European Forestry Pulse #62 🌲

Hello,

Two issues ago, we showed you the Nordic pattern. Processors losing money. Forest owners posting records.

This week, the pattern went global.

Södra, Sweden's largest forest-owner cooperative, lost 1.29 billion SEK. West Fraser, one of North America's biggest lumber companies, lost $937 million. Interfor reported a $147 million adjusted EBITDA loss.

Three continents. Same story. Processing wood is not where value is created currently. Owning forests is.

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

In EFP #60, we covered the Nordic results. Metsä, UPM, SCA, and Billerud all reported losses or falling profits. Tornator, a forest owner, posted all-time records.

That was the first wave. The second wave is worse.

Södra: 1.29 billion SEK operating loss. Sweden's largest forest-owner cooperative couldn't make the numbers work. Record pulp production volumes weren't enough. Prices stayed too low. Costs stayed too high. A cooperative that represents 52,000 family forest owners reported one of its worst years.

West Fraser: $937 million net loss. Compare that to a $5 million loss in 2024. One of North America's largest lumber producers saw its results collapse. Weak lumber prices and high operating costs did the damage. The scale of deterioration — from $5 million to $937 million — tells you how fast conditions worsened.

Interfor: $147 million adjusted EBITDA loss. Canada's other major lumber producer reported similar pain. Rising US import duties on Canadian lumber added costs that couldn't be passed to customers.

The pattern is unmistakable. This isn't one company making bad decisions. It's an entire segment of the value chain getting squeezed from both sides. Input costs rise because forest owners earn more. Output prices fall because end-market demand stays weak.

The problem is structural. Not temporary.

Too many mills chasing too little demand. European and North American processing capacity expanded in recent years. New mills opened. Existing mills upgraded. But construction activity — the main demand driver — fell for two consecutive years. Too much capacity meets too little demand. That's a recipe for losses.

Rising wood costs. German spruce sawlogs hit €129–132 per cubic meter this month — the highest levels reported in current market cycles. Forest owners earn €25–30 more per cubic meter than last year. That's money coming directly out of processor margins.

The squeeze works both ways. Processors pay more for their raw material. They sell finished products into weak markets. The margin between buying wood and selling lumber, panels, or pulp has shrunk to nothing. For many, it's gone negative.

While processors bleed, forest owners are having one of their best periods in a generation.

Tornator: €168 million operating profit. Record revenue of €232 million. Forest holdings exceeding 819,000 hectares.

Rayonier: Adjusted EBITDA up 7.7% to $248 million. Another forest owner, not a processor.

German private forest owners: Earning the highest sawlog prices in current market cycles. Every cubic meter of spruce they sell brings €25–30 more than twelve months ago.

The value chain is inverting. For decades, processors captured most of the margin. They bought cheap wood, added value through processing, and sold at a premium. Now the premium sits in the forest. The trees themselves are the scarce resource. Processing capacity is abundant.

If you own forests: Your negotiating position is the strongest it has been in years. Multiple processors compete for your wood. Don't lock into long-term contracts at last year's prices. The market favours you right now.

But stay diversified. If your biggest buyer is a processor posting losses, they might cut purchases or close operations. Have alternatives ready.

If you process wood: Plan for continued margin pressure. Demand recovery isn't visible yet. Euroconstruct forecasts only modest construction improvement in 2026. Meanwhile, raw material costs keep climbing.

The processors who survive will be those who cut costs fastest, specialise in higher-value products, or secure long-term wood supply at fixed prices. Generic commodity production is a losing game right now.

The investment signal: This is exactly why we wrote about forest investment in EFP #61. When processors lose billions and forest owners post records, the market is telling you where value sits. Investors who understand this are buying forests. Those who don't are watching from the sidelines.

Sources: Södra losses: Lesprom | West Fraser results: Nip Impressions | Interfor losses: Lesprom | German sawlog prices via Timber Online

Swiss roundwood prices continued their upward trend through early 2026. Sawmills report strong demand for domestic logs, particularly spruce and fir.

The driver: Swiss construction activity held up better than in Germany or Austria. Domestic demand for structural timber remains firm. Swiss mills prefer local supply.

