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Sweden\u2019s forest industry enters the new year after a difficult period marked by weak demand, soaring log prices and deteriorating currency conditions. The year 2025 proved particularly tough for sawmills, and the fourth quarter was perhaps the most difficult of all. Weak demand meant producers were unable to compensate for extremely high log costs, while revenues from energy assortments also declined.<\/p>\n
Several of the country\u2019s major sawmill operators ended the year with the lowest margins seen in a long time. S\u00f6dra and Holmen both reported negative results even before depreciation in the fourth quarter. SCA, which had managed high log prices better than most competitors, also recorded a clear decline in margins during the same period.<\/p>\n
The pressure is evident when comparing the sawmill operations of SCA and Holmen. Although their sales prices have followed roughly the same trend, their operating margins before depreciation differ by around ten percentage points. The main reason lies in Holmen\u2019s greater exposure to the higher log prices prevailing in southern Sweden.<\/p>\n
Even though log prices have begun to fall, the cost situation remains difficult. Sawmills still hold inventories of raw material purchased earlier at significantly higher prices, and these stocks must first be processed before lower costs can be reflected in production. The adjustment period varies between companies but typically ranges between three and nine months. As a result, margins are likely to remain under pressure even if demand improves.<\/p>\n
After three years of weak economic conditions, expectations within the sector remain cautious. There are some indications of slightly stronger demand in parts of Central and Southern Europe, as well as some positive signals from Sweden, but these remain early signs rather than a clear turning point.<\/p>\n
Shift in the European wood market<\/strong><\/p>\n A more fundamental development is beginning to take shape in Central Europe. Lower harvesting levels in Germany and the Czech Republic, following extensive damage caused by spruce bark beetle outbreaks, have significantly reduced the availability of spruce logs in the region.<\/p>\n This has created a tightening supply situation across parts of the European market. Although spruce supply has also declined in Sweden, the shortage in Central Europe creates export opportunities for Swedish sawmills. The structural damage to forests in the region suggests that this change in the balance between supply and demand may persist for a long time.<\/p>\n The American market, however, remains a disappointment. Demand has been weak due to continued high mortgage rates, while a weaker US dollar and tariffs have further reduced profitability for Swedish sawmills exporting to the United States. Producers with only limited exposure to the US market may be able to redirect volumes elsewhere, but for companies with a significant share of sales in that market the adjustment is more difficult.<\/p>\n Weak earnings and cautious expectations<\/strong><\/p>\n The difficult market conditions are reflected in the financial results across the forest sector. The fourth-quarter reports from SCA, Holmen, Stora Enso, Billerud, UPM and Mets\u00e4 Board showed an industry still struggling with weak European economic conditions, overcapacity, high costs and negative currency effects.<\/p>\n Sector shares declined by an average of 9 percent last year. In January the sector fell a further 11 percent following generally weak fourth-quarter results. The weak share price performance largely reflects weak earnings both in the final quarter and for the full year 2025.<\/p>\n SCA and Holmen, often regarded as the most stable companies in the sector thanks to their large forest holdings, both saw adjusted operating profit decline by 12 percent compared with full-year 2024 due to weaker results in their industrial operations.<\/p>\n Billerud, which is more sensitive to high wood costs, saw operating profit almost halve, falling 43 percent compared with 2024. Only the company\u2019s US operations prevented an even steeper decline.<\/p>\n Expectations for 2026 remain modest. Analysts on average expect adjusted operating profit at SCA and Holmen to increase by only 3 percent and 4 percent respectively. Billerud is expected to see an increase of around 12 percent, though this follows the sharp decline recorded in 2025.<\/p>\n Despite the weak outlook, valuations across the sector remain low. At the beginning of March, SCA shares were trading at around SEK 117 per share compared with a book value of forest assets of SEK 153 per share. Holmen shares were trading at around SEK 348 compared with a forest book value of SEK 370 per share. Billerud shares, at roughly SEK 80, have not traded at such low levels since 2015 even though the company\u2019s revenue is now almost double what it was at that time.<\/p>\n Sentiment in the sector can change quickly. In February, positive signals from pulp producers pushed share prices higher. Stora Enso rose 18 percent during the month and Billerud increased by 14 percent. SCA and Holmen, which are less cyclical because of their forest holdings, rose by 10 percent and 7 percent respectively. If companies begin reducing production capacity at the same time as economic conditions and demand improve, the sector could see a strong rebound.<\/p>\n Storm damage adds to an already saturated market<\/strong><\/p>\n At the same time, the market must absorb additional volumes following storm Johannes, which struck forests in southern Sweden.<\/p>\n In balance area 2, located at the centre of the storm\u2019s impact zone, inventories of both logs and pulpwood are unusually high for the season. Pulpwood stocks have increased by about 40 percent and log inventories by around 20 percent compared with the same time last year.<\/p>\n Harvesting storm-damaged forests proceeds more slowly than normal operations. Machines working in wind-thrown stands operate at significantly lower productivity levels than during standard final harvesting.<\/p>\n This may lead to a temporary drop in inventories during the first quarter, followed by sharply rising levels during the second and third quarters as large volumes of timber must be processed within a short period. In an already saturated market, this raises the risk of oversupply, particularly of pine logs and pulpwood.<\/p>\n Heavy snowfall across parts of the storm area has further complicated operations. Manual root cutting becomes more difficult under such conditions, increasing the risk that valuable butt logs remain in the forest.<\/p>\n There is also a significant risk that sawlogs are downgraded to pulpwood or even energy wood due to splitting and other quality damage. For forest owners this means the potential loss of substantial timber value.<\/p>\n Production cuts in southern Sweden<\/strong><\/p>\n Sawmills in southern Sweden are continuing to slow production and several producers in G\u00f6taland have announced further production cuts. At the same time forest owners appear increasingly reluctant to sell timber. Statistics from the Swedish Forest Agency show that harvest notifications in G\u00f6taland fell by 30 percent in the final quarter compared with the same period a year earlier.<\/p>\n For forest owners who do not need to sell immediately the situation may eventually turn favourable. If economic conditions improve and sawmills\u2019 purchased log inventories fall to low levels, timber buyers may need to return to the market to secure supply. Under such circumstances log prices could begin rising again, provided that demand for sawn products also improves.<\/p>\n High inventories and weak demand have also created growing problems for the biofuel market. Since the start of the year, however, winter weather has maintained a firm grip on the country, increasing consumption at heating plants compared with earlier forecasts.<\/p>\n At the same time production cuts at sawmills in southern Sweden are reducing deliveries of by-products, while storm-affected forests have seen lower extraction of logging residues. These factors will not resolve the oversupply situation immediately, but they may help ease pressure in the market and gradually improve the prospects for biofuel sales.<\/p>","protected":false},"excerpt":{"rendered":"","protected":false},"author":1,"featured_media":98212,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[5204],"tags":[],"class_list":["post-98209","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-daily-news"],"acf":[],"yoast_head":"\n