After four difficult years, the Nordic forest industry is beginning to see signs of a recovery. Prices are improving in some product markets, mills have closed across Europe and North America, and the remaining producers are starting to benefit from tighter supply. Yet the improvement has come largely from production cuts rather than a significant increase in demand.<\/p>\n
GWMI spoke with Oskar Lindstr\u00f6m, forest industry analyst at Danske Bank, about the change in market conditions, the prospects for 2027 and the difficulties still facing Swedish sawmills. His assessment points to a better outlook for pulp and packaging producers, while the sawn timber industry faces a more complicated recovery.<\/p>\n
\u201cThe cycle has turned,\u201d Lindstr\u00f6m told GWMI.<\/p>\n
After several years of poor profitability, capacity closures are beginning to change the balance between supply and demand. The weakest producers have been forced to reduce output or shut down altogether, allowing those still operating to recover some pricing power.<\/p>\n
Lindstr\u00f6m sees this as a familiar development in process industries. When too much capacity competes for insufficient demand, prices fall until production becomes uneconomic. Eventually, closures reduce supply enough for prices to recover.<\/p>\n
There are now signs of that happening in several forest product markets. Since the summer, producers have reported better conditions in Sweden, elsewhere in Europe and North America.<\/p>\n
Demand has also improved somewhat, although Lindstr\u00f6m believes the supply reductions have so far played the larger role.<\/p>\n
\u201cThere is still more to gain if the economy really starts to pick up,\u201d he said.<\/p>\n
That leaves room for a further improvement if construction activity and broader industrial demand recover. Danske Bank expects the effects of higher prices to become more apparent in company earnings during the second half of 2026 and into 2027.<\/p>\n
Energy costs favour Nordic producers<\/strong><\/p>\n Lindstr\u00f6m also sees energy costs as an important factor in the changing competitive position of European forest companies.<\/p>\n Integrated Nordic mills generate considerable amounts of energy from wood and production residues, reducing their dependence on purchased electricity and gas. Many continental European producers have greater exposure to external energy prices.<\/p>\n \u201cHigher gas prices raise costs for continental European mills, while Nordic producers can use energy coming from the wood,\u201d he said.<\/p>\n Lindstr\u00f6m compared the situation with the European energy crisis of 2022, when benchmark gas prices briefly exceeded \u20ac200\/MWh. At the time of the discussion, he put the Dutch gas benchmark slightly above \u20ac70\/MWh.<\/p>\n Although prices remain well below the 2022 peak, the difference in energy exposure continues to matter for industrial competitiveness.<\/p>\n Higher energy costs have contributed to closures in continental Europe and North America, reducing production capacity in markets already struggling with weak profitability.<\/p>\n Lindstr\u00f6m cautioned that the advantage could narrow again if European gas and electricity prices decline.<\/p>\n Packaging improves ahead of pulp<\/strong><\/p>\n The recovery is not progressing at the same pace across forest product markets.<\/p>\n Containerboard and packaging have been among the first segments to show a meaningful improvement in pricing. That differs from earlier industry cycles, when pulp prices often led the recovery.<\/p>\n According to Lindstr\u00f6m, packaging producers have increasingly succeeded in implementing price increases, while pulp markets have remained weaker.<\/p>\n Latin American producers of short-fibre pulp have begun announcing increases for customers in Asia and Europe. Comparable moves in Nordic long-fibre pulp had not yet become apparent at the time of the interview.<\/p>\n Danske Bank expects long-fibre pulp prices to begin improving towards the end of 2026 or around the turn of the year.<\/p>\n The bank also expects stronger earnings among several listed forest industry companies in 2027.<\/p>\n Lindstr\u00f6m pointed to Billerud, where expected profit growth is close to 40%, and Mets\u00e4 Board, whose earnings could more than double. Stora Enso is another company with substantial exposure to changes in the industrial cycle.<\/p>\n SCA and Holmen have a different investment profile because of their extensive forest holdings, which account for a significant part of their valuations.<\/p>\n The recovery in forest industry shares since midsummer is justified, according to Lindstr\u00f6m, although current earnings have yet to show the full effect of improving market conditions.<\/p>\n Swedish sawmills are still struggling<\/strong><\/p>\n The outlook for Swedish sawmills is less encouraging.<\/p>\n Danske Bank's latest Skog & Ekonomi report shows that profitability improved at some producers during the second quarter, but much of the improvement came from lower sawlog costs rather than stronger lumber prices.