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A long-term loan from the European Bank for Reconstruction and Development (EBRD) is helping one of the leading players in the international wood market switch its strategy from only importing raw Russian timber to outsourcing processing facilities to Russia in a landmark deal for the country’s forestry industry.

The €22.5mn nine-year loan is financing the building of a greenfield sawmill near the small town of Podporozhye 300km northeast of St Petersburg by Europe’s second-biggest pulp producer, Finnish Oy Mets-Botnia. The mill will, once completed, employ some 120 workers.

A network of sawmills initiated with this €55mn investment is the first step towards Botnia’s stated long-term goal of building its own pulp mill in northwest Russia.

The sawmill will have a capacity of 200,000 cubic metres of wood a year and most of its output will be exported to the Japanese and European markets. It will handle spruce logs, the bark of which will be stripped off to feed the mill’s own thermal power plant and thus produce the heat needed to dry the processed wood.

Most of the wood needed by the mill will be bought from external suppliers. Botnia’s local subsidiary, LLC Svir Timber, will, in keeping with the group’s wood procurement procedures, control the origin of timber and only buy raw material from approved wood suppliers.

Botnia specialises in the production of pulp for the manufacture of top quality printing and writing papers, packaging boards and tissue. Its shareholders include three of the world’s leading forest companies, UPM, M-real and Metsliitto, which are also based in Finland.