European timber consumption peaked in 2021 at approximately 72.5 million cubic metres across the EOS countries and the UK. This was followed by a sharp correction as inflation, rising interest rates and falling residential investment took hold. Since then, consumption has stabilised at a level roughly 20 percent below the peak.
“What matters is not only the decline in demand, but what has happened on the supply side during this period. When demand eventually turns upward again, the market will be facing a very different structural reality,” says Erik Eliasson, Marketing Director at Norra Timber.
Production That Does Not Bounce Back
Production in Europe’s sawmilling countries reached its high point in 2021 and has since fallen by around 8 million cubic metres per year. Volumes have remained broadly stable since 2023 – but at a clearly lower level than before.
Crucially, this decline is not merely cyclical. A combination of raw material shortages, geopolitics and regulatory change has effectively locked in lower production capacity.
“Historically, the sawmilling industry has been able to scale up relatively quickly when demand returns. That flexibility no longer exists to the same extent,” Eliasson notes.
Raw Material Supply – The Real Bottleneck
The most fundamental change lies in log availability. Bark beetle infestations, extreme weather events and extensive overharvesting of spruce – particularly in Central Europe – have significantly depleted short-term wood supply. In Germany, overharvesting has been so pronounced that current harvest levels now fall below historical baseline volumes.
At the same time, EU imports of logs from Russia and Belarus have effectively disappeared. This represents the loss of roughly 10 million cubic metres of logs per year, with particularly strong effects on Finland and the Baltic states.
“When several independent sources of raw material are constrained at the same time, the result is structural tightening. This pushes log prices higher and compresses margins throughout the value chain,” says Eliasson.
Environmental Policy Is Reshaping Incentives
Beyond physical supply constraints, timber availability is increasingly influenced by European climate and environmental policy. Under the LULUCF framework, forests are treated more explicitly as carbon sinks in national accounts, making high harvesting levels politically and economically costly for member states.
Projections indicate that this could result in substantial reductions in future harvest volumes – on the order of 25–30 million cubic metres of wood products per year at the European level over the coming decade.
“There is a clear policy trade-off here. Wood is one of the most climate-efficient and resource-efficient building materials, yet current regulations risk limiting supply precisely when demand for sustainable materials is increasing,” Eliasson says.
Profitability Is Removing Capacity
High raw material costs combined with weak product pricing have led to severely compressed margins. Several large Nordic sawmilling companies reported negative operating margins during 2025, and capacity has already been taken out of the market. At least 5 million cubic metres of annual production capacity has disappeared in the Nordic region over the past two years.
Importantly, the pace of losses has continued into Q1 2026, underlining that the pressure on profitability is not a short term phenomenon but an ongoing structural challenge.
“This is a classic selection phase. Capacity that lacks cost competitiveness or technological advantage will not return,” says Eliasson.
A Persistent Supply Gap – Even Under a Hypothetical Demand Recovery
A consolidated analysis shows that even under a hypothetical scenario where demand were to return to 2021 levels, Europe’s timber market could still face a shortfall of around 10 million cubic metres of annual supply compared with that peak year.
This points to a structural shift: higher volatility, greater regional divergence and an increasing premium on secure raw material access and industrial efficiency.
“We are moving towards a market where supply, rather than demand, increasingly sets the rules. For those who understand this shift, there are opportunities – but they require long-term thinking and strategic investment,” Erik Eliasson concludes.
