Major panel project takes shape for Sveza

One of Russia's largest plants for the production of particleboard - and one of the largest in Europe - will soon be built in the Ekaterinburg region (Russia's Urals) by the local Sveza Group of Companies, one of the leading players in the Russian woodworking market.

The plant will be built in accordance with a recent investment agreement signed between the authorities of the Ekaterinburg region and Sveza, while its capacity will be 500,000m3 of particleboard per year.

The project will be implemented by SVEZA-Forest, a subsidiary of Sveza and, according to Andrew Kashubsky, ceo of SVEZA-Forest, the total volume of investment in the project will be RUB6bn (USD$184m), while its payback period is said to be 11 years.

According to Mr Kashubsky, the construction work will be finished in January 2016, while the plant is intended to reach its design capacity during the following two or three years.

Construction work started in the second half of 2013 and the new factory will be founded on the capacities of the Fankom plywood mill, which was acquired by Sveza in 2012, and which is located in the Upper Sinyachikha district of the Ekaterinburg region.

Regional authorities have already promised to provide SVEZA with all the necessary support for the project and, in particular, tax breaks on property and revenue for a period of seven years. The Ekaterinburg government will also provide subsidies to the investor on the interest rates of loans attracted by the implementation of the project.

According to Mr Kashubsky, most of the production of the new plant will be sold on the domestic market, especially in the Volga- Ural region, where the demand for quality particleboard is among the highest in Russia. Among the major consumers of the plant's production will be local construction companies and furniture manufacturers.

He also added that supplying other regions of the country is unreasonable, due either to small populations, as in the case of the far east part, or to excess supply of particleboard, as in the European part, of Russia.

In the meantime, Russian analysts have already welcomed the launch of the new project, but also warned that its implementation may be associated with serious problems, mainly due to its declared enormous production volumes.

Nicholas Kireev, head of the Urals Union of Timber Producers, said this will be one the world's largest plants for the production of particleboard. According to him, it is currently unclear what volume of raw materials will be needed to meet the needs of the plant. According just to initial estimates, it will probably reach one million cubic metres per year and will require regular supplies from different areas of the Ekaterinburg region, including Upper Sinyachikha.

Nicholas Kireev commented: "The company will incur huge costs associated with the supply of raw materials, as well as their processing, which will require the establishment of at least several large-scale shops. Although establishment of such production is certainly possible, depending on the technology used".

At the same time, according to Russian business paper Kommersant, citing the executive director of the Russian Union of construction enterprises, Yuri Chumerin, the new plant will be able to solve all the problems associated with the supply of raw materials, as the production of particleboard does not require high quality wood, while waste is also expected to be suitable.

Yuri Chumerin commented: "Currently we have a lot of sick forests which require constant removal, but there are no factories for the processing of such wood. As a result, most of it is exported to Central Asia, Uzbekistan and Iran, which is associated with lost profits for the Russian economy. At the same time, the establishment of such a large plant will allow the supply of all such 'nonbusiness' timber for the plant at a very low price. And the region has long searched for an investor who would build such a plant here".

Attempts to establish large-scale production of particleboard in the Ekaterinburg region, capital of Russia's Urals, have also been made before. Several years ago, The First Forestry Company, one of Russia's largest forestry companies, announced its plans for the construction of a plant with a capacity of 300,000m3 of particleboard a year. However, according to Andrew Ustiugov, head of the company, the project was suspended due to its high cost.

According to him, total volume of investment was planned at the level of 4.5 billion rubles, however, despite the selection of a production site, and the recruitment of staff, all the potential investors refused to be involved in the implementation of the project, mainly due to its long payback period, which exceeded 10 years.

Located in Alapaevsk, currently the production capacity of The First Forestry Company is estimated at about 60,000m3 of board per year.

Local analysts believe that, in the event that a new plant is established by Sveza, it is expected to become the leading particleboard producer, not only in the Urals region, but the whole of Russia, while among its major competitors are expected to be local companies and plants such as Ugra-plates and Tomlesdrev, as well as foreign companies Kronospan, Kronostar, Pfleiderer and Egger.