Log price inflation, stricter harvesting policies, weak downstream demand and the disruption of export flows to the Middle East and North Africa (MENA) due to instability in the Persian Gulf are combining to strain sawmill operations in Finland and Sweden, with knock-on effects extending into Central European timber markets.<\/p>\n
In September 2025, the prime ministers of Finland and Sweden took the unusual step of jointly addressing European Commission President Ursula von der Leyen, warning that both countries were at risk of failing to meet binding EU forest carbon sink targets for the 2021\u20132025 and 2026\u20132030 periods.<\/p>\n
The message was direct. Finnish Prime Minister Petteri Orpo stated that reducing harvest levels was \u201cnot a viable option\u201d and would have \u201cserious consequences\u201d for Nordic economies, with wider implications for timber supply chains across the EU. Sweden\u2019s Prime Minister Ulf Kristersson described the regulatory framework as \u201cunreasonable and unjustified.\u201d<\/p>\n
By early 2026, little had changed at the EU level. Analysts noted that amendments to the LULUCF (Land Use, Land-Use Change and Forestry) regulation had broad support across the 27-member bloc, making any revision politically difficult.<\/p>\n
This coordinated push from Helsinki and Stockholm highlights a growing imbalance facing the Nordic lumber sector. Already dealing with high sawlog costs and subdued demand, the industry is now under additional pressure from tightening environmental rules, the restructuring of supply chains following sanctions on Russian timber, and the disruption of key export markets in the MENA region.<\/p>\n
The underlying driver is well understood. The halt in Russian timber imports after the invasion of Ukraine removed a major low-cost supply source, tightening availability across the Baltic region and pushing domestic log prices higher.<\/p>\n
At the same time, exporters face added uncertainty from the EU Deforestation Regulation (EUDR), which requires proof that timber entering the EU market is not linked to deforestation.<\/p>\n
The implementation of EUDR has already been postponed twice, with large companies now required to comply by December 2026. A scheduled simplification review in April 2026 could introduce further changes. For mills and traders still working to meet traceability requirements, these delays have prolonged uncertainty without reducing compliance demands, adding to an already difficult operating environment.<\/p>\n
Log cost pressure: margins under strain<\/strong><\/p>\n Raw material costs in the Nordic region have reached levels that are difficult to sustain. In Finland, prices have risen sharply since the Russian import ban. While the initial impact was strongest on pulpwood and energy wood, sawlog prices have also increased, outpacing any recovery in lumber prices.<\/p>\n Russian exports have declined by roughly 40% since 2019, falling to around 18.7 million cubic metres in 2024.<\/p>\n Tino Aalto, CEO of the Finnish sawmill association Sahateollisuus ry, said the loss of Russian supply has driven up costs, while economic uncertainty has simultaneously weakened demand.<\/p>\n For companies such as Koskisen Oyj, which has invested around \u20ac80 million over three years to expand its K\u00e4rk\u00f6l\u00e4 facility, access to competitively priced raw material remains critical. CEO Jukka Pahta has made clear that stable supply is not optional but fundamental to maintaining operations.<\/p>\n Species availability adds another layer of complexity. Spruce has become increasingly scarce across Europe, pushing prices higher and encouraging some producers to shift capacity toward pine, where supply conditions are more stable. The earlier availability of beetle-damaged spruce has largely disappeared, forcing a return to regular harvesting, which is more constrained.<\/p>\n This shift is beginning to alter traditional usage patterns. Pine, historically dominant in export markets such as Egypt, Saudi Arabia and Algeria, is increasingly being directed into construction and general-use segments in Central Europe, areas typically served by spruce.<\/p>\n The transition is not without risk. Buyers in Central Europe have a strong preference for spruce in structural applications, meaning substitution introduces both technical and commercial uncertainty. If harvesting restrictions further limit spruce supply, these tensions are likely to intensify, potentially reshaping both species demand and pricing structures.<\/p>\n Carbon sink debate: policy meets methodology<\/strong><\/p>\n The regulatory backdrop is further complicated by an ongoing debate over carbon accounting methods.<\/p>\n Finland\u2019s Natural Resources Institute (LUKE) reported that the country\u2019s forests shifted from a carbon sink to a carbon source around 2021, citing increased harvesting, higher emissions from peatland soils, slower biomass growth and climate-related effects on soil decomposition.<\/p>\n Subsequent revisions have reinforced this trend. Updated methodologies and new forest inventory data led LUKE to revise its 2022 emissions estimate significantly higher, from 4.44 million tonnes of CO\u2082 equivalent to 12.01 million tonnes.<\/p>\n Finland\u2019s Annual Climate Report 2025 confirmed that the LULUCF sector remained a net emissions source in 2024, with the government acknowledging that EU targets are unlikely to be met without additional measures.<\/p>\n Sweden remains in a comparatively stronger position, with forests still acting as a carbon sink. However, both countries are subject to the same EU targets and potential penalties for non-compliance.<\/p>\n The issue is not only scientific but also methodological. There is no uniform EU approach to calculating forest carbon balances, and differences in how emissions and disturbances are accounted for have led to divergent outcomes between countries with otherwise similar forest structures.<\/p>\n Despite these debates, the regulatory direction remains clear. The EU aims for net removals of 310 million tonnes of CO\u2082 equivalent annually from land use and forestry by 2030. Finland and Sweden, with vast forest resources, are expected to contribute significantly.<\/p>\n Proposals in Finland include reducing annual harvest volumes from around 73 million cubic metres to approximately 60 million, a reduction of about 15%. The economic impact could reach \u20ac3 billion, with 3,000 to 4,000 jobs at risk in sawmilling alone.<\/p>\n MENA exports disrupted by geopolitical tensions<\/strong><\/p>\n The MENA region has long been a key outlet for Nordic lumber. Finland and Sweden together have supplied roughly two-thirds of European softwood exports to the region, supported by established supply chains and product specifications.<\/p>\n That trade has been disrupted by instability in the Persian Gulf following military escalation involving Iran. The closure of the Strait of Hormuz has created logistical uncertainty, while rising energy costs in Europe have increased operating expenses.<\/p>\n Shipping routes to the Gulf and North Africa have become more expensive and less predictable. Construction activity in major markets such as Saudi Arabia and the UAE is also under pressure, affecting demand.<\/p>\n Russia, which shipped around 1.7 million cubic metres of lumber to the region in 2024, had been competing aggressively for market share. Disruption in MENA removes a key outlet for both Russian and Nordic exporters at a time when alternative markets are limited.<\/p>\n Central Europe offers limited relief<\/strong><\/p>\n Central Europe, often seen as a secondary outlet, is facing its own constraints. Germany in particular is dealing with the aftermath of the bark beetle crisis, which initially led to a surge in salvage timber and lower prices.<\/p>\n That surplus has now been absorbed. With reforestation still ongoing, log availability is tightening, pushing prices higher and narrowing the cost gap with Nordic producers.<\/p>\n For Nordic exporters, this creates a difficult situation. Buyers remain price-sensitive and have access to supply from Austria, the Baltics and Romania, limiting their willingness to absorb additional volumes.<\/p>\n At the same time, rising log costs across both regions highlight a shared interest in securing stable raw material supply, whether through EU policy or trade arrangements.<\/p>","protected":false},"excerpt":{"rendered":"","protected":false},"author":1,"featured_media":98453,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"Default","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[5204],"tags":[],"class_list":["post-98452","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-daily-news"],"acf":[],"yoast_head":"\n