Russia’s forestry industry is mired in one of its deepest crises since the post-Soviet era, caught between the compounding effects of international sanctions, collapsing export markets, a paralyzed equipment fleet, and mounting financial losses. What was once a major pillar of the Russian economy—accounting for roughly 22% of global softwood lumber trade before the war—has descended into what experts describe as a “systemic crisis” that could take years to overcome.
2025 Performance: A Collapse in Production and Finances
The scale of the downturn is stark. In 2025, Russia’s commercial timber harvesting volumes fell by 10% compared to 2024, dropping to just 176 million cubic meters. This represents the worst result since the start of the Ukraine conflict and is a staggering 30% below the levels recorded a decade ago. The decline has continued into 2026, with January production falling an additional 18.4% year-on-year.
The financial collapse is even more alarming. According to research by academic institutions, the sector’s combined net profit of 24.3 billion rubles ($311 million) in 2021 had turned into a net loss of 11.1 billion rubles ($142 million) by 2024. Over the same period, corporate debt increased 1.6-fold. Approximately half of all forestry companies are now unprofitable.
The situation is particularly dire for smaller producers, who hold thin financial reserves and are unable to absorb rising costs as their order books shrink. Researchers warn that consolidation offers no escape, as losses are so widespread that stronger firms cannot absorb the failing ones. “Dozens of companies are set to go through bankruptcy,” the study concluded, judging any recovery to be more than a year away.
Lumber Production: Falling Output and Regional Divergence
The downturn is affecting all areas of production. Official statistics show Russian lumber production declined from 29.2 million m³ in 2024 to 28.48 million m³ in 2025, remaining 2–3 million m³ below the 2019 peak of roughly 32 million m³.
Softwood lumber production—which dominates exports from eastern regions—fell 3.5% to 25.7 million m³ in 2025. Hardwood production, largely sourced from western and central regions, rose 5.5% to 2.31 million m³, supported by domestic processing demand. This divergence highlights shifting regional dynamics: eastern producers remain more export-dependent, while western mills primarily serve domestic markets. The gap has widened as overseas demand softens.
The Export Collapse: China, Japan, and South Korea
The most significant blow has come from the collapse of export markets. After the EU banned Russian timber imports in April 2022, forcing producers to redirect exports almost entirely toward Asia, those markets are now rapidly shrinking.
China: The Largest Market in Freefall
China absorbed roughly half of Russia’s sawn timber exports in 2025—about 11.2 million cubic meters. But the first four months of 2026 saw a dramatic reversal:
- Exports to China fell 30% year-on-year to 2.6 million mÂł
- Export revenue declined 26% to $603.7 million
The driver is China’s prolonged property downturn. Home sales by value fell significantly in 2025 to their lowest level in years, while floor space sold declined further in early 2026. This has reduced demand from the construction sector that traditionally anchored Russia’s mills.
Japan, South Korea, and the Wider Collapse
The slowdown extends well beyond China:
- Exports to Japan fell 19% in January-April 2026
- Exports to South Korea dropped 18% over the same period
Russia’s total sawn timber exports fell 32% year-on-year in the January-April period, leaving Russian producers with few alternative outlets for their surplus. Industry consultants expect Russian timber exports to decline further during 2026, citing weaker construction activity, higher freight costs, and the appreciating ruble as continuing headwinds.
A strengthening ruble has compounded the squeeze by pricing Russian timber out of Asian markets just as demand weakens, stripping the cost advantage that had carried mills through the first sanctions years.
The Equipment Crisis: 90% of the Fleet at Risk
Perhaps the most critical structural challenge is the paralysis of Russia’s logging equipment fleet. An estimated 90% of imported harvesters and forwarders currently operating in Russia will cease to function by 2028, according to expert assessments.
Sanctions have cut off access to Western manufacturers that serviced the bulk of Russia’s professional logging fleet. Russian machine-building companies cannot fill the gap, assembling only individual units while the industry will need an estimated 3,500 to 10,000 units over the next two to three years.
This equipment shortage is already constraining production and will deepen the crisis in coming years, affecting not just logging operations but downstream processing industries, including pulp and paper and wood processing.
Government Policy: The Wrong Direction
Rather than throwing the industry a lifeline, the Kremlin appears to be adding pressure. In search of funds, the Russian government plans to raise lease rates for forest plots significantly in 2026. This move will further reduce the attractiveness of the sector for investors and workers, analysts warn.
The government has also proposed amendments to the Forest Code, adding regulatory uncertainty to the industry’s burden. Despite these pressures, officials are simultaneously emphasizing the importance of the forestry sector. In April 2026, a national meeting highlighted plans for reforestation, the expansion of remote monitoring, and a reduction in illegal logging through digitalization efforts. These long-term environmental goals, however, do little to address the immediate financial and operational collapse facing producers.
Outlook: A Long and Uncertain Road
The outlook for Russia’s forestry industry remains bleak. The Economic Development Ministry has flagged wood-processing as one of Russia’s weakest industrial segments, with production declining throughout 2025.
Deputy Industry and Trade Minister has acknowledged the sector has entered a “downward trend,” warning of a worst-case drop of 20–30% in production in 2026, with further declines possible into 2027 if geopolitical conditions deteriorate further.
The industry’s problems are structural, not cyclical. With sanctions unlikely to ease, equipment imports frozen, the ruble strong, and China’s property crisis persisting, there are few near-term catalysts for a recovery. The sector’s collapse reflects a fundamental rupture in Russia’s timber economy that will take years—and potentially a complete restructuring of its supply chains and markets—to resolve.
