The LPC is in crisis
#1 Aug. 30, 2025 16:40:38
The LPC is in crisis
LPC in crisis: production is falling, business requires government support — full analysis
The situation in the Russian timber industry has reached a critical level. According to the Association of Timber Industry Enterprises, the volume of logging in 2024 decreased by 13% compared to the pre-crisis 2021. This is one of the sharpest declines in recent decades. The dynamics of the decline in production in key segments:
Such indicators indicate a systemic crisis that has engulfed the entire technological chain — from logging to deep processing. The largest companies in losses: Segezha Group, ULK, Ilim • Segezha Group (part of PJSC Sistema) in 2024 showed negative EBITDA in the lumber sector for the first time in 10 years • Ust-Ilimsky Timber Industry Complex (ULK) announced a 20% reduction in capacity and the transfer of part of the equipment to conservation • Ilim Group has reduced exports of kraft paper by 15% and is reviewing investment plans "At the current exchange rate of the ruble (≈90 rubles/dollar) and the cost of freight (≈$80/cubic meter), lumber exports to Asia bring a loss of $15-20 per cubic meter. We can't stand it without government support" — ULK internal report The three main causes of the LPC crisis 1. Strengthening of the ruble • The ruble-US dollar exchange rate increased by 22% in the first half of 2025 • Income in foreign currency depreciates, while expenses in rubles remain at the same level • The result is a squeeze on margins and a shift to unprofitable supplies 2. The Central Bank's high key rate • The key rate of the Central Bank of the Russian Federation as of August 30, 2025 is 17.5% • The average corporate loan rate for LPC is 20-25% per annum • Debt burden increased to 58% of revenue (34% in 2021) 3. Increasing tax burden • The income tax rate increased from 20% to 25% • The average profitability of the industry after tax is 6-7.5% • With an inflation rate of 12.3% and a loan rate of 20%+, many businesses operate at a loss Industry requirements for the Ministry of Industry and Trade 1. Create an operational headquarters to support the LPC 2. Temporarily restrict the import of lumber from the CIS countries 3. Subsidize logistics for exports — up to 30% of the freight cost 4. Return the income tax rate for LPC to the level of 20% 5. Develop an import substitution program for logging equipment What can change in September? • September 2, 2025 — meeting with the Minister of Industry A. Alikhanov • Possible scenarios: from the introduction of quotas to the denial of support • Without support measures, up to 15% of LPC enterprises may suspend operations Key solutions to save the industry: • Protectionism (import restrictions) • Fiscal support (tax holidays) • Import substitution of machinery • Development of domestic demand Переведено «Яндекс.Переводчиком» Edited Moderator (Aug. 30, 2025 18:11:42) Offline
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