Impact of Trade Restrictions on the Russian Forest Industry: Evidence from Siberian Timber Producers
Round 1
Reviewer 1 Report
Comments and Suggestions for AuthorsComment to Authors:
I assume it is necessary to tiptoe around some things. Everybody knows the reasons for the 2022 sanctions. Is there a full list of them as of year-end 2022? There are not only sanctions on products, but on various so-called “oligarchs” – do those have a knock-on effect via there control, over portions of the forest sector?
Outside Russia there is widespread skepticism as to the accuracy of many items of economic data. There is also awareness of widespread illegal logging and operations by timber mafias which surely affects the data. Researchers cannot fix this but should acknowledge these issues. Readers will take them into account.
Further, evidence is emerging that sanctions are being skillfully evaded. This is to be expected. Effect on results?
Terminology
English is far better than many Forests contributions. There are a few points where terminology might be more clear to westerners:
Deep processing = value added
Net revenue – is this pretax or post tax?
At 190 “specialization” does this refer to multiproduct firms adding product lines in additional specialized niches, or rather, small firms or startups specializing in specific niches?
Selection bias -- “survivor bias” might be a more accurate term
Poor processing = does this mean minimal sawing, as taking off slabs to produce cants as was done for so long in the Alaska “cant trade” to Japan?
Line 566 private boiler houses – do you mean residential heating systems?
Leasing “plots” of timberland -- discussed a bit below.
Background on trade trends
Authors are in far better position than most of us to have trade data, whether from State sources or “mirror” data (e.g. China, Japan). Test mentions year to year bits of this. Paper needs perhaps a ten year trend of annual export and import data, charts or tables, showing exports in volume and value, for unprocessed logs, lumber, and maybe all paper products.
This should be shown separately for Siberia which surely differs.
Line 52 describes sawn timber the major export – but in the East, logs were historically important... the shift toward lumber needs to be documented here.
More specifics
The paper needs a generalized map of the Siberian region highlighting the principal jurisdictions and locations mentioned in the paper. Especially so as most readers will not be familiar, but also because geographic differences are so important to the subject of the paper.
A few sentences on how the supply chain works in Siberia are need for western readers. Especially the system for allocating timber harvests. How the State forests lease timber, size and terms of those leases (Many are probably not mere “plots”) It would seem that with freight costs and operating costs, stumpage residual values would be low in this region. As log exports are eliminated, will stumpage payment to the State have to decline? This would give needed context to remarks such as at line 387.
Authors acknowledge selection bias. Wouldn’t it be possible to compare the number so respondents in the databases over time to measure firms shutting down?
Treatment of firm sizes should be supplemented by a focus on who the big firms are. The charts indicate differences by size classes. Would be important to show for each product, concentration of production volumes by size classes. For sawmills, how concentrated is control over timber leases by large firms?
At 185, it says that the profit rate has fallen but industry has “not suffered” – loss of profit would be considered suffering by most. Further, without being able to document shutdowns, seems a strong conclusion.
We’d think geographic differences need no explanation in such a vast region as Siberia. The data used her seems fairly abstract for readers outside of the region, perhaps even in European Russia. Figure 4 is an ingenious graphic but does not overcome this. In addition to the map suggested above, a map illustrating the routes and distances from centroids of the regions mentioned in Fig 4 to a series of border point, Pacific ports, and the various Ural crossings would be valuable. Also to Arctic ports.
Outlook
Outside observers consider Siberia a high cost region and hence will be skeptical of suggestions that there are advantages to producing there. Authors may wish to simply declare looking into the future at this uncertain time to be out of scope.
Anyway, it would be of interest to have comments on one thing –Russian development of military and commercial activity on the Arctic sea routes is growing – Implications for the forest sector?
Comments on the Quality of English LanguageTerminology
English is far better than many Forests contributions. There are a few points where terminology might be more clear to westerners:
Deep processing = value added
Net revenue – is this pretax or post tax?
At 190 “specialization” does this refer to multiproduct firms adding product lines in additional specialized niches, or rather, small firms or startups specializing in specific niches?
Selection bias -- “survivor bias” might be a more accurate term
Poor processing = does this mean minimal sawing, as taking off slabs to produce cants as was done for so long in the Alaska “cant trade” to Japan?
Line 566 private boiler houses – do you mean residential heating systems?
Leasing “plots” of timberland -- discussed a bit below.
Author Response
Dear reviewer! Your review is a rare case of very thoughtful and valuable feedback. We are very grateful for your comments that helped to improve the quality of our manuscript.
1. We added the information about personal sanctions in lines 51-56
2. We added the information about the accuracy of Russian data in lines 74–79
3. We added a point about the sanctions bypass in lines 539–541
4. We have corrected the terminology as you suggested. As for "net revenue", we do not use that term, so perhaps line 101 misled you. In our document, revenue is the pre-tax value and net income (net profit) is the after-tax value.
5. We added the background on trade trends in Appendix
6. We added the map of Russian regions (figure 1)
7. We added a few sentences on how the supply chain works in lines 438–449
8. Selection/survival bias. Due to the obvious cyclical nature of the forest business and its risks, it would be difficult to determine the true reason for the closure. To identify the causal relationship between the structural shifts of 2022 and the closure of enterprises, an analysis of the dynamics over several years is necessary. Such study can become a direction for future research.
9. We added the information about the market concentration and the large timber companies in lines 379–388. We agree that information on the concentration of production volumes of each product by size class would be useful. However, such data can only be obtained by analyzing media reports, which could be the subject of a separate study.
10. We have revised and extended the paragraph on rising costs (line 185 in the previous version), please see lines 208-219
11. We added a paragraph about the Northern Sea Route (lines 575–590)
Please, see the attachment. We appreciate your review of the revised manuscript.
Reviewer 2 Report
Comments and Suggestions for AuthorsThe manuscript is more of an overview and does not provide fundamental scientific knowledge. In my opinion, it is more suitable for some form of an international scientific conference than for a scientific journal. It is also focused on only one specific region in the Russian Federation, and the interest of readers from all over the world may therefore be significantly limited.
The introduction lacks a more global and complex view, a more detailed literary research.
Lines 80-85 are more suitable for the methodological part of the article
A more detailed interpretation of the results in Figure 1 is lacking.
It would also be appropriate to evaluate the development of prices for wood and selected wood products in the period in the context of sanctions and restrictions. You also note that the production performance of the companies has not changed much, but their costs have risen significantly. It would be appropriate to specify what specific costs and to what they have increased and whether it is directly affected by sanctions, the impact of inflation, etc.
Author Response
We are grateful for your time and effort to review this manuscript. Please consider the attached manuscript that has been revised according to the reviews. As you suggested we have extended literature review to almost 100 sources. We also specified the types of costs of companies in 2022, the impact of timber prices and the ruble exchange rate on the financial performance of companies.
Round 2
Reviewer 2 Report
Comments and Suggestions for AuthorsThe authors have improved their manuscript. However, I still think that in terms of scientific quality and international importance, it does not bring anything new or fundamental.