<\/p>\n SCA's wood products business returned to a small operating profit of SEK 17 million, compared with a loss of SEK 23 million in the first quarter. Setra moved from a SEK 60 million loss to a SEK 15 million profit.<\/p>\n Holmen also reduced its losses in wood products.<\/p>\n S\u00f6dra Wood, however, reported an operating loss of SEK 215 million, as lower deliveries and weaker market prices coincided with high raw-material costs.<\/p>\n Sawn timber prices increased by only around 2\u20135% during the quarter, depending on the producer.<\/p>\n The modest price improvement has done little to reverse the effects of the downturn that followed the exceptionally strong market of 2021.<\/p>\n Danske Bank estimates that European sawn timber consumption peaked at approximately 72 million m\u00b3 that year and has since declined by about 20%, equivalent to roughly 14 million m\u00b3.<\/p>\n The contraction has forced producers to reduce output, but some recent closures in Sweden have also been driven by a longer-term shortage of raw material.<\/p>\n Vida closed its Urshult and Orrefors sawmills during 2026, reducing its Swedish network from 15 to 13 plants. Bergkvist Siljan has closed its Mora sawmill, while Setra previously reduced production at Hasselfors by approximately one-third. Holmen has also announced a lower production ceiling at Linghem.<\/p>\n Vida has linked its restructuring to a persistent imbalance between regional timber availability and sawmill capacity.<\/p>\n That distinction matters for the next market recovery. Production idled because of weak demand may return when orders improve. Capacity closed because sufficient sawlogs are no longer available is less likely to restart.<\/p>\n Sawlog availability could limit the next recovery<\/strong><\/p>\n Danske Bank's report raises a further concern about the longer-term availability of timber in Sweden, particularly in the south.<\/p>\n Sawmills are currently relatively well supplied, partly because storm Johannes brought additional timber onto the market. Once those volumes have been processed, the underlying supply situation could become more difficult.<\/p>\n Vida CEO Karl-Johan L\u00f6wenadler estimates that the timber deficit in G\u00f6taland may be larger than the 2.5 million m\u00b3sk indicated in previous assessments.<\/p>\n Closing Urshult and Orrefors has reduced Vida's annual raw-material requirement by approximately 400,000 m\u00b3fub. The company nevertheless believes further adjustments may eventually be needed to bring processing capacity into line with available timber.<\/p>\n The bank also points to a change in the relationship between sawlog prices and harvesting volumes.<\/p>\n Swedish sawlog prices more than doubled between 2020 and 2025, yet the area notified for final felling did not increase correspondingly.<\/p>\n Higher prices have therefore not produced the additional harvesting volumes that sawmills might previously have expected.<\/p>\n The consequences are already visible in the structure of the industry.<\/p>\n Sweden had approximately 300 softwood sawmills in 2000, compared with around 130 today. The five largest producers now account for more than half of national output, while the average sawmill is almost three times larger than at the beginning of the century.<\/p>\n Danske Bank expects consolidation to continue as high investment requirements and weak margins make conditions increasingly difficult for smaller independent operators.<\/p>\n The bank cites Vida's acquisition of Karl Hedin's sawmills as an example of the consolidation taking place. Modern mid-sized mills may remain attractive acquisition targets, while smaller plants without a strong market position face a greater risk of permanent closure.<\/p>\n Foreign investment is also becoming more important, with access to Nordic timber supplies increasingly influencing acquisition decisions.<\/p>\n For Swedish sawmills, the next recovery may therefore bring a different problem from the one they have faced over the past four years. Demand could improve while the domestic production base continues to contract and competition for sawlogs remains intense.<\/p>\n Lindstr\u00f6m's more positive assessment of the wider forest industry does not remove those difficulties. Packaging and pulp producers may benefit from tighter markets and improving prices, but Swedish sawmills still face a difficult combination of reduced European lumber consumption, expensive raw material and limited scope to increase harvesting.<\/p>\n The coming quarters should provide a clearer indication of how much of the recovery reaches company earnings \u2014 and whether the improvement in lumber prices will be sufficient to restore sawmill profitability.<\/p>","protected":false},"excerpt":{"rendered":" After four difficult years, the Nordic forest industry is beginning to see signs of a recovery. Prices are improving in some product markets, mills have closed across Europe and North America, and the remaining producers are starting to benefit from … Continue reading