European Forestry Pulse #47 🌲

Hello,

Russia is losing its forest industry. That's not my claim. It's what the chairman of Russia's largest forest company said this week.

Zakhar Smushkin leads Ilim Group, Russia's biggest forest company by revenue. His warning came December 25. Export markets are closed. Domestic demand can't fill the gap. Bankruptcies are coming. He called it an "ideal storm."

What does this mean for European forestry? Short term: less competition in some markets. Long term: supply chain shifts that could reshape global timber trade for years.

Meanwhile, Germany's softwood log exports hit a seven-year low. Two Canadian OSB mills announced shutdowns. Vietnam launched its own certification mark. And an investment fund just committed real money to European sustainable forestry.

Here's what's moving European forestry as 2025 ends:

Russia's forest sector faces extinction. Zakhar Smushkin, chairman of Ilim Group, made this warning on December 25, 2025. Ilim Group is Russia's largest forest company by revenue. His message was blunt: the industry cannot survive current conditions.

What he said: Smushkin described an "ideal storm" hitting Russian forestry. Export markets are gone. Western sanctions closed European buyers. Chinese demand isn't enough to replace lost volumes. Shipping costs to remaining markets eat into margins. The math doesn't work anymore.

The bankruptcy warning: Companies that invested in expansion before 2022 now carry debt they cannot service. Revenue collapsed. Costs stayed high. The result: a wave of bankruptcies is coming. Not might come. Is coming.

Already happening: Deputy Industry Minister Mikhail Yurin confirmed in late November that Russian forest production faces a steep slump in 2026. Tobol Timber, one of Tyumen's largest firms, already entered bankruptcy proceedings. The collapse Smushkin warns about has already started.

Why this matters now: Russia was a major player in global timber. Before sanctions, Russian lumber competed with Nordic products in European markets. Russian plywood dominated certain segments. That supply is now stuck.

The China problem: Russian exporters pivoted to China after losing Europe. But China's construction crisis means weak demand. Chinese buyers want low prices. Russian suppliers need high prices to survive. Someone has to lose.

The structural damage: Forest industry needs long planning cycles. Equipment lasts decades. Mills take years to build. When companies go bankrupt, that capacity doesn't just pause. It disappears. Trained workers find other jobs. Equipment rusts. Knowledge leaves.

What this means for European markets: Less Russian competition sounds good for Nordic and Central European producers. But it's complicated.

Russian plywood disappearing created shortages. Prices spiked. Some European manufacturers couldn't get materials. Supply gaps hurt everyone in the chain.

Russian lumber leaving Asian markets could help Nordic exporters regain share. We covered Nordic losses to Russia in issue #46. If Russian suppliers exit, that dynamic reverses.

The timeline question: Industry collapses don't happen overnight. Russian companies will fight to survive. Government might intervene. Some mills will find ways to continue. But the trend is clear. Capacity is leaving the market.

What to watch: Russian bankruptcy announcements. Chinese import statistics showing Russian share declining. Nordic export data showing Asian market recovery. These signals will confirm whether the collapse is real or exaggerated.

The bigger picture: Sanctions work slowly. Three years after Western markets closed, the damage is becoming visible. Russian forestry built its business on European and Asian exports. Without both, the model breaks.

This is what economic isolation looks like in forestry. Not sudden collapse. Slow decline into bankruptcy. Source: Lesprom Network | The Moscow Times

German softwood log exports fell to their lowest point in seven years. The data confirms what the market already felt: German timber is staying home.

The numbers: Germany exported 4.3 million cubic meters in the first ten months of 2025. That's the lowest level since 2018. Before the bark beetle crisis. Before COVID disrupted trade. Before the construction crash.

Why it's happening: German sawmills are running below capacity. They don't need imported logs. They're not producing enough lumber to justify buying more raw material. Weak construction demand is the root cause.

The supply side: Germany's forests still produce timber. But that timber isn't finding export buyers. Domestic processors can't absorb it all. The result: logs pile up or prices fall.

What this signals: When a major timber producer stops exporting, it tells you domestic markets are absorbing supply. Or demand is so weak that production dropped. Neither is good news for the broader European market. Source: Timber-Online

Two major Canadian OSB mills announced curtailments. West Fraser will idle its High Level, Alberta facility indefinitely starting spring 2026. Arbec Forest Products suspended operations at its Amos, Quebec mill on December 20.

West Fraser's decision: The High Level mill produced oriented strand board for construction markets. The curtailment affects 190 employees. West Fraser recorded a $200 million impairment charge. "Indefinite" means no restart date planned.

