Timber prices vs. lumber prices

Timber prices vs. lumber prices

During 2021 we have seen the lumber prices reach the sky. Sawmills, that in Sweden normally have a profit margin of -5 to +5 % suddenly had margins of 25 – 50 %. The locomotive in this lumber boom was the USA, but also Europe experienced a building boom and higher lumber prices. In some cases, the lumber prices went up by over 100 %. For the forest owners, this should mean higher timber prices and more profit. After all, sawlogs is the most valuable assortment in the forest.

Timber prices vs. lumber prices
Swedish pine timber.

Timber prices vs. lumber prices

So, 2021 was the “golden age” for the forest owners as well? Especially as the prices for pulp, that normally is the product that keeps the Swedish forest industry going, also went up it should have been. But it wasn´t quite that good …

Log Max Harvester Heads

During the same period as the lumber prices in Sweden went up by over 100 %, the round wood prices went up by a modest 1,5 %. Ok, it´s a rise, but is it fair? The forest owners are important links in the raw material chain and should maybe have had a larger share of the profit?

Does the forest owner have a choice?

Many, especially young forest owners have big loans that they must pay, with interest. That normally means that they are forced to sell their timber no matter what the prices are. In this situation the forest owner has very few choices. The best he or she could do is to put the timber on the market, get quotes from buyers, and hope to get enough to cover the interest and bank payment.

Maybe the EU Taxonomy could be an option for those forest owners? It´s becoming more and more obvious that the forest has a value as carbon storage. The question is if the profit for letting the forest be, can compete with the profit of felling? For the moment that is unclear, but it will for sure be exciting to see where it ends. As a forest owner, it would be nice if one could make just as much on not felling, and still have the forest. That, however, sounds too good to be true …

Forest owners who are debt free, always have the choice of letting the forest stand, and simply wait for better prices. This seems to be the strategy in e.g., Austria and Germany, but for some reason not so much in Sweden.

Why is Sweden special?

Normally, in times like this, forest owners should be aware of the prices, and not sell until the prices goes up. But the annual felling in Sweden in 2021 seems to have reached at least the same level as previous years according to prognoses. Why don´t they do like the Austrian and German forest owners seem to do: Wait until the prices reach the “right” level?

There is no doubt that the Swedish forest owners are dictated by the forest industry, mainly the pulp industry. Since the Forestry Act was updated in 1994 the role as advisers has been taken over from the Swedish Forest Agency by the industry’s wood buyers. The new Forestry Act was meant to give the forest owners more freedom, and more responsibility. But instead, the management of the forests has more or less been taken over by the industry.

Timber prices vs. lumber prices
Pulpwood and sawlogs waiting for transport to the mills.

What do the forest owners’ associations do about it?

The first forest owners’ association in Sweden was founded in 1906 in mid Sweden. The Swedish private forest owners needed a counterpart to the forest industry who had been taking advantage of the forest owners for many years. One of the main purposes of the association was to make sure that the forest owners got the right value for their forests. Together they could put up terms towards the industry and claim their rights.

Today, Sweden has three main forest owners’ associations: One in the north, one in central Sweden, and one in the south. They are all very tight connected to the industry. They even have their own industries. The largest of them, Södra, that are active in south Sweden, is also one of the largest forest industries in south Sweden. Södra has both pulp- and sawmills that their members are expected to feed with timber.

One might think that Södra would use their unique position to keep the member’s profit up, but it doesn’t seem like they do. Many of the members are just as unhappy with the situation as non-members.

What could be done?

Knowing that only 21 % of the Swedish timber becomes solid wood one might wonder if that share could increase. If so, it should logically benefit the forest owners as the prices for sawlogs is much higher than for pulpwood.

That fits well with the fact that the EU Commission in their new Forest Strategy for 2030 state that carbon binding products, like wood, should be given priority. So why not making more out of wood, lumber, and engineered wood products? The more refined products we make, the more profit for everyone involved. That´s logical to me.

The Swedish strategy to make more faster – bulk production of mainly pulp makes less sense for each day that passes. Still, that seems to be the strategy also in the future. One might wonder why the Swedish forest is felled at all.

Comparing Sweden to other countries

We like to think that the situation is better in other countries. “The grass is greener on the other side of the fence”. But is that true? If you ask forest owners in other countries, they will probably say they are not pleased with what they get for their timber. It´s human. And to compare prices between countries is not so easy as there are different measurements and different methods used.

Nevertheless, we have decided to give it a try. We will collect information about timber prices in different countries and make it comparable. Keep a lookout here at NordicWoodJournal.com. If you have any input about prices where you are active you are more than welcome to share it with us.

Photos: Per Jonsson

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