Russia's official harvest of just over 100 million cubic metres (the unofficial harvest is 10% to 30% higher due to illegal logging) is currently an astonishingly low proportion (16% to 20%) of its apparent sustainable annual cut. Consequently, a huge surplus of mature wood exists in Russia, says Russell Taylor, co-author of a new report, 'The European & Russian Wood Products Sectors'. "European associations believe that the harvest could be expanded to 250 million cubic metres within 10 years if the necessary government and industry changes are implemented," he says, adding that due to major investments announced for new or improved sawmill capacity, sawn lumber production in Russia is expected to increase by about 20% in the next two to three years. Taylor says it is likely that lumber exports will increase by at least 50%, based mainly on the number of announced capacity expansions in 2003 and 2004. This could increase Russian lumber exports by about two million cubic metres by 2005, a 25% increase over 2002 lumber export volume of 8.4 million cubic metres. "The most profitable logging and wood product manufacturing companies in Russia today are those exporting as much of their production as possible. These are the companies that are, in turn, reinvesting export-earned profits into new logging and manufacturing equipment/technology, to support the process of modernising and expanding the forestry and manufacturing sectors." The low-cost structures of the timber industry coupled with increasing investments in modern processing equipment are new trends in Russia. "The ability to produce higher quality products combined with the superior qualities of Russian fine-grained pine, larch, and spruce logs virtually guarantees Russian log and lumber exporters excellent selling opportunities throughout European and Asian markets [especially China and Japan]," says Gerry Van Leeuwen, co-author of the report. "With the ability to significantly expand its annual log harvest and with about 50% of the world's temperate forest area, Russia remains one of the biggest supply threats to upset the world's existing balance between producers and buyers in global wood markets." Van Leeuwen says high export prices for logs and lumber during the past five years have shifted the production focus to export-quality products. In turn, export products are producing much-needed profits to reinvest in plant replacement, modernisation and expansion to facilitate even more exports. Growing log and lumber exports are impacting on Asian (especially China and Japan) as well as European markets by increasing the supply of low-cost, high-quality wood to already oversupplied markets, at the expense of traditional, higher-cost suppliers throughout the world. Profile Publishing Limited