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ProjectEYE What we observed, analyzed, and accomplished

Russia Timber Project

No barriers between partners(Page 1/3)

December 2009

We believe the success of our partners is our own success. Keeping this principle in mind, Sumitomo takes on a challenging new timber project.

Plastun, located in the most eastern reaches of Russia, is a small port town in the country’s Maritime Province. About nine hours’ drive from Vladivostok, this little place is host to one of Russia’s largest integrated forestry companies. A partner of Sumitomo Corporation, OAO Terneyles owns about 2.6 million hectares of forest. With 45% of the company under its control, Sumitomo Corporation worked with OAO Terneyles to develop huge facilities, which having launched operation in April 2009, now process about 80% of timbers produced from the forest. Those processed timbers are then exported to Asia, including Japan, China and South Korea.
This initiative was begun not only to enable the procurement of high quality timbers but also to open the way to a new era of timber trade between Russia and Japan. This challenging project, it has been made possible by an unshakeable partnership between the two companies as well as the individual commitment of all involved.

Sudden change in the wake of the Soviet collapse

In the early 1990s, before the existence of Terneyles, Sumitomo Corporation was already importing timbers from the then Soviet Union. The scale of timber import then was so small that a withdrawal plan was repeatedly considered. However, circumstances changed drastically in the wake of the Soviet collapse, and in January 1992, Sumitomo Corporation was approached by a representative of the town of Plastun.
The approach came from the man who was the founding president of Terneyles, Scherbakov Vladimir Feodrovich. At the time, formerly owned state enterprises were being forced into a rapid privatization with almost no trading expertise to back them up. In the words of Scherbakov, “We have a big learning curve to overcome. Please become our partner and help us.”

Hiroshi Tomishima, General Manager, Wood Resources Business Department

Hiroshi Tomishima, the leader of the project both then and now, says, "We offered them a lot of advice in relation to the development of a timber trade between Russia and Japan. Some of our advice might have been difficult to take: we pointed out problems with the former Soviet Union’s timber operations and so on. General Director Scherbakov chose us to be his partner because he thought we sounded the most credible and we left the strongest impression.” And so the partnership between Terneyles and Sumitomo Corporation for the purpose of taking on a new challenge, was born.

Terneyles General Director Scherbakov V.F.

First step as partners

Consisting of both hardwoods and softwoods, Terneyles’ forest resources are among the richest in the world, not only in terms of quantity but also quality. However there was a need to add value to the timber to make it an attractive business for Japan. With that in mind, the Sumitomo team proposed an improvement plan, which included the launch of a new timber processing plant, designed to make the business more attractive.
Since the timber trade in Russia in those days was a simple “cut-and-sell” affair, Terneyles was at first reluctant to go along with the plan, as Sumitomo had expected. However, those involved continued to insist that the plan would without a doubt contribute to the development of Terneyles and finally managed to get the company’s assent. The project turned out to be a success, achieving a significant increase in exports to Japan. This experience provided a firm basis for the future partnership of the two companies.

Column:What is OAO Terneyles?


OAO Terneyles, an independent company privatized in 1992, is the largest integrated forestry company in the easternmost part of Russia. With its own shipping port, it is engaged in forestry management, manufacturing timbers and export of logs, and processing of timbers into veneer panels, chips, etc. The company’s mission statement reflects its commitment to “sustainable forest management”, “a customer-oriented approach” and “legal compliance.”
The company’s headquarters are located in Plastun, a small town about 700 km away from Vladivostok (about nine hours by car). About 7,000 people live in the town, most of whom have some connection to Terneyles. There were few stores to be seen when the project was first started, but now there are restaurants, supermarkets, hotels, and more, and the people have embraced new fashions. Our business with Terneyles has contributed much to the development of Plastun.

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