Investment potential of Russian forest sector. Dr. Eugene Lopatin, Natural Resources Institute Finland,

Transcription

1 Investment potential of Russian forest sector Dr. Eugene Lopatin, Natural Resources Institute Finland,

2 Theoretical potential of Russian forest resources is huge forest area: mln. ha 45% of the land is covered by forest growing stock: 82,1 bln. m3 coniferous 77% deciduous 23% harvesting in 2014: 202,3 mln. m3 + 4,9% Leased areas for wood harvesting: 2013: 174 mln. ha (14,75%) 2014: 171 mln. ha security of wood supply is influenced by responsibilities for forest management mln. m Wood harvesting, import and export in USSR and Russia Production (m3) Import (m3) Export (m3) Domestic consumption (m3) Theoretical potential: - AAC: 635 mln. m3 - harvesting: 490 mln. m3 - export 50 mln. m3 What part of this potential can actually be used? 2 Eugene Lopatin

3 Russian Forest Sector Outlook is driven by potential supply Actual production vs. FAO Outlook 2030 (moderate scenario)

4 Open questions: How much wood is available for future investments? Theoretical potential Accessible potential Free resources Are we at saturation point of wood harvesting in Russia? Is it possible to increase harvesting and processing? What are the most attractive areas for investments? 4

5 Spatial distribution of theoretical potential Annual allowable cut in production forests of Russian regions Data source: Database of sub-regional forest management plans with approved changes, Eugene Lopatin

6 Utilization of theoretical potential in 2013 Limiting factors: 1. Demand 2. Accessibility of forest resources 3. Structure of accessible forest resources 6 Eugene Lopatin

7 Theoretical investment potential Potential increase in timber harvesting in case of investments into the roads construction, mln. m3 7 Eugene Lopatin

8 BUT, Majority of wood resources are not accessible Data Source: Google Earth, accessibility by roads and water ways 8 Eugene Lopain

9 Roads density: Russia and Finland

10 Example: Accessibility of wood resources by forest roads in North-West Russia (max forwarding distance 1000 m) What is the harvesting potential within the accessible forest areas? 10 Eugene Lopain

11 Official forest inventory data is not public and outdated for 76% of the forest areas Age of forest inventory data, years Relationship between the age of the data and uncertainties in decision making Source: Roslesinforg, Manovich, Eugene Lopatin

12 How to evaluate the forest investment potential? 1. To calculate detailed map of the growing stock using latest remote sensing data (scale 1:50 000, 1 pixel = 30 m, sattelite images from 1974 till 2015, including any single harvesting site) 2. To select areas with more than 80 m3/ha 3. To select areas within 1000 m from existing road network 4. To recalculate the AAC via ratio between volume of accessible and non accessible mature stands Solution: time series of satellite images processing at 12 Eugene Lopatin

13 Growing stock in 2015 (stands more than 80 m3/ha) Data Access: 13 Eugene Lopatin

14 Accessible growing stock (> 80 m3/ha, 1000 m from the road) Data Access: 14 Eugene Lopatin

15 Accessible growing stock (> 80 m3/ha, 1000 m from the road) in European part of Russia Data Access: 15 Eugene Lopatin

16 Accessible growing stock (>80 m3/ha, 1000 m from the road) in Asian part of Russia Data Access: 16 Eugene Lopatin

17 Available and accessible investment potential in 2015 Existing and accessible amount of annual allowable cut, (mln., m3) suitable for investments without forest roads construction: 106 mln. m3 17 Eugene Lopatin

18 Where there is wood available in 2015? Data sources: 1. Approved forest management plans 2. Database on wood consumption points 3. Growing stock map for 2015, 25 m/pixel 4. Database on priority investment projects 5. Existing forest roads network, 2015 Shortage of accessible AAC = investments in roads: - Leningrad reg. - Arkhangelsk reg. 18 Eugene Lopatin

19 How to get access to inaccessible wood resources? Invest into roads construction or (and) into forest management Extensive forest management = low quality winter roads Business as usual Large forest leasing areas HCVFs Climate change will affect the rythm and security of wood supply (example Tikhvin) Intensive forest management = high quality all season roads, +20% to the wood costs Smoothed duration of winter felling seasons in with a linear extrapolation of the durations out to Source: Goltsev & Lopatin, The impact of climate change on the technical accessibility of forests in the Tikhvin District of the Leningrad Region of Russia. International Journal of Forest Engineering 19 Eugene Lopatin

20 What will happen if the harvesting age will be reduced? Modelling effects of new legislation on wood balance within 100 km from Segezha mill Volume, м Years Current norms Reduced harvesting age Maximum consumption Area, ha Years Current norms Reduced harvesting age Maximum consumption Supported by WWF-IKEA Partnership 20 Eugene Lopatin

21 How much we could expect from investments into intensive forest management? m3/ha Intensive No tending of No tending of seedling stands seedling stands + no thinnings Logs Pulpwood Waste wood Mortality Net present value EUR/ha Intensive No tending of No tending of seedling seedling stands stands + no thinnings 21 Eugene Lopatin

22 Priority investment projects Own money Loans State Number of new registered projects projects (386,3 bln. Rub = 6,8 bln. ), 37 excluded Actually invested 280,5 bln. Rub = 4,9 bln. Reserved 52,7 mln.m3 from AAC (8% from whole Russian AAC) Implementation Average payback time 6,8 years Actually consuming 89,1 mln.m3 (46% from whole country harvesting) 38 projects were listed as completed 22 Eugene Lopatin

23 Priority investment projects Number of projects Investments, bln. rubles 13 78,8 22 Wood processing Boards 168,3 Wood processing and houses Pulp and paper 76 Pulp and paper Boards 33 Wooden houses construction 138,6 23 Eugene Lopatin

24 Priority investment projects Own money Loans State Number of new projects Implementation Average payback time 6,8 years Reserved 71,7 mln.m3 from AAC (10% from whole Russian AAC) Actually consuming 89,1 mln.m3 (46% from whole country harvesting) 9 projects were completed 24 Eugene Lopatin

25 Russian Forest Industry: Competitive Advantages (illustrated by sawmilling sector) Cost structure per 1 m3 of sawnwood Source: Nova Capital, 2015 * Wood net cost = (Log Cost at Mill x Log Consumption) Income for Residuals. Sources: Poyry, Nova Capital Wood net cost can be reduced by lowering log consumption (increasing yield) and/or selling residuals at higher price. However in Russia residuals prices are relatively low Data for Russia and EU countries have been adjusted to the current foreign exchange rates.

26 Round wood flows in Round wood export, th.m Year 2013 Year Eugene Lopatin

27 Conclusions 1.Current investment potential of Russian forest sector without all year around roads construction is 47 million cubic meters per year (= 10 big projects). 2.Investment potential with roads contruction is 100 million cubic meters per year (= 30 big projects). 3.Low raitings of Russia at international raiting agecies (for example S&P. Moody) will limit the investments 27 Eugene Lopatin

28 Thank you!