European Forestry Pulse #14 🌲

Hello,

When raw material costs consume 70% of your revenue and environmental compliance eats another 15%, what's left? Nordic timber companies are discovering the answer: not enough to survive. The consolidation wave has begun.

Here's what's disrupting European forestry this week:

The Nordic forest industry's second quarter results confirm a sector-wide crisis. Swedish giant Setra reported an operating loss of 60 million SEK, down from a profit of 31 million SEK in the same period last year. Even worse, Södra posted an operating loss of SEK 389 million in Q2 2025, compared to a profit of SEK 398 million the previous year—making it "the most significant challenges among the six Nordic companies" according to industry analysis.

The core problem is clear: "High raw materials costs continue to pressure margins universally, with multiple companies stating that current wood prices are unsustainable for long-term industry profitability," reports Fastmarkets. The publication notes that "elevated raw materials costs, global trade uncertainties and currency volatility created significant headwinds across the sector" in the first half of 2025.

Market observers describe a "volatility and margin squeeze" hitting Nordic timber companies, with "most companies reported declining profitability despite mixed sales performances." The situation is forcing strategic shifts—Stora Enso recently agreed to divest approximately 175,000 hectares of forest land for €900 million, representing 12.4% of its Swedish forest holdings.

The consolidation wave is accelerating. A Fastmarkets analysis reveals over €450 million in mergers and acquisitions across European sawn timber markets, with deals "frequently linked to low profitability, insolvency risks, or distressed asset sales." The rapid pace of transactions—including the Ziegler insolvency proceedings that led to asset transfers within just two months—suggests more distressed sales are coming.

What this means for you: Nordic processors are struggling with what they call "unsustainable" wood prices while facing severe margin compression. If you're selling to Nordic mills, monitor their financial health closely. If you're buying Nordic lumber, expect continued volatility as the sector restructures. The €450 million M&A wave signals fundamental changes ahead—position yourself accordingly. Source: Fordaq Daily Newsletter - Setra results, Source: Fastmarkets - Nordic timber industry faces cost pressures, Source: Fastmarkets - European sawn timber M&A analysis

The Iberian Peninsula's first Verra-certified forest project just opened the floodgates. Motor Verde's certification proves Mediterranean reforestation can meet international carbon standards, despite water scarcity and fire risks.

The takeaway: Iberian forest owners rush to register projects—expect many applications by December. Move fast or watch prices drop as supply floods in. Source: Carbon Herald - Motor Verde Certification

Swedish Parliament erupts over proposal to pay forest owners about 400 SEK (~$42) per ton of CO₂ annually to delay harvests for carbon storage. Forest industry claims 7,200 jobs at risk from increased raw material costs. Green Party says it's "cheaper than any technology solution."

The takeaway: If Sweden implements this 2.36 billion SEK scheme through 2030, expect EU-wide adoption within a few years. Calculate what delayed harvest payments would need to match your timber revenue. Source: Carbon Herald

While others retreat, Lithuania's Grigeo Group announces record €106 million tissue paper investment. The largest expansion in company history will double production to 140,000 tonnes per year by 2028. CEO Tomas Jozonis: "The market potential in the Baltics, Scandinavia and Western Europe is growing."

The takeaway: Major tissue producer expanding when others contract. New PM7 machine alone will add 70,000 tons annually—equivalent to their current three-machine output combined. Opportunity for regional pulp suppliers Source: Lesprom

China’s central bank, alongside the National Financial Regulatory Administration and the National Forestry and Grassland Administration, unveiled 15 targeted measures to strengthen forestry finance. These include innovations in forest rights mortgage lending, expanded loan term flexibility, streamlined approval processes, and enhanced financing coordination for national reserve forest projects. The package aims to convert ecological resources into capital and support high-quality forestry development.

The takeaway: China is ramping up financial support for forest tenure reform and industry modernization. European equipment suppliers should track evolving lending terms and collaborate with Chinese partners to capitalize on upgraded credit facilities. Source: Fordaq Daily Newsletter

Malaysia maintains its total log export ban through 2025, forcing all timber to undergo domestic milling first. The policy is designed to strengthen local processing and add value within national supply chains.

The takeaway: International buyers will need to source finished or semi-finished Malaysian wood products rather than raw logs. Exporters and importers should adjust procurement strategies to focus on processed Malaysian timber and explore alternative log suppliers. Source: Fordaq

SonicFlora raised €240,000 to commercialize AI-powered ultrasonic sensors for greenhouse tomatoes. The technology detects stress-related sounds at 20-100 kHz frequencies—stressed tomato plants emit dozens of ultrasonic "clicks" per hour. The company states ambitions to expand to other plant types including trees, but has not field-tested this. Calibration for woody plants is acknowledged as a major technical challenge.

The takeaway: Ultrasonic plant monitoring works for tomatoes in greenhouses. Tree applications remain unproven. Watch for future developments. Source: Boreal Tech Brief - Issue #004

Audit your hidden costs—NOW. Nordic mills report rising compliance expenses—from water treatment to sustainability reporting—that add up. Review last month’s P&L and total all environmental fees, compliance audits, and reporting costs introduced since 2015. Industry analysis shows these line items now represent a material share of expenses, squeezing margins further. If compliance costs feel invisible, they’re not immaterial. Identify and price these costs into your contracts now—otherwise you may find yourself unprofitable before raw material costs alone.

The Integration Playbook lands tomorrow at 09:00 CET—but only for Professional subscribers.

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Until next Tuesday (or tomorrow),

Wish you all the best: Peter

P.S. What’s the biggest challenge you’re facing in forestry right now?
Hit reply and let me know — I read every message personally.

P. P. S. Know a forest professional who’s drowning in EUDR complexity or missing out on timber market shifts? Forward this issue or invite them to join!

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