Russia’s largest forest products group, Segezha Group, is preparing to establish a manufacturing and logistics cluster in Shanghai’s Lingang Special Economic Zone, underlining the continued reorientation of the Russian timber industry toward Asian markets following the loss of most Western export outlets.

According to company statements and Russian media reports, the project—scheduled to be developed in 2026—will include converting facilities for consumer packaging as well as a manufacturing and distribution centre for birch plywood and planed lumber products. Located within one of China’s fastest-growing industrial and logistics zones, the cluster is designed to bring Segezha closer to its largest remaining export market while reducing transport costs and easing cross-border financial operations.

The move reflects how central China has become for Russian forest-based industries since 2022. With European and North American markets largely closed due to sanctions linked to the war in Ukraine, China has absorbed a growing share of volumes previously shipped westward. For Segezha, that dependence is already substantial. In the first nine months of 2025, China accounted for 77% of the group’s lumber revenue, 38% of plywood revenue and 34% of paper revenue. By contrast, paper packaging sales remain overwhelmingly domestic, with 92% sold inside Russia and the balance mainly in neighbouring CIS countries.

In a statement accompanying the announcement, Segezha president Kirill Arsentyev described the Lingang project as a strategic step in consolidating the company’s Asian footprint. He pointed to China’s scale, flexible downstream markets and developed logistics infrastructure as key advantages, arguing that localised processing would allow products to be adapted more quickly to end-user requirements across the Asia-Pacific region.

Beyond commercial considerations, the Shanghai cluster also reflects broader structural changes across Russia’s timber sector. Timber has long been one of the country’s largest export industries, but the post-2022 environment has forced producers to rethink supply chains, redirect flows and invest in alternative processing and logistics routes. China and, increasingly, India have emerged as priority destinations, even as competition intensifies from established domestic Chinese producers.

At the same time, the pivot east has not insulated the sector from mounting pressure at home. Russian officials have acknowledged that the industry is entering a period of contraction. Speaking before a Federation Council committee, Mikhail Yurin, deputy industry and trade minister, warned that output could fall by 20–30% in 2026 under a worst-case scenario, with declines potentially extending into 2027 if geopolitical conditions worsen. Elevated interest rates, a strong ruble and tightening sanctions are all weighing on investment and export competitiveness.

Official data underline the scale of the downturn. Russian timber exports have dropped by more than 20% since before the invasion of Ukraine, falling from around $12.5 billion in 2021 to roughly $9.8 billion last year. Logging volumes are also expected to reach a four-year low of about 182 million cubic metres, highlighting the strain across the supply chain from harvesting to processing.

Against this backdrop, Segezha’s planned presence in Lingang can be read as both a defensive and strategic move: defensive in securing access to its most important export market, and strategic in embedding parts of its value chain within China’s industrial ecosystem. Whether this model will offset declining volumes and rising competition remains uncertain, but it underscores how deeply Russia’s timber industry is now tied to Asian demand—and how limited its alternatives have become.