Segezha interested in exporting lumber to India, but logistics costs too high
MOSCOW. Oct 23 (Interfax) - Russian lumber producers cannot start large-scale exports to India due to the high logistics costs, although the potential of this market is huge and companies are interested in entering it, Segezha Group president Mikhail Shamolin said at the Made in Russia 2023 forum on Friday.
"We produce 2.5 million cubic meters of so-called shipping dry lumber and we export 98% of this lumber. We currently export almost zero of all this lumber to India, 0.4% to be precise. The reason is very simple: we have to compete in shipments to India with European producers, for the most part. The average cost of shipping cargo to India for Europeans is 40 euros/cubic meter, [while] the average delivery price that we are currently being offered is $150-$220/cubic meter," Shamolin said at a business breakfast on forestry exports to India organized by Fesco Transportation Group and the Russian Export Center (REC).
With such shipping rates, exporting lumber to India is not profitable, "and until rates drop to comparable amounts, there will not be any serious business in shipping lumber to India for us or any other Russian producers," Shamolin said.
No Russian lumber producers currently export this product to India in any significant amount, he said. Forestry products that are exported to India include newsprint, with the Kondapoga Pulp-and-Paper Mill being the main supplier, and plywood, Shamolin said. Segezha exports small amounts of specialized plywood to India.
"The issue is the expansion of transport corridors to India, the possible completion of a railway on one of the three routes of the North-South international transport corridor. If the logistics costs could be reduced significantly relative to current levels, the potential for exports to India is huge, because the market is large and it's going to grow," Shamolin said.
Segezha vice president Nikolai Ivanov cited an estimate that sees the Indian market for forex products growing by about 40 million cubic meters of timber in seven years, while Segezha's allowable logging rate is 22.7 million cubic meters. The potential of the North-South corridor will be needed to ship the increased amounts, he said.
Segezha's main export market at the moment is China, to which shipping rates are competitive, in part thanks to the flow of Chinese exports to Russia, unlike India, imports from which are small.
"The development of Indian imports into Russia is an extremely important issue. Even if we imagine for a second that rates have dropped or the price in India has risen and we shipped 2 million cubic meters of lumber to India. These containers arrived successfully in India. The question is how they will return to Russia, and there's no answer to this question at the moment. And if they don't come back, we have to pay for their empty shipment, so our logistics costs immediately double. In China there is no such problem, because Russian imports from China are comparable to the amount of exports," Shamolin said.
Commenting on exports to China, he said an upward trend in lumber prices has now begun on the Chinese market. Segezha shipped 85% of its lumber to China and 8% to Egypt in the second quarter of 2023.