Travelling in the Republic of Karelia, Russia – from forests profitable business

Опубликовано KA4002 - пн, 05/13/2019 - 16:40

Blog of the project coordinator Pasi Poikonen at Luke's site  

Project operations are like a business where it is important to be actively present where it all happens.

I joined a Russian bioenergy team to visit the Republic of Karelia in order to analyse the current state of the local forest industry. During the journey, I presented the forest sector projects of the Natural Resources Institute Finland (Luke) to representatives of the Russian forest industry. My main goal was to acquire contacts for business development from wood procurement companies.

Bioenergy from forests as source for local heating energy

In Finland, the idea is to combine proper young forest treatment with the use of pruned stems in energy production. In the Republic of Karelia, local heating plants have replaced fuel oil with a mixture of forest chips and peat as a power source. Chips are made from sturdy aspen logs or from slabs obtained from sawmills, while young forests are allowed to grow in peace.

This is the fourth year when the town of Suoyarvi located nearby the lake Ladoga region in the Republic of Karelia mainly uses chips made from slabs obtained from sawmills and peat brickets acquired from local peatlands as a heat source. Peter Peat, a Moscow-based company, is in charge of heat production in Pryazha, Yessoila and Suoyarvi, towns locating west of Petrozavodsk.

Luke’s Bofori project gives a boost for forestry and wood procurement

In the old industrial town of Impilakhti in Pitkyaranta, a pulp mill continues its operations following a bankruptcy a few years ago. It is typical in Russia that a bank acquires debts accumulated during a bankruptcy, on the basis of which the ownership structure is determined.

The most recent change was the transfer of Zapkarelles, a Suoyarvi-based forestry and harvesting company, to the ownership of the Pitkyaranta pulp mill and the Sortavala sawmill.

Managers of the mill were cautiously optimistic of the Bofori project.

Zapkarelles is a significant forestry company in the region with its leased forests of 813,000 hectares. In addition, it is one of the six partners in the Bofori project coordinated by Luke in the Karelian border region.

Managers of the mill were cautiously optimistic of the Bofori project, but they also had their doubts, particularly about its benefits for Russia. The purpose of the project is to develop local entrepreneurial activities and methods in forestry so that, for example, a larger part of the raw material of the Pitkayarvi mills could be produced in Karelia. Currently, half of all raw material is imported from other parts of Russia.

Belarussians investing in forest machine production in Petrozavodsk

Amkodor, a Belarussian company, was originally planning to establish a unit in Yekaterinburg, east of the Ural Mountains, but finally selected Petrozavodsk as a production location for harvesting technology for various reasons. Petrozavodsk is home to a university of forest technology, and it has excellent connections, particularly by sea waterways.

While the university produces young workforce in the area, the proximity of Finland was not regarded as any significant factor. However, Kesla Oy from Joensuu will be a key component supplier for Amkodor.

The Karelia cross-border program challenges Luke as a research institution to analyse forestry related business development activities.

The machines to be produced range from forest road machines to heavy-duty harvesters. Amkodor’s managers thought that the prices of their products are 40 per cent lower than those of western machines. Reliability and a comprehensive maintenance network are key factors when competing over market shares.

Regardless of the changing relationship between the EU and Russia, it is wonderful that the outer edge of the EU has its own regional development programmes. Even though many consider the Russian markets to be uncertain, there are still successful and enthusiastic forestry entrepreneurs.

The Karelia cross-border program challenges Luke as a research institution to analyse forestry related business development activities.