and it’s implications…
As Wood and Wood products industry is one of the strategic export oriented industries in Russia and Belarus, we can say with confidence that the sunctions, trade bans and other types of limitations would be applied shortly. P.S. for the Belarus import ban to EU for products with HS code starting with 44 is already in effect. Pick a pop corn and let’s see….
Below I just want to list the measures taken by the world against W&WP in Russia and Belarus:
Trade with Ukraine has reduced considerably following the imposition of martial law in Ukraine & draft of men. One of the challenges for factories still operating in Western Ukraine is transportation to Europe since Ukrainian truck drivers are not allowed to leave Ukraine. We don’t expect any change in this situation till an end of the war. Forestry / Wood exports from Russia are not under sanctions.
- The main difficulties of wood exporters are linked to payments & transportation.
- Road transportation is hugely disturbed from Russia to Europe. The alternative route via the Baltic Sea is suffering from a shortage of shipping vessels.
We expect EU exports of machinery & furniture to Russia to be much more affected:
- Importers using the banks described above will have the same problems to do their payments. With the additional risk that Russia might place restrictions on foreign payments in Euro/USD;
- Transportation suffers from the same problems described above;
- Credit agencies have stopped covering Russia & EU/US export finance agencies are not working with Russia anymore.
Trade between China & Russia should be less affected. Road & rail links to China are operating normally. The Chinese – Russian RMB payment link is still nascent and trading partners are trying to understand if this is something they could use.
Sanctions imposed by the EU against Russia in connection with the military operation in Ukraine have limited transactions on correspondent accounts between German and Russian banks. Now German banks do not open new or even confirm existing letters of credit to manufacturers. This will lead to the fact that the supply of German machine tools to the Russian market will be greatly reduced.
Russian companies are suspending lumber supplies to European countries in search of new currencies for transactions and expect complications due to possible counter sanctions from the Russian government. It is not clear how transactions in the currency will be carried out. If the buyers are ready to switch to other types of currencies, i.e. yuan, rupees, ruble, Iranian rial, the supplies are possible. If not, russian producers will look for other markets.
Raute Corporation to withdraw its financial guidance for 2022 as the sanctions and financial transaction restrictions resulting from Russia’s military actions in Ukraine are causing significant uncertainty in Raute’s business operations in Russia. Of the new orders received in 2021, 39% came from Russia.
Facing inadequate supplies of critical raw materials, Sylvamo may curtail or temporarily shut down pulp and paper production at its Svetogorsk, Russia. The mill is currently operating while the company takes steps to mitigate the supply chain issues and continue production.
The Svetogorsk mill, located at the border with Finland, employs approximately 1,700 people and produces uncoated freesheet, coated paperboard and pulp.
Stora Enso will stop all production and sales in Russia until further notice due to the ongoing invasion in Ukraine. Stora Enso has three corrugated packaging plants and two wood products sawmills in Russia, employing around 1,100 people. The Company will also stop all export and import to and from Russia. A mitigation plan has been activated to secure availability of input materials from other sources.
Ponsse Plc has decided to discontinue all export operations to Russia and Belarus for both Ponsse forest machines and their spare parts. Also the Ponsse Group’s Russian subsidiary OOO Ponsse is discontinues temporarily its local spare parts and service operations. Sales in Russia and Belarus account for about 20% of the company’s net sales calculated from the 2021 financial statements. Ponsse Plc withdraws its profit guidance for the current year.