Rosleskhoz) plans to reform forest management and forest fire-fighting in Russia within five years for $ million, as agency s press service reported. The project will probably start in January International Bank for Reconstruction and Development will give a $40 million credit, the rest of the funds will be taken from the federal budget. The project aims at introducing innovative forest management methods to save resource, recreational, environmental and biological potential of the forests, press service says. Earlier it was announced that by 2020 Rosleskhoz plans that 78.5% of all wood would be processed in Russia. In order to do this, 112 investment projects are implemented today with joint investment volume of 417 billion roubles ( 10.8 billion) bln were Andritz s sales in Q1 2012, this is 28% higher year-on-year, with four big projects being carried out in Russia Company s report

2 Pulp & Paper : Ilim Group decreased pulp&paper paper production in Siberia by 1.1% Bratsk and Ust-Ilimsk affiliates of Ilim Group (Irkutsk region) decreased pulp and paper production by 1.1% to 363,000 tons in the first quarter of the year, as the company reported. This is due to containerboard production decrease by 16% to 48,500 tons. Due to upgraded technology of corrugated packaging production, demand shifted to thinner board grades. This led to decreased production in terms of tonnage, but in terms of square meters board production remained on the same level, the report says. Market pulp production at Irkutsk region affiliates increased by 2% to 314,000 tons. Company-owned logging grew by 4% to 1.86 million sq m. On the other hand, Koryazhma affiliate of the company (Arkhangelsk region) increased pulp and paper production by 2% in the first quarter of 2012 yearon-year. In Q1, production there stood at 273,000 tons, the company says. Paper production grew by 15% to 59,000 tons, including 30,000 tons of offset paper, 22,000 tons of grocery bag paper, 7,000 tons of wallpaper. Market board production, however, also decreased by 2.5% down to 124,000 tons due to market conditions and capacity shift to paper production. Ilim Gofra OJSC (Leningrad region) increased production by 4% to 29.4 million sq m. Ilim Group is the largest Russian forest industry company in terms of revenue. 50% of the shares are owned by global pulp & paper leader, International Paper. The group s mills are located in Arkhangelsk, Irkutsk and Leningrad regions. They produce 65% of all Russian market pulp and over 25% of paperboard. In 2011, pulp and paper production of the company grew by 5.3% year-onyear, up to 2.6 million tons. Net benefit of the company increased by 1.5% to 8.59 billion roubles ( 220 million), net sales by 10.7% to 59.2 billion roubles ( 1.52 billion).

3 Vyborg Pulp s CEO Alexei Kazmin left the company President of Vyborg Pulp company (Vyborg, Leningrad region) Alexei Kazmin who held this position since 2005 left the company and board of directors in early May, as he announced in a letter addressed to the media. As Kazmin said, a new company, VLK, was established where all employees of Vyborg Pulp are shifted. In April 2012, the company shipped over 24,000 tons of pellets. Mr. Kazmin plans to go on with his career in some other industry sector. VLK (Vyborg Pulp) produces 144,000 tons of paper per year and has the largest pellet plant in terms of rated capacity (one million tons per year), however, it has not been fully loaded yet. China is ready to buy out all Baikal pulpmill products Chinese consumers expressed their will to have long-term contracts with Baikal pulpmill OJSC (Baikalsk, Irkutsk region) for acquiring all rayon pulp of the mill if the company launches second rayon pulp line, as mill s press service reported. Increased demand for mill s products is accounted for limited world capacities of softwood pulp. Earlier it was announced that in May 2012 Baikal pulpmill is going to increase bleached pulp capacities to 93,600 tons per year, which is 94% of its rated capacity. Along with that, Russian PM and former president Dmitry Medvedev said that the mill should be converted. For instance, he presumed that production may be shifted to Pitkyaranta OJSC. Baikal pulpmill OJSC produced sulfate softwood pulp, including bleached one which can only be produced with open water circuit which harms Lake Baikal. Continental Invest company, owned by Nikolai Makarov, holds 50.27% of mill s shares, the state has 49%. In 2010, mill s revenue reached 1.2 billion roubles ( 30.7 million), net loss exceeded 600 million roubles ( million).

