European sawlog prices plunged 12% quarter-over-quarter in the 3Q/23 with the largest declines in Central Europe. The sawlog market in Europe has gone through a turbulent period over the past three years, with wood demand falling, log flows shifting, and sawlog prices going through unprecedented swings. Source: ResourceWise
The European Sawlog Price Index (ESPI) was at an 11-year low of less than €70/m3 in the 3Q/20, surged to €110/m3 in the 2Q/22, following a decline to €92.91/m3 in the 3Q/23 (down 12% quarter-over-quarter).
According to WoodMarket Prices, the ESPI, which represents sawlog prices in nine European countries, is currently €13/m3 above its 28-year average.
Over the past year, log prices have fallen the most in the Baltic States and Central Europe, with the decline ranging between 10-25%. In the Nordic countries, prices have been practically unchanged the past year except for Sweden, where spruce prices were up almost 10% from the 3Q/22 to the 3Q/23.
The higher log costs were driven by a slowing in deliveries by private forest owners, predominantly in the southern region of the country, rather than by an increase in demand.
Instability and ambiguity about the market has persevered throughout the last few years thanks to several ongoing global factors.
Russia’s continued aggression against Ukraine is fast approaching its 2-year anniversary. The country has faced several consequences for their acts of war, including an export ban from Russia into the EU.
China’s economic growth slowed to approximately 5% growth year-over-year (YoY). Although this growth is slightly higher than previous forecasts of about 4.5%, it still marks a much slower growth than the 20-year average of 9%. The softened demand here yielded lower wood product exports to the country from sources such as Europe.
Sweden, as in most European countries, has seen a reduction in lumber demand as activities in the building sector have fallen. Although domestic wood consumption has fallen in 2023, the export market has remained healthy due to competitive lumber prices in Euro-terms, thanks to the weak Swedish Krona.
In the Baltic States, a region that is exporting both logs and lumber, sawlog prices fell due to reduced log demand by the domestic sawmills and to a small decline in log exports in 2023. Lumber exports from Estonia and Latvia were down 16% y-o-y in the 3Q/23, with the biggest declines in shipments to China, the UK, and the US.
Log prices also fell in Central Europe during the first nine months of 2023 due to reduced production levels at the sawmills in the region. The three largest lumber producers in the region, Austria, the Czech Republic, and Germany, are all major exporting countries.
However, with lumber demand weakening throughout Europe, the three countries’ total export volume has fallen from over five million m3 in the 1Q/22 to less than four million m3 in the 3Q/23.
Fortunately, the 2024 outlook across the EU sees a modest but positive growth pattern ahead. With issues such as Russia’s export ban and China’s economic downturn, we will likely continue to see market instability in several European wood markets this year. However, other factors may impact this market in other ways.
For instance, massive growth and interest in decarbonization has become a top priority in 2024 for European businesses. With increasing mandates and reporting requirements looming, many businesses are actively working on their plans to reduce their carbon footprint and focus on sustainable operations.
Wood products have quickly come into the spotlight as a feedstock for renewable fuels. These developments will assuredly play a role in how the market moves from 2024onward.
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