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The Strait of Hormuz blockade and resulting sharp drop in traffic could create favorable conditions for the Russian pulp and paper industry, according to domestic producers.
The global pulp and paper market faced strong pressure in recent weeks amid tensions between the US, Israel and Iran, which affected global supply chains for raw materials and raised costs. The Strait of Hormuz crisis has created even further uncertainty for shippers, oil companies and war risk insurers.
The blockade, however, brought optimism to Russian pulp and paper companies, which have also been struggling recently due to overproduction and unfavorable terms for international shipments.
“The situation in the Strait of Hormuz and the 90% drop in traffic through it could create favorable conditions for the Russian pulp and paper industry,” Perm Pulp and Paper Mill’s chairman Aleksandr Boychenko told local media on Wednesday April 15.
He said that increasing prices of raw materials and hydrocarbons lead to higher prices for pulp, paper and board on the global market. This, in turn, increases the profitability of exports, including to China.
“The industry is currently facing challenges. Many enterprises are operating at 70-80% capacity due to overproduction and unfavorable terms for international shipments. However, a restructuring of logistics chains in the wake of the situation in the Strait of Hormuz could change the balance,” he said.
“Rising logistics costs are leading to a shift in the market model: buyers are increasingly focusing not on price but on supply reliability. As a result, a buyer’s market is gradually transforming into a seller’s market.
“Pulp and cardboard exports to China remain sensitive to the yuan exchange rate, but rising global raw material prices are partially offsetting this, increasing the value of Russian products in foreign currency.”
Several other Russian producers also see the Strait of Hormuz crisis as a good chance for local industry’s revival, saying the positive effect could become apparent within the next three to six months.
“Russia is the big winner from the crisis created from the Middle East war,” Bruegel think tank’s analyst Simone Tagliapietra was quoted as saying in local media.
The Russian pulp and paper industry has been working to deepen relations in the Middle East and Asia following the imposition of international sanctions after Moscow’s invasion of Ukraine.
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