ILIM IS POISED TO BECOME A MAJOR PLAYER IN THE PULP MARKET

Implications: Ilim's four mills were built in the early-mid 60s on a shoestring by the Soviet Gov't.  They are badly in need of updating and renovation.  This could conceivably increase production by 50%.  What market areas will profit most from this new NBSK and dissolving pulp? The Russian gov't has just increased its duty on export logs to 35% and says it wants to increase it even more.   Will this severely impact China and their newsprint paper industry? The Russia domestic market is growing rapidly...will Ilim be forced to completely satisfy their own markets before exporting larger quantities.  And, is there any danger the Gov't will want to take over Ilim?

Analysis:  Russia has the world's largest free standing, natural growth forests.  So large, in fact, that 550 million cubic meters could be harvested annually without diminishing them to any extent.  Today only 160-170 cubic meters arre being harvested.  In fact, more trees die of natural causes than are harvested.   Illegal harvesting has been rampant with many trainloads going to China for their newly developed Newsprint industry (they now have 770,000mt/year excess supply and are conducting trials up and down the US West Coast).  Stopping this flow and also having a high duty on legal export logs will, no doubt, have a negative impact on China's newsprint industry...reducing its competitiveness in global markets.
Russia's domestic market has increased by 45% since 2000 but papermills in the country export 80-90% of their production meaning that Russia consumption is much below world standards for industrialized nations - in fact, it's  only 18 kilos/per person compared with 230kg/person in the US (paper products).   As Russia's domestic demand grows the Gov't will insist that more and more pulp production stay at home and not be exported.  What is exported will go almost entirely to China (shipments can go by rail) or to Eastern Europe (traditional markets).  Ilim may conceivably expand by a million mt/year but it may only go to these three markets - domestic, China and eastern Europe.
Finally, would the Gov't ever consider taking over Ilim?   The fact that International Paper was permitted to enter into a 50/50 joint venture position would indicate the opposite...that Ilim will be permitted to stay an independent company.