Russia says its timber industry continues to be hampered by a poor export structure, inefficient use of forests and a dearth of wood processing capacity.

Industry newsletter Random Lengths said Russian federal forestry agency chief Valeriy Roshchupkin had identified the flaws at the recent International Forestry Forum in St Petersburg.

Other factors holding back Russia’s timber sector include widespread illegal logging, outdated production equipment and low levels of foreign investment.

The government estimates logging has dropped by 1.5% this year, despite the country’s annual allowable cut increasing to 559 million m3. About 52% of logging companies are believed to be operating at a loss with 12 enterprises going bankrupt during the first half.

But Russia’s forest product exports are on the up, with US$3bn worth of shipments recorded during the first half, compared to US$5.4bn for the whole of 2004.