The Alpine pattern: This matches what we reported from Tyrol in EFP #59. Alpine timber markets are outperforming the European average. Regional demand, shorter supply chains, and wood-friendly building traditions keep prices moving up.

The takeaway: If you sell roundwood in the Alpine region, your market is one of the healthiest in Europe right now. Take advantage while conditions last. Source: Global Wood

Metsä Group's lignin demo plant at its Äänekoski bioproduct mill in Finland is now producing up to 2 tonnes of lignin per day.

What is lignin? It's the natural glue that holds wood fibres together. Traditionally a waste product of pulp production, burned for energy. Now companies want to turn it into a raw material for adhesives, resins, carbon fibres, and biochemicals.

Why it matters: If lignin can replace fossil-based chemicals at scale, it creates an entirely new revenue stream from existing pulp mills. Every tonne of lignin sold as a chemical product is worth more than burning it for energy.

The demo stage: Two tonnes per day is small. But it proves the process works. Metsä is testing product quality and customer demand before committing to full-scale production.

The takeaway: Watch lignin. If it scales, pulp mills gain a new profit centre. That changes the economics of the entire forest-bioeconomy chain. Source: Metsä Group

US softwood lumber prices have declined for four consecutive weeks after hitting elevated levels in January. Benchmark framing lumber prices retreated as seasonal demand eased.

What happened: Speculative buying ahead of potential US tariff changes on Canadian lumber pushed prices up in January. When those fears faded, prices corrected downward.

The European connection: When US prices fall, North American producers look for alternative markets. Some of that lumber competes with European products in export destinations.

The broader signal: Lumber prices remain volatile. The January spike and February retreat show a market driven by policy uncertainty, not fundamental demand recovery.

The takeaway: Don't read too much into short-term US price moves. The underlying demand picture — weak construction, cautious buyers — hasn't changed on either side of the Atlantic. Source: MarketWatch via Morningstar

Nordic lumber exports weakened through late 2025 and into early 2026. The main pressure comes from an unexpected direction: Russia is expanding its presence in the Chinese lumber market.

The shift: After the EU banned Russian timber imports in 2022, Russia redirected its wood exports to China. Russian lumber is cheaper. Chinese buyers have shifted sourcing away from Nordic suppliers.

The US factor: At the same time, US sawmills increased domestic production, reducing their need for Nordic imports.

The double squeeze: Nordic producers lose market share in China to Russia and in the US to domestic mills. That leaves European markets as the main outlet — but European demand is also weak.

The takeaway: Nordic sawmills face a shrinking export pie. Those that survive will need to focus on quality, certification advantages, and customer relationships that cheaper competitors can't match. Source: EU ban on Russian timber | Woodcentral | Global woodmarkets Info | NAHB

European hardwood auctions in early 2026 produced extraordinary prices for exceptional veneer-quality logs.

The headline numbers: Sycamore maple reached €12,689 per cubic meter. Service tree hit €4,400. Oak veneer logs sold for €3,489. These are real prices from verified auction results.

Important context: These are extreme outliers. They represent the absolute best logs from the continent — flawless grain, exceptional dimensions, perfect condition. Typical commercial hardwood prices are a fraction of these numbers.

Why they matter anyway: Premium prices signal that the top end of the market is healthy. When buyers pay five figures for a single log, confidence in high-quality European hardwood remains strong.

The practical angle: If you manage hardwood forests, these auctions reward patience. Growing exceptional trees takes decades. But the returns can be extraordinary. One sycamore maple log at €12,689 per cubic meter tells you what's possible.

The takeaway: Premium hardwood is a completely different market from commodity softwood. While processors struggle with commodity margins, the luxury end of the wood market is thriving. Source: Global Wood | Forest Machine Magazine

Check the health of your three biggest wood buyers.

The processor bloodbath is real. Companies that bought your wood last year might not be around next year. Or they might cut purchases dramatically.

Fifteen minutes of due diligence:

We covered this exercise in EFP #60. It's worth repeating now because the situation is worse. Södra, West Fraser, and Interfor aren't small companies. They're industry giants. If giants struggle, smaller processors are in deeper trouble.

The best time to find new buyers is when you don't need them. Start today.

Until Tuesday!

Wish you all the best: Peter

P.S. What’s the biggest challenge you’re facing in forestry right now?
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