Aug 20, 2008. /Lesprom.com/. A looming Russian tax on log exports could push markets for North American wood products into the most dramatic supply-side shock since the northern spotted owl crisis of the 1990s, Vancouver Sun quoted consultant Russ Taylor forecasts. And that has some coastal loggers saying it could open up new opportunities for the beleaguered sector. "Russia is a huge exporter of logs. A restriction in the amount of logs coming out of Russia will create demand elsewhere, so it could be an extremely positive thing," said Dave Lewis, executive director of the B.C. Truck Loggers Association. "But we still have to be able to access [potential markets]," he said, referring to restrictions on B.C. log exports. Taylor, president of the International Wood Markets Group, said in a monthly research report that the Russians are on track to raise the export tax on raw logs from its current rate of 25 per cent to 80 per cent effective Jan. 1, 2009. That's going to squeeze European, Chinese and Japanese log supplies, sending a ripple effect into North America's currently depressed log and lumber markets. Already, Chinese delegations are sending out feelers to B.C. in their search for supply to replace Russian exports, should the tax go into effect as proposed, forest company TimberWest Forest reported last week. Russia is the world's largest exporter of raw logs, supplying 40 per cent of the world's softwood logs. Taylor said the shock of such a price increase on Russian logs is not well understood within North American wood products markets because most Russian sales are to China, Finland and Japan. But in today's global economy, a disruption in one supply chain has worldwide repercussions. "The major question on many peoples' minds is how large the ripple effect will be beyond the main impacted markets," he said. In North America, "it could be bigger than the impacts felt by the withdrawal of U.S. National Forest timber as a result of the spotted owl." Measures taken to save the northern spotted owl by withdrawing timberlands from logging resulted in a log shortage in 1993 that pushed lumber prices to a record high of $495 US per thousand board feet, almost double the current price of $282 US. That supply squeeze, however, was during a period of high lumber demand from the U.S. housing market. Today, with housing stalled, supply-side changes are not likely to effect lumber prices to the same degree. However, log prices will likely go up. Taylor forecast that the ripple effects of the Russian log tax will begin showing up in higher log prices as early as this year's fourth quarter as new exporters start taking advantage of the Russian move to choke off their supply. Russia is imposing steep export taxes to encourage the development of a domestic wood-processing industry. British Columbia's largest log exporter, TimberWest Forest, concurs that the tax is likely to start log prices climbing before the end of the year. "We are seeing increased levels of interest from China and I think it is primarily driven by concern over escalating log export taxes," TimberWest CEO Paul McElligott told investment analysts in a conference call last week. "It's not really showing up in our log realizations yet, but we are encouraged by the number of delegations coming over talking to us and talking to the provincial government," he said. "We are hopeful it will translate into increased realizations later in the year." TimberWest spokesman Steve Lorimer said the company is monitoring markets closely as well as the situation in Russia. The tax has not been implemented yet, he said, and governments have been known to change their minds. Russia announced the tax several years ago, raising it in stages. It went to 25 per cent April 1 and the next increase, to 80 per cent or a minimum of 50 euros, is scheduled for Jan. 1, 2009. Lorimer said if the tax is imposed, it will also benefit the northern and central coast logging sector, where the province allows 30 per cent of the harvest to be exported as an economic stimulation. "There are many sources of logs around the world and it will be interesting to see how this vacuum is filled, assuming that the vacuum is created," he said. Analyst Paul Quinn, of RBC Capital Markets, said in an interview that currently Russia supplies 85 per cent of the 33 million cubic metres of logs that China imports every year. "We expect that the implementation of this export tax increase, from 15 euros a cubic metre to 50 euros a cubic metre will almost stop future Russian log imports," he said. The interest China is now showing in B.C. wood could be a timely shot in the arm for companies like TimberWest that are in an economic tailspin because of the U.S. housing crisis, he said.