Arbec's situation: The Amos mill suspended operations affecting nearly 100 workers. Weak North American construction demand means less need for OSB panels. Building materials follow building activity. When construction slows, panel mills feel it.

The union response: Unifor Quebec expressed anger and concern over the Arbec closure. Jobs disappear when mills close. Communities built around forest industry suffer.

Government action: Canada announced a Forest Sector Transformation Task Force on December 14-15. Minister of Energy and Natural Resources Tim Hodgson leads the effort. The government recognizes the crisis. Solutions take longer than announcements.

Why Europeans should care: North American market weakness affects global pricing. Canadian producers who can't sell domestically look for export markets. That means competition in Europe and Asia. Source: West Fraser Announcement | Unifor Statement | Natural Resources Canada

Vietnam created its own timber certification brand on December 22. The "Vietnam Wood" mark validates legal sourcing. It targets international buyers who want proof their wood comes from legitimate sources.

What it does: The certification confirms timber meets Vietnamese legal requirements. It shows wood wasn't illegally harvested. It provides traceability that export markets increasingly demand. Seven companies received the first licenses at the Hanoi launch conference.

The legal foundation: Vietnam registered the intellectual property for the mark on October 17, 2025. This gives the certification legal standing in international trade.

Why now: EUDR is coming. The EU will require proof that timber products don't come from deforestation or illegal logging. Vietnam wants its exporters ready. A national certification makes compliance easier.

The branding angle: "Vietnam Wood" isn't just compliance. It's marketing. Vietnam competes with Indonesia, Malaysia, and other Asian wood exporters. A recognized certification mark builds buyer confidence.

The European connection: Vietnam exports significant furniture and wood products to Europe. European importers need due diligence documentation. Vietnam's certification provides that documentation in standardized format.

What this means: More countries will create their own certification marks. National systems that feed into EUDR compliance make sense. Expect similar announcements from other exporting nations in 2026. Source: Vietnam Plus | Vietnam News

Real money is now committed to European sustainable forestry. CapMan Natural Capital's Dasos European Forest Fund IV completed its first financial close on December 23. This means investors actually transferred capital. Not just promised it.

What happened: The fund raised money specifically for sustainable forest management across Europe. First close means initial fundraising succeeded. More capital will follow as the fund continues raising.

The investment focus: This is a sustainable forestry fund targeting returns above 8% through active forest management. Carbon sequestration adds value but isn't the primary goal. The fund invests in timberland, not just carbon credits.

Why this matters: Forest investments need patient capital. Investors who understand 20-30 year timelines. This fund provides that capital for European forestry.

The institutional signal: Sophisticated investors conducted due diligence. They examined European forest returns. They decided sustainable forestry is worth betting on. That validation matters more than press releases.

What it means for forest owners: More capital chasing forest investments means more opportunities. The fund may acquire properties or partner with existing owners. European forestry attracts institutional interest.

The timing: This closes days after EUDR's formal publication and weeks after the EU Carbon Removals Certification Framework launched. Investors see the regulatory framework stabilizing. They're committing capital accordingly. Source: CapMan Announcement | Carbon Pulse

German wood pellet prices stayed moderate through December despite winter heating season. Industry data shows prices well below the peaks seen in previous years.

The mild weather factor: Temperatures stayed warmer than normal across Central Europe. Less heating means less pellet consumption. Less consumption means stable prices.

The market context: Austrian pellet prices we reported in issue #46 showed similar patterns. The €366-486 range there tracks with German stability. Regional markets move together.

What it means for sellers: Forest owners and pellet producers can't count on winter price spikes this year. Budget accordingly. The mild weather pattern may continue through January.

What it means for buyers: Good news if you're buying pellets now. Prices aren't spiking. Stock up while conditions favor buyers.

The climate angle: Milder winters are becoming normal. Heating fuel markets will adjust. Pellet demand patterns may shift permanently if warm winters continue.

Source: Industry data, December 2025 | Global Wood Markets Info, historical price trends

January 2, 2026: EFP #48 publishes – PEFC Indonesia investigation and more year-end developments

January 24, 2026: PEFC field mission to Indonesia begins investigating deforestation concerns

Q1 2026: EU Carbon Removals Certification Framework applications open

December 30, 2026: EUDR deadline for large and medium operators

Review your 2025 market assumptions against reality. The year ends tomorrow. How did your forecasts hold up?

Fifteen minutes, valuable perspective:

Russia's slow-motion collapse wasn't predicted by most analysts three years ago. Germany's export crash wasn't obvious in early 2025. The markets that surprised you this year will teach you what to watch next year.

Don't repeat 2025's blind spots in 2026. Learn from what you missed. Adjust what you monitor. Forest markets reward those who see changes early.

Until Next Year!

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.

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