4 Wood &Timber : Ukrainian biofuel market may shrink by 80% Wooden biofuel producers in Ukraine may lose possibility to participate in raw wood auctions, which will shrink biofuel market by 80%, as Den newspaper reports. Market players are alarmed because of the new project on timber sales procedure of the Ministry for Economy. The draft project suggests selling all wastewood at special auctions which can be attended by particleboard, plywood and pulp&paper manufacturers only. The ministry may finally kill the industry with this project, as today many pellet companies are hardly making break-even point, some are even suffering losses because of expensive wood and energy, says President of the Ukrainian Alternative Fuels Association Vitaliy Daviy. Daviy estimates that pellet companies buy 60% of raw wood at auctions and 40% directly from woodworking companies. Today, surplus of wastewood in Ukraine exceeds one million tons per year, Daviy says. Along with that, Minister for Economic Development and Trade Petr Poroshenko announced that soon ministry representatives will meet those of Forest Service and market players to discuss the problem of access of pellet producers to raw wood auctions, as the paper reports. LVL producer STOD to build an OSB mill in Tver region for 333 million Modern Technologies of Woodworking LLC (STOD, Leningrad region) is going to build an OSB mill in Tver region, close to its LVL capacities, as regional government reported. According to available data, the mill s annual capacity will be from 200,000 to 500,000 cu m. STOD company was established in Among the founders were Tatiana Golubeva, wife of Gazprom s Deputy Chief, and Aleksandr Ebralidze, CEO of Talion company which deals in catering and hotel business.

5 Four years later, in April 2009, the company launched Talion-Terra mill in Torzhok (Tver region) which produces LVL board. Its current capacity is 150,000 cu m, with a possibility to speed up to 250,000 cu m. Moreover, the mill produces 60,000 tons of pellets per year. The investment scope of the project is around 13 billion roubles ( 333 million). The new mill will employ 400 people, another 2,000 will be employed in logging. Agreement on the project was signed by Aleksandr Ebralidze who heads STOD s corporate board and Tver region governor Andrei Shevelyov on May 4, Net loss of Lesozavod-3 almost doubled in 2011 Net loss of Lesozavod-3 (Arkhangelsk) almost doubled in 2011 to 234 million roubles ( 6 million), as the company reported. Sales also decreased by 19.6% down to 669 million roubles ( 17.1 million). Decreasing sales are primarily accounted for falling sawn timber export by million roubles compared to 2010, the company reported. Apart from that, the mill decreased its headcount by 17% to 757 people. Northern Forest Partnership Lesozavod-3 OJSC deals in production of sawn timber, fencing wood and planed timber. Stem LLC is the major shareholder with 75.86%, head of the board Bernhard Cordes has 7.2% of shares, Chief Executive Evgeniy Valkov 2.4%. Net benefit of Novator plywood mill boosted by 58% in 2011 Net benefit of Novator plywood mill (Vologda region, belongs to Sveza holding) increased by 58% to 152 million roubles ( 3.9 million) in 2011, compared to 96.2 million roubles in 2010, as the holding reported. Net sales of the mill increased by 25.4% to 1.56 billion roubles ( 39.9 million). Physical volume of sales in 2011 also grew by 3.3% to 103,300 cu m.

6 Novator plywood mill is located near Velikiy Ustyug town and produces white, water-proof and laminated plywood. Rated capacity of the mill is 120,000 cu m. Shareholder capital amounts to million roubles ( 2.38 million) and is divided into one-rouble ( 0.026) shares. The mill s sole shareholder is Sveza Les LLC. Titan Group increased logging by 0.6% in Q Titan Group (Arkangelsk region) increased logging by 0.6% in Q yearon-year, up to 464,500 cu m, as reported by Arkhangelsk pulpmill press service. In March 2012, logging grew by 5.3% to 188,100 cu m of wood. Titan Group entails eight logging enterprises: Karpogoryles, Pinezhyeles, Ust- Pokshengskiy, Velskoe, Belomorskaya Splavnaya Kompaniya, Shalakushales, Dmitrievskiy and Syamzhenskiy. #15-16 May 02-13, 2012 News, analytics & infographics whatwood.ru Twitter: twitter.com/whatwood_en Mail: kb@whatwood.ru