Despite the seriousness of the Covid-19 pandemic and its impact on European markets, recent statements by some of Russia’s leading panel producers and local analysts suggest investment plans in the industry may be back on the drawing board.

The ongoing recovery of the market is also showed by statistics of the Russian Ministry of Industry and Trade – a state agency, responsible for the development of panels industry in the Russian government – according to which in May-June the demand for the majority of types of panels available to the Russian market grew by 40%-45%, on a year-on-year basis. And growth is currently ongoing.

According to state analysts, the recovery of the demand in the panels sector could be primarily explained by the resuming of construction and other manufacturing activities in Russia after the pause of almost one-and-a-half months.

That stimulates both domestic producers and global majors, operating in Russia, to resume implementation of their investment projects in the country, which have been suspended since the beginning of the pandemic.

Kronospan Investment

For example, Kronospan, which already operates several facilities in Russia, plans to launch a new large-scale OSB production on the basis of its already existing particleboard plant in the Russian Bashkiria Republic.

According to the Russian Kommersant Bashikiria business paper, the launch of the plant is scheduled for Q3 this year. It will have the capacity to produce up to 650,000m3 of OSB annually and will be the largest production facility of its kind in Russia.

That will be the largest OSB plant in Russia in terms of output until at least 2022-2023, when a production facility of almost the same capacity should be commissioned by the Krono Group.

The plans to invest about RUB18bn in the building of an OSB plant with the capacity of 600,000m3 per year in the Russian Kostroma region (Central Russia) were announced by the Swiss company about two years ago. It is expected that the project will be completed on time, despite Covid-19 and its negative economic consequences.

Currently, Swiss Krono already operates a plant for the production of particleboard in Kostroma, while the launch of a new OSB facility will allow it to strengthen its position in the Russian market significantly.

Back to the Kronospan project – it is planned that most of raw material needs of the plant will be sourced locally, as the company is currently in talks with representatives of the Bashkiria regional authorities in regard to renting some local forest plots.

These plots have harvesting volume of 1.44 million m3 of wood – a volume that would meet the company’s production needs for 49 years.

Kronospan’s plans for OSB expansion in Russia are not confined to the Bashkiria project.

Last year the company also announced its plans to build a facility for the production of particleboard in the Penza region (Volga area) of Russia.

Under the terms of the project, the plant will have the capacity to produce up to 500,000m3 a year with a commissioning schedule of 2023. The total volume of investments in the project is estimated at RUB8bn. The new plant will create more than 350 new jobs at the initial stage.

According to some Russian analysts, most of the future output of the plant could be supplied for the needs of a large-scale furniture cluster, which is located in close proximity to the site of the planned Penza factory.

Plant Opposition

In general, Kronospan places big hopes on the development of its Russian business, despite the attacks which have been conducted on it by some local environmentalists in recent years. Protesters have accused the Bashkiria plant of being in violation of various norms of the Russian environmental legislation.

These attacks even resulted in the start of legal proceedings against the company in Russian courts, where opponents insisted on the closure of the plant, due to claims of high emission levels and non-compliance of its waste treatment facilities with Russian ecological requirements.

In their numerous petitions and lawsuits to the Russian federal courts, the protesters say that the local factory of Kronospan is equipped with the same equipment that was installed in the Sonae woodworking factory in Liverpool, UK. The Liverpool plant suffered a major fire in 2011.

Protesters say the UK fire resulted in the submitting of lawsuits from more than 10,000 local citizens, which claimed compensations for impacts to health due to the fumes released by the fire. In 2012 the plant was closed, while the removed equipment was purchased by Kronospan. In general, Kronospan has been operating in Russia since 2003, when it commissioned the first stage of its plant for the production of boards for laminated flooring in the city of Yegoryevsk (Moscow region).

Since that time, the company has invested more than US$2bn in the development of its Russian business.


In the meantime, the Austrian company is expected to be not the only global major that is considering resuming its investment activities in Russia.

The same plans have recently been announced by the Turkish Kastamonu company, which in recent years has become one of the leading players in the Russian panels market, thanks to the establishment of a large-scale facility for the production of MDF in the Tatarstan Republic – a centre of petrochemical production in Russia.

So far, two stages of the plant have been launched, while a third stage is also planned. Currently, the plant, which is located in the Alabuga special economic zone has the capacity to produce about 1 million m3 of MDF annually, while the launch of the third stage will allow it to further expand these figures.

“We have been working intensively in the territory of the Tatarstan Republic for almost five years, during which time all the planned projects were successfully implemented,” said Ali Kylych, head of Kastamonu Russia.

“We have been working at almost the full capacity and have never stopped production. Now we produce 1 million m3 of MDF and laminate per year. Soon we will launch the third phase of the plant, where some new products will be produced.

“These products have not been produced in Tatarstan in the past and should enjoy the demand. At the same time, the planned expansion will be just the beginning, as the company plans to open new production facilities in Russia outside the Alabuga zone.”

So far, Kastamonu has already invested €450m in the construction of two phases of the plant, which makes it the second largest resident of the Alabuga zone and one of the largest Turkish investors in Russia.

MDF growth promising

Local analysts expect a recovery of the Russian board industry from the crisis, with the MDF segment expected to be the most promising in terms of further growth of the entire local market of boards within the next several years.

According to their predictions, that will contribute to the further growth of investment activities in the market, particularly the MDF sector.

In the meantime, the major potential of the MDF sector in Russia is also confirmed by the experts of the Russian Federal State Statistics Service (Rosstat), according to which data the current demand for MDF in Russia remains stable, despite the pandemic.

In accordance with their calculations, the current volume of the segment is estimated at 2 million m3 per year.

There is a possibility these figures may significantly increase during the next several years, mainly due to the planned commissioning of some new facilities, that will specialise in the production of MDF for the local market.