Photo: Staff of Castanet
A sudden increase in global demand and higher prices for Canadian logs, lumber, pulp and wood pellets could result from a dramatic disruption in wood markets, due to the invasion of Ukraine by Russia.
The western world acted with swift and dramatic sanctions against Russia for its invasion of Ukraine.
Russia is a commodity giant. In addition to being a major producer of petroleum, natural gas and potash, it is also a major exporter of logs, lumber, pulp and pellets.
But economic sanctions taken by both governments and the private sector (i.e. buyers) could suddenly curb exports of Russian forest products, forcing buyers to look for new suppliers.
“Increased sanctions on trade with Russia and difficulties with financial transactions are likely to disrupt and redirect shipments of forest products around the world,” WRI Market Insights briefly notes.
“As a result, trade with Russia will likely decline, impacting long-established international trade flows of forest products.
“Governments in North America and Europe are also seriously considering excluding Russia from the international monetary transaction system SWIFT. If this happens, Russian companies will find it difficult to trade with the world. »
Private companies are also cutting ties with Russian producers. Bloomberg News reports that Orsted AS, a Danish power company, has stopped buying Russian coal and biomass.
Biomass includes wood pellets burned as an alternative to coal in the production of thermal energy. British Columbia has increasingly become a major producer of wood pellets.
Russia exported $12 billion worth of lumber, logs, pulp, paper and wood pellets in 2021, WRI Insights notes.
“To meet the growing global demand for forest products, the Russian government has recently launched programs to encourage investment in the sector to both expand/upgrade existing manufacturing plants and build new facilities,” notes WRI. .
“However, it is likely that many investment projects in Russia’s forest products manufacturing sector will come to a halt as the growing list of sanctions and restrictions on financial transactions come into effect.”