In recent years, the sawn timber sector has dealt with supply chain constraints and demand fluctuations caused by factors such as C19-related home renovation trends. The industry is accustomed to boom and bust cycles. Currently, higher interest rates are impacting construction and consumer spending, resulting in a decrease in timber demand across Europe, North America, and Asia.

It is expected that demand for sawn timber in the USA in 2023, which is heavily influenced by housing starts, will fall by 10-25%. However, a recovery is expected in 2024-2025. In the European Union, confidence in the construction sector declined in 2023, primarily due to higher interest rates affecting the costs of project financing. The European Central Bank announced a 0.25 percentage point increase in its main interest rate on 15 June, raising it to 4%. Experts predict that interest rates will remain elevated until at least 2025. A similar downturn is being experienced by the construction and housing sectors in Japan and Korea.

Global demand for softwood sawn timber decreased by 5% in 2022. US demand fell by 3% in 2022 and is projected to decline by a further 6% in 2023, with a return to growth expected in 2024. Forecasts suggest that Europe will see an even more significant and prolonged downturn, with demand falling by over 10% from the peak reached in 2021 to the low point in 2025.

Furthermore, the ongoing war in Ukraine is changing timber trade routes across the globe and causing cost increases for energy resources and, in some regions, sawlogs. In 2021, Russia provided 11% of global softwood sawn timber production and 22% of total exports. Trade restrictions imposed by Western countries on Russia have forced Russian sawmills to export more to China, thereby increasing competition for European and Canadian exporters in the Chinese market. Sawmills in the western part of Russia are facing significant expenses due to the long trade route to China, while import bans on Western logging and sawmill equipment are creating challenges for sawmills across Russia.

Lower demand and cost inflation will affect sawmills worldwide. Two major export regions – Canada and Central Europe – have already encountered difficulties. Canadian exports, which provide approximately 80% of US timber imports, are expected to decline as sawmills in British Columbia face tight profit margins and limited log availability. In Central Europe, including Germany, the Czech Republic, and Austria, timber production will decrease significantly following the damage caused by spruce bark beetle infestations in recent years. Conversely, the US South is expected to see relatively good results in the coming years due to cost advantages and announced capacity increases of 5 million cubic metres (11%) between 2022 and 2024.