Conditions across the Nordic wood products industry became more predictable during the second quarter, but not materially stronger. Finnish producer Koskisen reported that demand largely developed as expected across its main business areas, suggesting the sharp swings that characterised the market over the past two years are beginning to ease. Even so, the company says the recovery remains incomplete, with residential construction still limiting demand for many wood-based products and preventing producers from restoring margins.<\/p>\n
The comments, made during a pre-silent period conference call with analysts, offer one of the clearest indications yet that Europe's timber industry is entering a different phase. Supply chains are becoming less volatile, raw material markets are beginning to rebalance and production is running largely without disruption. Yet demand has not recovered sufficiently to support a larger improvement in profitability.<\/p>\n
Stability replaces volatility<\/strong><\/p>\n For much of 2025 and the opening months of this year, market participants were forced to face rapidly changing conditions driven by tight log supplies, high procurement costs and uneven order intake. Koskisen now describes a market that is considerably more stable, although far from buoyant.<\/p>\n Demand for sawn timber developed largely in line with seasonal expectations during the April-June period. Prices improved modestly compared with the first quarter, but the increase provided only limited financial relief as much of the gain was offset by higher freight costs. Compared with the same period last year, average lumber prices remained slightly lower, highlighting how difficult it remains for producers to recover margins while construction activity across Europe stays subdued.<\/p>\n The pattern mirrors observations made by several European sawmills interviewed recently by Global Wood Markets Info. Many reported that order books have stopped deteriorating, yet customers continue to purchase only for immediate requirements, limiting pricing power and encouraging cautious production planning.<\/p>\n Birch plywood continues to outperform commodity panels<\/strong><\/p>\n Not every segment is moving at the same pace.<\/p>\n Koskisen reported that birch plywood demand exceeded its internal expectations during the quarter, making plywood one of the more resilient product categories within the company's portfolio. Producers have been able to recover part of the increase in manufacturing costs through higher selling prices, although management acknowledged that market uncertainty continues to prevent a full recovery of margins.<\/p>\n The contrast with commodity panels remains pronounced.<\/p>\n Demand for chipboard stayed weak throughout the quarter, reflecting the prolonged slowdown in residential construction across Northern and Central Europe. Until new housing activity begins to recover more convincingly, panel producers focused on construction markets are likely to face a more difficult operating environment than manufacturers supplying industrial applications.<\/p>\n One reason is the customer base itself. Technical birch plywood is used across transport, engineering, vehicle manufacturing and other industrial sectors where purchasing decisions are less closely linked to the residential building cycle than standard construction materials. That distinction has become increasingly visible during the past year, with specialised plywood generally proving more resilient than commodity wood panels.<\/p>\n Investment continues despite uncertain demand<\/strong><\/p>\n Perhaps the most notable message from the conference call was not related to current trading but to capital allocation.<\/p>\n While many European wood products manufacturers continue to postpone expansion projects, Koskisen is moving ahead with investments designed to remove production bottlenecks and improve long-term efficiency rather than simply adding capacity.<\/p>\n One of the company's largest projects this year entered operation in June, when new channel kilns were commissioned at the J\u00e4rvel\u00e4 sawmill. The investment removes a constraint at the drying stage and supports the gradual increase in annual sawing capacity from approximately 400,000 cubic metres towards the company's long-term target of 450,000 cubic metres.<\/p>\n Unlike the capacity expansions announced during previous market upcycles, the current investment programme is aimed less at chasing short-term demand than at improving productivity once market conditions strengthen. That distinction has become increasingly common across Europe's more competitive wood-processing companies, where investments are being justified by efficiency gains rather than expectations of rapid market growth.<\/p>\n Log market begins to diverge from finished products<\/strong><\/p>\n Perhaps the most important message from Koskisen was not about sales, but about raw materials.<\/p>\n During the first half of the year, log prices continued to climb even as demand for finished wood products remained subdued. In management's view, that imbalance is unlikely to persist through the rest of 2026.<\/p>\n The company expects softwood log prices to flatten during the coming months before edging lower later in the year. The reasoning is straightforward. Lumber markets have shown little improvement since spring, making it difficult to justify another round of increases in raw material costs.<\/p>\n That assessment echoes what timber buyers across Central Europe have been saying in recent weeks. Log prices rose much faster than sawn timber values during the first half of the year, leaving many mills processing expensive raw material into products that generated only modest returns. If demand does not strengthen after the summer, forest owners may have to accept lower prices to keep timber moving.<\/p>\n Koskisen noted that wood trading during the opening months of 2026 ran roughly one quarter below the level recorded a year earlier. Even so, procurement met production requirements and inventories remained close to target, avoiding the shortages that disrupted parts of the market earlier in the year.<\/p>\n The company also pointed to another change. Prices for energy wood fractions have retreated from earlier peaks, while inflation affecting chemicals and other industrial inputs has started to lose momentum. Costs remain well above pre-crisis levels, but the sharp increases seen over the past two years appear to be fading.<\/p>\n Investment plans remain intact<\/strong><\/p>\n While several European producers have postponed capital spending, Koskisen has kept its investment programme on schedule.<\/p>\n New channel kilns at the J\u00e4rvel\u00e4 sawmill entered service in June, removing one of the main constraints in the drying process. The project supports the gradual increase in annual sawing capacity from around 400,000 cubic metres to 450,000 cubic metres, although management stressed that production growth will continue to depend on market demand rather than installed capacity.<\/p>\n Work also continues in the Panel Industry division, where new production technology is still being introduced. The transition has weighed on output and manufacturing costs, but customer deliveries have continued without major disruption. Most of this year's remaining investment work is scheduled to take place during the summer maintenance shutdown.<\/p>\n Rather than expanding aggressively, the company appears to be preparing its manufacturing base for the next upturn, whenever it arrives.<\/p>\n Demand, not capacity, will shape the second half<\/strong><\/p>\n Koskisen's comments leave little doubt about where the market stands.<\/p>\n Production is running normally. Investment projects are progressing. Supply chains are functioning better than they did a year ago.<\/p>\n Customers continue to place orders cautiously, particularly in construction-related markets, while birch plywood linked to industrial applications has proved more resilient than standard building products. Until residential construction begins to recover, producers are unlikely to regain meaningful pricing power, even if log prices soften during the second half of the year.<\/p>","protected":false},"excerpt":{"rendered":" Conditions across the Nordic wood products industry became more predictable during the second quarter, but not materially stronger. Finnish producer Koskisen reported that demand largely developed as expected across its main business areas, suggesting the sharp swings that characterised the … Continue reading