Turnaround in sight for the sawmill industry

I believe this year will end better than it started for the forestry industry. Erik Eliasson, Sales director Norra Timber.

Text Erik Eliasson, Sales director Norra Timber Published 8 April 2024

PhotoVictor Lundberg

As I write this we can look in the rear-view mirror at what was a really challenging 2023. In the Nordic region production decreased significantly, especially towards the end of the year. The slowdown was mainly driven by high raw material costs and a weakened supply of raw materials.

The year ended with a decrease in production of six percent in Sweden and seven percent in Finland. Raw material costs for sawmills have skyrocketed, while global timber prices fell back to 2020 levels. The bottom line is that operating margins are currently negligible - even for the most efficient facilities in the industry.

A consequence of this market turbulence is that production and finished goods inventories are very likely to continue to decline - at least as long as profit margins keep shrinking. The industry will be forced to try and achieve profitability by implementing significant price increases for timber products. We are already seeing clear signs that stock shortages, especially for spruce, are pushing up price levels in some markets.

Macroeconomic factors also point to slowly improved demand throughout 2024. I hope that the projections for six interest rate cuts will prove correct, starting in the summer. For the Nordic market, where the proportion of variable mortgages is extremely high, interest rates have a clear effect on the willingness of people to invest in the construction sector. In conclusion, if my prediction comes true, this year will end better than it started - for all of us.

Within the marketing department at Norra Timber we have formed a new logistics unit, where we bring together all the personnel who work with loading administration. Heading up the unit is Jonas Ström – an experienced colleague who previously worked as Operations Manager for a haulage company. We have also reviewed our working methods and our systems support, which has led to the introduction of digital check-ins and check-outs for timber transportation, as well as a new booking system that makes selecting more sustainable freight solutions far easier.

We hope that efforts like these will enable us to achieve a more efficient way of working, as well as lower our shipping costs while improving our level of service.

This summer we are carrying out major investments in new measuring stations in Kåge and later in Sävar. We are also moving forward with the new timber sorting facility and CT scanner in Kåge, which will start being constructed this autumn.

In other words, we at Norra Timber continue to follow our long-term development plan and business strategy. We are even accelerating faster to deal with the current market fluctuations.