The sawn timber market remains weak. Demand is subdued in several markets, construction activity is slow and profitability remains under pressure for many sawmills. At the same time, there are signs that the market is beginning to stabilise. Production is being cut back, inventories have been reduced and prices have started to edge upwards in some markets.
The European construction market remains one of the main constraints on demand. High costs, weak residential construction and cautious consumers continue to weigh on demand for timber products. Although borrowing conditions and mortgage amortisation requirements have improved in Sweden, this has yet to translate into a clear recovery in construction activity. Instead, market interest rates have turned upwards as a result of inflationary pressures triggered by the Strait of Hormuz crisis.
For sawmills, the situation has been particularly challenging. The industry has been forced to make production cuts, reducing the supply of sawn timber. In Sweden, sawn timber production was down by around seven per cent through July compared with the same period last year. These production cuts have contributed to a modest recovery in prices, but profitability remains very weak. Similar production declines are being seen in Germany, Canada and other major producing countries.
At the same time, the market is beginning to show some signs of coming into balance. Lower production means less timber is available for sale, while inventories have fallen in several markets. This is an important development following a period of cyclical oversupply of forest products and pressure on prices for both raw materials and finished products.
Cautious customers
For customers, the market remains cautious. Builders’ merchants and distributors are keeping inventories lean and, to a large extent, are buying only to meet actual demand. There is still no broad-based recovery in demand.
Developments also vary considerably between markets and end-use segments. In Sweden, the domestic market for timber products has contracted significantly from the peak reached during the pandemic.
Export markets are also developing at different rates. Europe remains sluggish, while activity in the Middle East and North Africa is showing more positive signs.
Several factors will determine the outlook
It is still too early to speak of a clear market turnaround. During the autumn, developments among wood-processing industries, builders’ merchants and distributors across Europe will be important to monitor, along with order intake and inventory levels.
Sawn log prices and contract levels in Sweden, Finland and Central Europe will also provide important market signals. The same applies to production announcements from the sawmill industry, which is likely to face further significant capacity adjustments.
The market is therefore still far from normal. However, lower production and reduced inventory levels could, over time, contribute to a better balance between supply and demand.
For the industry, the coming months will be about monitoring whether this balance holds – and whether the tentative improvement can develop into a broader market recovery during 2027.
