Record Timber Prices Propel Forest Owner Earnings

The Norwegian timber industry is experiencing unprecedented economic conditions, with record-breaking timber prices significantly benefitting forest owners. Recent data from the Norwegian Forest Owners' Association and Statistics Norway (SSB) reveals that timber prices have surged by an impressive 26% over the past year. In the third quarter of 2024, forest owners earned an average of 694 NOK (€59) per cubic meter, with sawlogs reaching as high as 830 NOK (€70) for spruce and 787 NOK (€66) for pine. These increases mark a high point in profitability for forest owners, fueled by global raw material shortages stemming from key issues such as the war in Ukraine and widespread bark beetle infestations.

October 2024 further underscored these record earnings, with sawlogs priced at a staggering 877 NOK (€75) per cubic meter. Pulpwood has also seen strong international demand, with over half (54%) of the third quarter's production exported. This trend, while lucrative for forest owners, is sparking debate within the industry over its long-term viability.

Rising Exports Spark Concerns Among Domestic Producers

While surging prices and exports have boosted the bottom line for many forest owners, domestic producers are raising red flags about potential supply chain imbalances. Statistics indicate a 7% rise in Norwegian timber exports for the third quarter of 2024 compared to the same period last year, with total exports reaching 1.1 million cubic meters. The export of sawlogs, in particular, has seen a notable 11.6% increase.

This growth in exports has domestic stakeholders worried. Heidi Finstad, CEO of the Treindustrien association, cautioned about the risks to Norway's wood supply chain, saying, “The alarming increase in raw material exports continues, which risks creating a shortage of wood products in Norway and driving up prices.” Finstad expressed concerns that the dual challenge of rising costs and limited local supply could hinder the ability of Norwegian companies to meet demand in critical sectors like construction and renovation.

The construction industry is already under strain due to a slowdown in housing starts and a rise in bankruptcies. With access to affordable raw materials now at risk, the situation for domestic wood product manufacturers could become increasingly precarious.

Global Shortages Drive Demand Despite Local Weaknesses

The pressures faced by domestic producers contrast sharply with the opportunities brought by global demand. According to Håkon Bakken, sales manager at Glommen Mjøsen Skog, the international market continues to depend heavily on Norwegian timber amid an ongoing global shortage of wood. This dynamic has allowed Norwegian timber to command high prices even as local industries struggle. Bakken noted, “While some product areas are struggling, overall demand for pulpwood remains robust. The raw material needs of the industry will continue to support high prices in the near term.”

Despite these favorable conditions abroad, the disparity between export growth and local supply could jeopardize Norway’s wood products industry in the long run. Producers fear that if the local market cannot access sufficient raw materials, production capacity could shrink, and labor could be lost—an issue that would severely impact the industry's ability to rebound once the domestic housing market recovers.

Balancing Exports and Domestic Sustainability

The success of Norwegian timber on the global market paints a mixed picture. For forest owners, it remains a period of record profits, but for local producers, the increasing imbalance of supply and demand poses significant challenges. Addressing these concerns will require industry leaders and policymakers to strike a delicate balance between encouraging profitable exports and ensuring a stable, sustainable supply of raw materials for domestic use.

Maintaining production capacity and securing labor within Norway will be key to supporting the long-term growth of the wood products sector. As the construction and renovation markets recover, laying the groundwork now could help ensure the industry's resilience in the years to come.