Turbulence in timber prices – Can we expect a hurricane?

The timber market dynamics have been turbulent the past few years due to supply and demand shocks, logistic disruptions and changed consumer behavior as a response to Covid-19. Climate impacts such as forest fires and pests have strengthened the volatility. The ongoing war in Ukraine will reshape the wood supply from Russia and Belarus to Europe and the descending economic iron wall may prepare ground for new major disruptions.

A year of exceptions

The supply and deliveries did not keep up with the demand due to logistics challenges, production restrictions and the Covid-19 pandemic. Due to travel restrictions and time spend at home, buying behaviour has changed presumably permanently. The construction boom started during the summer of 2020. Various subsidy schemes have brought a lot of funding to the market for public construction, businesses, and private households. Challenges in wood availability, employee safety, labor availability as well as floods and forest fires have kept the production prices high.

The volatility of sawn wood prices has been exceptionally high during the last year, as the prices have literally been sawing up and down. The cause arises from imbalances between the supply and demand. The demand was high in every main market, especially in the US and Central Europe. Meanwhile, despite the higher prices the attractiveness of wooden construction remains strong as the customers would not opt for alternative materials.

Disruptions in all regions

The price of softwood logs increased in several markets in 2021. The inflated roundwood has increased the manufacturing costs especially in Central Europe and Baltics. This is partly due to supply shortage from Russia, as the Russian wood is now considered conflicted. Distribution channels are also different in Europe, the US and Asia.

In the US, the housing construction and renovation are booming as employment rates are rebounding and interest rates remaining low. The furniture production has also been increasing. Decreasing supply and up-going demand caused the prices spike in the second half of 2021. Floods in British Columbia and heavy rains in November jammed the shipments in Canadian ports. The suppliers were fiercely filling up their inventories for the 2022 season. Additionally, private purchasers bought more than usual due to the US Ministry of Trade’s decision to double the import duties from Canada. Supply-demand balances improved when sawmills returned to normal. The US relies heavily on large DIY chains but has also increased imports.

Picture: 5 year lumber prices Source: EBC, NASDAQ commodities


North American demand has been reflected in European markets. In Europe, the market is driven by distribution channels and direct sales to major customers and end-users. Finland, Europe’s second largest exporter of timber, has increased deliveries by 16% in 2021. Intra-European exports have spiked while exports to China have fallen by 40% year-on-year. Logistical challenges to serve export markets have been a major challenge especially in distant markets such as the Middle East and Asia. Exports to North America are strengthening as a result of high consumption in North America, strong US dollar and relatively cheap and abundant fibre supply in Central Europe.

The favorable market price boosted sawmill profitability and spurred investments in capacity additions. Lumber exports from Europe to US in 2022 were previously expected to increase, but forecasts need to be adjusted as European market dynamics change dramatically alongside wood and timber trade flows.

In Europe, the Green Deal will increase the demand for sawn timber, and timber construction is forecasted to grow strongly, with especially high growth in cross-laminated timber. There has also been a concentration of the industry in the Nordic countries, which will have an overall impact on the supply-demand balances and price volatility.

The Chinese market will be the most affected by the possible stagnation of conifer wood exports from Russia. China’s situation is more linked to the global trade and tight constraints around the world. China relies on trading houses for imports. Russian raw wood export ban and export duties on lower quality lumber have a particular impact on the Asian and Chinese markets.

Impact of economical iron curtain

The global impact of economical iron curtain between Russia and Europe is not anticipated to be extreme, but it will have several significant consequences for certain industries. Russia and Belarus are significant players in the European lumber market. The sudden disappearance of major players will increase short-term price volatility. However, European players will be able to soften potential negative effect on European domestic market by decreasing export of products to Asia, Middle East and in some extent to North America.

Continuation of imbalances between supply and demand

Long-term forecasts point to strong demand for sawn timber. Exact demand forecasts are hard to draw due to high price volatility. In particular, the impact of supply chain challenges may persist for a long time if the economic iron wall in place and the Covid-19 are prolonged. The demand for lumber is growing globally, but supply in wood-based raw material is remaining limited. New sawn wood capacity is under construction in Europe and was also planned in Russia. The war has made the investing in Russia almost impossible due to high cost of equity. The planned capacity additions in Russia won’t be realized for a long time.

Due to export limitations from Russia the availability of wood becomes more difficult in Finland and Baltics, Poland, Sweden and Germany. In 2021, Russia’s exports accounted for 22% in softwood lumber and pulpwood logs and around 8% in sawn logs, wood panels and hardwood lumber globally. FSC and PEFC consider Russian and Belarusian wood as conflict timber which will have direct impact on wood flows and mechanical industry.

The current year will be challenging. Logistical problems will not disappear overnight. Going forward, global disruptions in supply may cause price shocks and volatility. In the long term, the economic impact of Russian invasion to Ukraine, ESG trends and sustainable wood construction remain strong drivers for lumber demand.


Vision Hunters provides strategic advisory services for the forest and bio-based industries, and energy sectors. We assist leadership teams in making the smartest strategic choices to improve the outcome of their company in the future. We are highly experienced and result-oriented and have advised many of the leading companies in our industry.

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