Latvia's wood-processing sector has weathered many market cycles over the past two decades, from the global financial crisis to the pandemic-era boom and the disruptions that followed Russia's invasion of Ukraine. Yet few issues have generated as much frustration among sawmill operators as the disconnect that emerged between lumber prices and log prices during the market downturn that began in 2022.

For producers of softwood construction materials, the problem was straightforward. Demand for lumber weakened sharply in Europe and Asia, prices fell month after month, yet the cost of the raw material required to manufacture those products remained stubbornly high. Many producers argued that the situation left Latvian sawmills at a competitive disadvantage compared with rivals in Scandinavia and elsewhere in Northern Europe.