Following a difficult autumn for Swedish sawmills, marked by a sharp drop in sawn timber prices and an equally rapid rise in timber costs, a more optimistic feeling has returned. Since mid-December, information has been received from buyers about a timber shortage, which is allowing sawmills to cautiously increase prices. This increase ranges between 5-10%. Most Swedish sawmill managers are confident that the price increase will continue in the second quarter of 2024 and will be slightly steeper. In recent years, sawmill price forecasts have fluctuated quite erratically, demonstrating market instability.

Unfortunately, the price rise is not driven by increased consumption, but by the limited supply of timber. Buyers who were waiting for lower prices reduced their stocks to a minimum. The question is, is this a sustained turnaround in the Swedish sawmill price cycle? It looks like prices have bottomed out and a short-term price increase could occur in the spring. However, it is highly doubtful that this is an indicator of longer-term growth. Demand remains too low to support increased production. Growth is potentially expected if timber prices rise; however, everything depends on the raw material.

Lack of raw materials hinders production in sawmills

In Sweden, sawn timber production at sawmills decreased by 15% in November-December 2023 compared to the same period in 2022, which is a very serious decline. By the end of the year, the decrease to 17.8 million cubic metres is significant – 6.6% compared to 2021, when production volume reached its maximum level of 19 million m³. The decline in production is hardly a market adjustment to a strained situation; it is primarily related to a lack of timber. Most Swedish sawmills temporarily halted production in the autumn precisely because of insufficient raw materials.

If “consolation” can be found in the fact that the situation with raw materials is even worse elsewhere, one can turn attention to Central Europe, where production decreased by 20% compared to the previous year. It is likely that this region is dealing with a combination of market conditions and a lack of raw materials. Across Europe, total sawmill output has shrunk by 13% or 15 million cubic metres over two years, which is expected to continue. Across the ocean – in Canada – sawmill output has decreased by 9% over the last two years, and it looks like this is the beginning of a larger decline caused by a timber deficit.

For the majority of Swedish sawmills, the 4th quarter of 2023 was disastrous. From nearly astronomical profitability in the 3rd quarter of 2021 to double-digit loss margins in the 4th quarter of 2023. To recall losses of a similar scale, one has to go back to 2012... Of the major sawmills that reported for the 3rd quarter of 2023, only SCA managed to break even. The 4th quarter 2023 figures will be even worse. The rise in timber prices is not yet fully felt. This is the situation at the moment, and, as usual, nobody can predict anything due to the completely unpredictable geopolitical situation as well.