Falling demand in China and Europe, competitive pressure from Australia and logistics costs have all taken their toll on Uruguay's forest sector. The industry entered 2026 with higher processing volumes, reduced prices and hopes that current investments will restore business activity in the medium term, although caution and adjustment will continue to dominate in the short term.
As in Argentina, Uruguay's forest sector has had a difficult start to the year; although production volumes rose by 4%, prices fell globally by 9%. This is happening at a time of weaker demand, uncertainty in the major markets and increasingly aggressive competition. Despite the drop in prices on the international market, the investments planned for 2026 make it possible to forecast growth in exports, though only from 2027 onwards.
This information was provided by South American timber market experts, who noted that the first signs of the market "cooling" appeared as early as 2024, intensified in 2025, and that no significant price growth is expected this year for the time being. "In Uruguay, timber production volumes rose by 4%, but the value fell by 9%," explains market expert Nelson Le Desma, stressing that caution still prevails internationally, particularly in Europe and China, which are the most important timber markets.
Weaker demand and competitive pressure
According to the experts' assessment, uncertainty in China remains one of the main problems. Although there are large projects that continue to operate, they are being carried out on slim margins and there is no unambiguous market recovery. Added to this is the reluctance of European and Asian buyers to conclude new deals, given the low prices and large stocks.
Australia has become the main player in the process of driving prices down. "Australia is ready to cut prices and sell larger volumes," said the timber market specialists, warning that competing on price is particularly difficult for Uruguay, not only because of domestic costs but also because of the rising cost of sea freight.
As for current prices, a tonne of short-fibre pulp costs around 560 dollars in China, while in the USA it ranges from 565 to 585 dollars. The price of long-fibre pulp usually differs by about 100 dollars: it is around 680 dollars in China and 700-730 dollars in the USA, depending on the region concerned. "China is a very significant market participant, and it has not experienced the economic recovery that was long forecast," the expert noted, explaining that this Asian country is increasingly seeking to buy timber from Vietnam, Australia or South Africa, as well as to use domestic timber, which limits the opportunities for other exporters.
Vertical integration as a defensive strategy
Given the situation, the experts stress that many companies in Uruguay's forest and timber industry are choosing to deepen vertical integration along the forestry chain in order to reduce their exposure to market fluctuations. The aim of this strategy is to increase efficiency, reduce dependence on global prices and maintain a normal level of profit amid a still unstable geopolitical and economic situation. Uruguay's forest sector entered 2026 with larger volumes, a focus on price levels and hopes that current investments will restore business activity in the medium term, although caution and adjustments will continue to dominate in the short term.
Investments with an eye on 2027
Despite the unfavourable price situation, Uruguay's forestry companies are maintaining considerable levels of investment in the sector. At least three significant projects will be carried out in 2026: Urufor, Braspine and Lumin. According to N. Le Desma, these investments will begin to have a positive effect in the middle of the year or in the third quarter, with their full impact only visible in 2027, when exports will increase. The current negative situation is also affecting trade in other timber products.
Prices for timber products fell by as much as 18%, which brought production to a halt at several sawmills. "Wood chip producers had difficulty increasing volumes, which meant that some mills halted production for two, three or even four months," said Nelson Le Desma. In this situation, several plants chose to buy domestic timber at lower prices and cut production in other countries.
A telling example was the situation at the wood processing company Lumin, which had to halt operations at its plant at the end of 2025 and send its employees to claim unemployment benefit. "The downturn in the construction sector, the fall in demand for panels and the large stocks clearly illustrate the problems of this situation," N. Le Desma stressed.
About Uruguay's forest sector
Uruguay's forest sector has enjoyed a historic boom, becoming one of the main pillars of the country's economy. In 2024, pulp exports overtook beef exports for the first time in history, becoming Uruguay's leading export commodity. That said, the sector is now beginning to stagnate because of global geopolitical and economic problems. Uruguay's forest sector accounts for roughly 6% of the country's GDP. It provides more than 30,000 jobs; in 2024, pulp exports made up about 20% of total goods exports, reaching more than 2.5 billion US dollars. Uruguay's forest sector is built on the management of eucalyptus and pine plantations, which cover around 1.1 million hectares, or 6% of the country's territory. Uruguay's largest forest sector companies include the Finnish group UPM, with two large pulp mills (Fray Bentos and the recently built Paso de los Toros). The new mill is one of the most modern in the world and has significantly increased the country's pulp production capacity. Montes del Plata is a joint venture (owned by Stora Enso and Arauco) that runs a pulp mill in the Colonia department. Investment in sawn timber and plywood production is growing. For example, the company Arboreal has built South America's largest plant for mass timber (CLT and Glulam) structures.
Uruguay positions itself as South America's leader in sustainable forestry, using the international FSC and PEFC forest management certificates. By 2035, the country plans to expand its plantation area by a further 20% while at the same time protecting natural forests. The sector's growth is a direct result of the adoption of the 1987 Forest Act, which created a stable legal environment and tax relief for foreign investment. The rapid expansion is also prompting public debate about the impact on water resources and biodiversity.